Lexmark revises financial outlook
LEXINGTON, Ky., July 9 /PRNewswire-FirstCall/ — Lexmark International, Inc. (NYSE: LXK - News) today announced that financial results for its second quarter of 2007 will be lower than expected. — Although based on partial data for the quarter …
Context & Ripple Effects
Lexmark's warning lands two months after rival HP raised its second-quarter earnings and revenue guidance, a stark divergence inside the same hardware market: the diversified giant trending up while the printer-concentratedLexmark trends down.
The company itself cautions the revision is based on partial data for the quarter, so the size of the shortfall is still an estimate — but the direction is enough to reset expectations ahead of full Q2 reporting later in July 2007.
First-order effects
- Lexmark shareholders and analysts covering LXK must mark down second-quarter 2007 expectations immediately, before the company reports complete results.
- HP's May guidance raise now reads as a widening competitive gap: Lexmark enters the quarter's close losing relative ground in printers rather than sharing the sector upswing.
Second-order effects
- A weaker Lexmark puts more pressure on its laser-printer and supplies pricing against HP, since consumables carry the profit pool and a share-hungry number-two typically competes harder on price.
- Channel partners and retailers stocking both brands get added leverage to push for margins and terms as Lexmark defends shelf position.
Third-order effects
- If the pattern holds, hardware vendors whose economics rest on a single printer franchise face mounting pressure to diversify into services and software or become consolidation candidates — the strategic fork every printer pure-play of this era confronts.
The trend: The printer hardware market is bifurcating, with diversified players lifting guidance while printer-dependent vendors like Lexmark absorb the margin squeeze.