Lexmark Plans to Make More Money by Helping Companies Print Less
Lexmark Plans to Help Companies Print Less
Daniel Acker/Bloomberg
Lexmark tells customers that it can bring down their printing costs by 30 percent or more when it takes over the busywork of installing, repairing and restocking printers.
Lexmark tells customers that it can bring down their printing costs by 30 percent or more when it takes over the busywork of installing, repairing and restocking printers. Photographer: Daniel Acker/Bloomberg
The amount of paper consumed by the average American office worker, after rising for decades, has declined steadily to 106 pounds last year from 143 pounds in 1999, according to RISI, a research firm that tracks the forest- products industry. So what’s a printer company to do?
For Paul Curlander, chief executive officer of Lexmark International Inc., the answer is simple: Help big companies print less, Bloomberg Businessweek reports in its Aug. 30 issue.
For Curlander, Lexmark’s future may lie in selling fewer printers with higher profit margins and then earning a steady stream of revenue by managing the printers for the companies that buy them. Lexmark tells customers that it can bring down their printing costs by 30 percent or more when it takes over the busywork of installing, repairing and restocking printers.
The strategic shift is part of an overhaul for Lexmark, which became independent in 1991 when it was spun off by International Business Machines Corp. Lexington, Kentucky-based Lexmark abandoned the low-margin consumer inkjet printer market in 2007. As it switched gears, the company shut factories in Mexico and moved those operations to the Philippines. Sales declined 27 percent to $3.88 billion in 2009 from a peak of $5.31 billion in 2004.
Lexmark’s managed print-services division helps companies wring out inefficiencies by raising the worker-to-printer ratio. In most companies, two people share one small printer. It’s more cost-efficient if seven people share a larger printer, Curlander says. Placing printers farther away from workers is another cost-cutting tactic because it discourages unnecessary print jobs.
Savings at Coke
Beverage bottler Coca-Cola Enterprises Inc. says it saved $11 million over five years with the help of Lexmark, which swapped out 6,000 printers and fax machines from 16 different vendors for 3,800 new machines, including expensive laser printers, almost all made by Lexmark.
Lexmark is now expanding its managed print-services division. In the past nine months, it completed 14 deals with companies including regional bank BB&T Corp., engine maker Cummins Inc., pharmacy chain CVS Caremark Corp. and investment bank JPMorgan Chase & Co. In May, Lexmark landed a five-year, $127 million contract to manage office printers for the U.S. Social Security Administration.
The company doesn’t break out services revenue in its earnings reports. Angela Boyd, an analyst with research firm IDC, estimates that in the first quarter of 2010, Lexmark’s printer sales grew roughly five times faster than the market as a whole.
Perceptive Purchase
In May, Lexmark paid $280 million for Perceptive Software, a Shawnee, Kansas, company that makes applications to manage and share digital documents. Curlander said the Perceptive acquisition dovetails nicely with Lexmark’s strategy to help companies reduce the number of printed pages they generate.
“We’ve always been in the workflow business,” he said. “It used to be that all business documents were paper. Now they’re digital, and you need software to manage it.”
Lexmark is focusing its sales efforts in sectors where print demand is still climbing, such as finance and health care.
“We’re very narrowly focused on laser printers and on specific industries,” Curlander said. “We don’t try to be everywhere.”
That concentration is paying off: Analysts surveyed by Bloomberg forecast that Lexmark’s revenue will rise 9 percent to $4.22 billion this year, and its shares have gained 91 percent in the past year. They fell 48 cents to $35.53 yesterday in New York Stock Exchange composite trading.
As IDC’s Boyd put it, “Lexmark is a company that would rather be quietly growing off in a corner, until one day its competitors wake up and say, ‘Holy cow.’”
To contact the reporter on this story: Arik Hesseldahl in New York at ahesseldahl@bloomberg.net
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