Merrill Lynch cuts Lexmark International (LXK) to long term buy from strong buy.
Analyst Shannon Cross says Hewlett-Packard Compaq announced an aggressive inkjet printer initiative including sub-$100 pricing for photo quality printer hardware, and new cartridges priced to yield a 20% decrease in cost per page. She says she believes Lexmark will be forced to answer these price points, and she expects continued deterioration in margins and pricing in the inkjet business over the long term. Although Lexmark announced the launch of two new, all-in-one printers, Cross says she expects Hewlett-Packard Compaq to launch upgrades to its consumer all-in-one product set within the next six months. She says she maintains her estimates, but will watch for signs of deteriorating market share.