Lexmark International, Inc. -  Printer Manufacturers -  Category Main Page 

(859) 232-2000

One Lexmark Centre Drive
740 West New Circle Road
Lexington, KY 40550

www.lexmark.com

Sales

$4.8 billion

Business Description 

Lexmark is a leading developer, manufacturer and supplier of printing
solutions -- including laser and inkjet printers, multifunction products,
associated supplies and services -- for offices and homes. Lexmark develops and
owns most of the technology for its laser and inkjet products and associated
supplies, and that differentiates the company from many of its major
competitors, including Hewlett-Packard, which purchases its laser engines and
cartridges from a third party. Lexmark also sells dot matrix printers for
printing single and multi-part forms by business users and develops,
manufactures and markets a broad line of other office imaging products. The
company operates in the office products industry. The company is primarily
managed along business and consumer market segments. Refer to Note 17 of the
Notes to Consolidated Financial Statements for additional information regarding
the company's reportable segments.

Revenue derived from international sales, including exports from the United
States, make up about half of the company's consolidated revenue, with Europe
accounting for approximately two-thirds of international sales. Lexmark's
products are sold in over 150 countries in North and South America, Europe, the
Middle East, Africa, Asia, the Pacific Rim and the Caribbean. This geographic
diversity offers the company opportunities to participate in new markets,
provides diversification to its revenue stream and operations to help offset
geographic economic trends, and utilizes the technical and business expertise of
a worldwide workforce. Currency translation has significantly affected
international revenue and cost of revenue during the past several years. Refer
to Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Effect of Currency Exchange Rates and Exchange Rate Risk
Management for more information. As the company's international operations grow,
management's attention continues to be focused on the operation and expansion of
the company's global business and managing the cultural, language and legal
differences inherent in international operations. 

PRODUCTS

Laser Products

Lexmark offers a wide range of monochrome and color laser printers,
multifunction products, and associated features, software, and application
solutions. In 2003, the company introduced a new line of monochrome laser
printers designed to serve both workgroup and desktop applications. The T634 and
T632 monochrome laser printers with print speeds of up to 45 and 40 pages per
minute ("ppm"), respectively, are designed to support large and medium
workgroups and have optional paper input and output features, including a
stapler and offset stacker. The T630 and T420d monochrome laser printers with
print speeds of up to 35 and 22 ppm, respectively, are designed to support
medium and small workgroups. For the personal sector of the market, the company
introduced the E323, E321 and E220 monochrome laser printers with print speeds
of up to 20, 20 and 18 ppm, respectively. The monochrome laser printer line
extends into the wide format sector of the market with the W820 and W812. With
print speeds of up to 45 ppm, the W820 is supported with an array of paper
handling and finishing options that make it well suited for departmental
printing needs. The W812 is a small workgroup printer designed for wide format
and specialty printing applications with print speeds of up to 26 ppm.

In 2003, the company introduced two single pass technology color laser printers,
the C752 and C912. The C752 features the company's internally developed color
laser technology and prints both monochrome and color pages at up to 20 ppm. The
C752 is designed for large and medium workgroups. The C912 prints both
monochrome and color pages at up to 28 ppm and supports printing on tabloid size
paper. The company also offers the C720, a small workgroup color laser printer
that prints at up to 24 ppm in monochrome and six ppm in color. Early in 2004,
Lexmark introduced the C752L, which makes high-speed color printing even more
affordable for businesses. The C752L prints both monochrome and color pages at
up to 20 ppm.

In 2003, the company introduced the X912e, X752e and X632e multifunction
products. Along with the X820e, these products include an intuitive touch screen
display and the ability to integrate with corporate directories and leverage
existing network security to regulate access. These characteristics make it easy
for users to scan paper documents and fax or e-mail them. Other multifunction
products introduced in 2003 by the company include the X632, X630 and X215, each
of which provides print/copy/fax/scan capability. The X215 is a compact,
integrated device, designed for desktop applications and personal use. The X720
is also offered by the company, and like the X912e and X752e, has the added
capability of printing, scanning and copying in color. Early in 2004, Lexmark
introduced the X422, which is a compact, integrated, network-ready,
multifunction product for workgroups.

The N4000e network adapter was announced by the company in 2003 to support
low-cost networking for desktop devices. MarkVision Professional, Lexmark's
print management software that provides remote configuration, monitoring, and
problem resolution of network print devices can be bundled with all business
printers and multifunction products. Application solution options that support
web, bar code, encrypted data and Intelligent Printer Data Stream ("IPDS")
printing are also available for most of the printers in the "T", "W", "C" and
"X" families of business printers to support specific customer environments.

In early 2003, the company introduced the Lexmark Document Solutions Suite,
which is designed to minimize the expense and inefficiencies of manual,
paper-based processes that are costly and time-intensive. The Lexmark Document
Solutions Suite integrates three distinct document solutions which work
separately or together as an integrated solution. The Lexmark Document
Distributor helps improve information workflow by capturing and moving documents
faster, more efficiently and more accurately into a broader range of network
systems. The Lexmark Document Producer is an e-forms solution that empowers
customers to take control of the presentation and delivery of output from almost
any host system and thus avoid the cost of preprinted forms. The Lexmark
Document Portal enables users of a Lexmark multifunction product to find, view
and print network documents when and where they need them. The suite enables the
graphical e-Task interface featured on Lexmark network multifunction products to
be tailored to an individual, workgroup, business or industry, using friendly
and descriptive icons that allow users to quickly identify and select the
appropriate work process. It also extends this interface and e-workflow
capability to workstation users of the X215 and X6170 multifunction products.
Early in 2004, the company introduced the Lexmark Workgroup OCR Solution, which
enables users to easily transform paper information into versatile, electronic
documents that can be efficiently shared and used.

Inkjet Products

In 2003, the company broadened its consumer product line with the introduction
of its first "P" line of photo products, as well as its next generation "X" line
of all-in-one products and "Z" line of inkjet printers. Lexmark's inkjet
introductions included a wide range of innovative functions and photo features,
as well as proven technology, such as the Accu-Feed paper handling system.

Lexmark's "P" series launch into the photo market in 2003 was led by the P707
and P3150. These products deliver 4 x 6 inch photographs in less than sixty
seconds and include innovative features such as PrecisionSense technology, which
automatically determines the paper type loaded in the printer and automatically
aligns the print cartridges. In addition, the company's "P" series offers
six-color printing, borderless photographs, Lexmark Photo Center software and
includes a memory card reader for today's most popular digital media.

The enhancements to Lexmark's all-in-one inkjet products was led by the
company's first four-in-one flatbed product, the X6170, which offers
print/copy/fax/scan capabilities in an innovative design. The X6170 also
established new industry standards in productivity with its 100-sheet automatic
document feeder and PC-free color or black fax mode. The Lexmark "X" series
continues to define the multifunction category by offering up to 4,800 x 1,200
dots per inch ("dpi") printing and 48-bit color scanning in the sub-$100 sector,
with its X1150. The company has expanded its line of "X" inkjet printers to five
models with print speeds of up to 19 ppm in black and 15 ppm in color.

Lexmark's "Z" line of inkjet printers in 2003 is focused on delivering high
performance with ease of use features. The company introduced borderless
printing on its Z705, which also automatically determines the paper type loaded
into the printer to ensure high quality output. Lexmark's "Z" line of products
offer up to 4,800 x 1,200 dpi resolution, as well as maximum print speeds of up
to 17 ppm in black and 10 ppm in color.

Dot Matrix Products

The company continues to market several dot matrix printer models for customers
who print a large volume of multi-part forms.

Supplies

The company designs, manufactures, and distributes a variety of cartridges and
other supplies for use in its installed base of laser, inkjet, and dot matrix
printers. Lexmark is currently theexclusive source for new printer cartridges for the printers it manufactures.
The company's revenue and profit growth from its supplies business is directly
linked to the company's ability to increase the installed base of its laser and
inkjet products and customer usage of those products. Lexmark is an industry
leader with regard to the recovery, remanufacture, reuse and recycling of used
supplies cartridges, helping to keep empty cartridges out of landfills.
Attaining that leadership position was made possible by the company's various
empty cartridge collection programs around the world. Lexmark continues to
launch new programs and expand existing cartridge collection programs to further
expand its remanufacturing business and this environmental commitment.

The company also offers a broad range of other office imaging supplies products,
applying both impact and non-impact technology.

Service and Support

Lexmark offers a wide range of professional services to complement the company's
line of printing products including maintenance, consulting, systems integration
and fleet management capabilities. The company works in collaboration with its
customers to develop and implement comprehensive, customized printing solutions.
Fleet management services allow organizations to outsource fleet management,
technical support, supplies replenishment and maintenance activities to Lexmark.

The company's printer products generally include a warranty period of at least
one year, and customers typically have the option to purchase an extended
warranty.

STRATEGY

Lexmark's strategy is based on a business model of building an installed base of
printers and multifunction products that generate demand for its related
supplies and services. Management believes that Lexmark has unique strengths
related to this business model, which have allowed it to grow faster than the
market over the past several years and achieve above average profitability in
the office and home printing output market.

First, Lexmark is exclusively focused on printing and related solutions.
Management believes that this focus has enabled Lexmark to be more responsive
and flexible than competitors at meeting specific customer and channel partner
needs.

Second, Lexmark internally develops all three of the key technologies in the
distributed printing business, including inkjet, mono laser and color laser.
Lexmark is also recognized as an industry leader in critical software
competencies related to printing, network connectivity/management and enhancing
document workflow. The company's technology platform has historically allowed it
to be a leader in product price/performance and also build unique capabilities
into its products that enable it to offer unique solutions (combining hardware,
software and professional services) for specific customer groups. This breadth
of technology capabilities has also enabled Lexmark to offer an extensive
product line alternative to the industry leader, Hewlett-Packard.

Third, Lexmark has leveraged its technological capabilities and its commitment
to flexibility and responsiveness to build strong relationships with
large-account customers and channel partners, including major retail chains,
distributors, direct-response cataloguers and value-added resellers. Lexmark's
path-to-market includes industry focused sales and marketing teams that deliver
unique and differentiated solutions to both large accounts and channel partners
that sell into the company's target industries. Retail-centric teams also have
enabled Lexmark to meet the specific needs of major retail partners and have
resulted in the company winning numerous "best supplier" awards over the last
few years.

Lexmark's business market strategy involves targeting large corporations, small
and medium businesses and the public sector to increase market share by
providing an array of high quality, technologically advanced products at
competitive prices. Lexmark also continues to identify and focus on industries
where it can differentiate itself by providing unique printing solutions and
related services.

Lexmark's strategy also continually focuses on enhancing its laser printers to
function efficiently in a networked environment as well as providing significant
flexibility and manageability to network administrators. Generally, Lexmark
leverages expertise gained from its exclusive focus on printing solutions and
its understanding of industry-specific customer requirements to provide unique
and customized printing solutions and related services tailored to address
specific industry customer needs.

The company's consumer market strategy is to generate demand for Lexmark
products by offering high-quality, competitively-priced products to consumers
and businesses primarily through retail channels. Lexmark develops its own
technology to meet customer needs for increased functionality, faster printing
and better print quality. Lexmark management believes that its core product
offerings in this market, including the "Z" and "X" families of inkjet printers
and all-in-one printers, will also help it to build brand recognition in the
retail channels. Lexmark has aggressively reduced costs while pushing the
performance and features of higher-end color inkjets into the sub-$100 sector
and all-in-one printers into the sub-$250 sector.

Because of Lexmark's exclusive focus on printing solutions, the company has
successfully formed alliances and OEM arrangements with many companies,
including Dell, IBM, Lenovo (formerly Legend) and Sindo Ricoh. The entrance of a
competitor that is also exclusively focused on printing solutions could have a
material adverse impact on the company's strategy and financial results.

The company's strategy for dot matrix printers and other office imaging products
is to continue to offer high-quality products while managing cost to maximize
cash flow and profit.

MARKET OVERVIEW(1)

In 2003, estimated worldwide revenue for the office and home printing hardware
and associated supplies market, including monochrome (black) and color laser,
inkjet and dot matrix printers, exceeded $40 billion. Lexmark management
believes that the total office and home printing output opportunity is expanding
as copiers and fax machines have begun to be integrated into multifunction
printers. Based on industry analyst information, Lexmark management estimates
that this expanded market revenue opportunity, which includes multifunction
products, copiers and fax machines, was approximately $80 billion in 2003, and
will grow annually at low- to mid- single digit percentage rates through 2006. Management believes that this
integration of print/copy/fax capabilities favors companies like Lexmark due to
its experience in providing industry leading network printing solutions and
multifunction printing products.

The Internet is positively impacting the distributed home and office printing
market opportunity in several ways. As more information is available over the
Internet, and new tools and solutions are being developed to access it, more of
this information is being printed on distributed home and office printers.
Management believes that an increasing percentage of this distributed output
includes color and graphics, which tend to increase supplies usage. Growth in
high-speed Internet access to the home, combined with the rise in digital camera
sales, is also contributing to increased photo printing on distributed devices.

The laser printer market is primarily serving business customers. Laser printing
products can be divided into two major categories -- shared workgroup printers,
which are typically attached directly to large workgroup networks, and lower
priced desktop printers attached to PCs or small workgroup networks. The shared
workgroup printers include color and monochrome laser printers that are easily
upgraded to include additional input and output capacity, additional memory and
storage, and typically include high performance internal network adapters. Most
shared workgroup printers also have sophisticated network management software
tools and some products (including Lexmark's) now include multifunction upgrades
that enable copy/fax/scan to network capabilities. Based on industry data,
within the overall distributed laser printer market, Lexmark has gained market
share over the past six years. At the end of 2003, the company estimated its
installed base of laser printers at 5.2 million units versus 4.8 million units
at year-end 2002.(2)

Laser printer unit growth in recent years has generally exceeded the growth rate
of laser printer revenue due to unit growth in lower priced desktop laser
printers and unit price reductions, and management believes this trend will
continue. This pricing pressure is partially offset by the tendency of customers
in the shared workgroup laser market to add higher profit margin optional
features including network adapters, document management software, additional
memory, paper handling and multifunction capabilities. Pricing pressure is also
partially offset by the opportunity to provide business solutions and services
to customers who are increasingly looking for assistance to better manage and
leverage their document-related costs and output infrastructure.

The inkjet product market is predominantly a consumer market but also includes
business users who may choose inkjet products as a lower priced alternative or
supplement to laser printers for personal desktop use. Additionally, over the
past two years, the number of consumers seeking to print digitally captured
images in their homes have driven the photo-based sector up significantly. The
greater affordability of inkjet printers, as well as the growth in the
inkjet-based multifunction devices (all-in-one printers), both with a focus on
delivering digital photos, have been important factors in the growth of this
market. Based on industry data, Lexmark has gained market share over the past
six years. Growth in inkjet product revenue has been slower than unit growth due
to price reductions, which management expects to continue. At the end of 2003,
the company estimated its installed base of inkjet products at 47 million units
versus 43 million units at year-end 2002.(2)

Over the last few years, Lexmark has provided estimates of its laser and
inkjet installed base on an annual basis, usually in January of each year.
These estimates are derived from detailed models, which contain numerous
assumptions requiring the use of management's judgment, such as ink and toner
usage, economic life of the products, retirement rates and product mix. The
company continually updates these models internally and revises the
assumptions, as new information is discovered. While these installed base
amounts reflect management's best estimate when published, they are subject to
change based on subsequent receipt of additional or different data, or changes
in the underlying assumptions. There can be no assurance that any of the
assumptions are correct and management's estimates of the installed base may
differ materially from the actual installed base. Management undertakes no
responsibility to update the public disclosure of its estimate of the
installed base as new information is continuously discovered.

The markets for dot matrix printers and most of the company's other office
imaging products, including supplies for select IBM branded printers,
aftermarket supplies for original equipment manufacturer ("OEM") products, and
typewriter supplies, continue to decline as these markets mature, and the
underlying product installed bases are replaced.

1 Certain information contained in the "Market Overview" section has been
obtained from industry sources. Data available from industry analysts varies
widely among sources. The company bases its analysis of market trends on the
data available from several different industry analysts.

COMPETITION

The company continues to develop and market new and innovative products at
competitive prices. New product announcements by the company's principal
competitors, however, can have, and in the past, have had, a material adverse
effect on the company's financial results. Such new product announcements can
quickly undermine any technological competitive edge that one manufacturer may
enjoy over another and set new market standards for price, quality, speed and
functionality. Furthermore, knowledge in the marketplace about pending new
product announcements by the company's competitors may also have a material
adverse effect on the company as purchasers of printers may defer buying
decisions until the announcement and subsequent testing of such new products.

In recent years, the company and its principal competitors, many of which have
significantly greater financial, marketing and/or technological resources than
the company, have regularly lowered prices on printers and are expected to
continue to do so. The company is vulnerable to these pricing pressures, which
could jeopardize the company's ability to grow or maintain market share and, if
not mitigated by cost and expense reductions, may result in lower profitability.
The company expects that as it competes more successfully with its larger
competitors, the company's increased market presence may attract more frequent
challenges, both legal and commercial, from its competitors, including claims of
possible intellectual property infringement.

The markets for printers and supplies are extremely competitive. The laser
printer market is dominated by Hewlett-Packard, which has a widely recognized
brand name and has been estimated to hold approximately 50% of the market.
Several other large vendors such as Brother, Canon, Samsung and Konica Minolta
also compete in the laser printer market.

As more data is distributed electronically, demand has risen for increased
device functionality to include print/copy/fax/scan capabilities, resulting in a
convergence of the distributed printing and copier markets. This converging
marketplace is highly competitive and, in addition to the traditional laser
competitors, includes large copier companies such as Canon, Ricoh and Xerox.

The company's primary competitors in the inkjet product market are
Hewlett-Packard, Epson and Canon, who together account for approximately 80% of
worldwide inkjet product sales. As with laser printers, if pricing pressures are
not mitigated by cost and expense reductions, the company's ability to grow or
maintain market share and its profitability could be adversely affected. In
addition, the company must compete with these same vendors for retail shelf
space allocated to printers and their associated supplies.

Although Lexmark is currently the exclusive supplier of new printer cartridges
for its laser and inkjet products, there can be no assurance that other
companies will not develop new compatible cartridges for Lexmark products. In
addition, refill and remanufactured alternatives for some of the company's
cartridges are available and, although generally offering inconsistent quality
and reliability, compete with the company's supplies business. As the installed
base of laser and inkjet products grows and matures, the company expects
competitive refill and remanufacturing activity to increase.

The market for other office imaging products is also highly competitive and the
impact printing sector of the supplies market is declining. Although the company
has rights to market certain IBM branded supplies until December 2007, there are
many independent ribbon and toner manufacturers competing to provide compatible
supplies for IBM branded printing products. The revenue and profitability from
the company's other office imaging products is less relevant than it has been
historically. Management believes that the operating income associated with its
other office imaging products will continue to decline.

MANUFACTURING

The company operates manufacturing control centers in Lexington, Kentucky and
Geneva, Switzerland, and has manufacturing sites in Boulder, Colorado; Orleans,
France; Rosyth, Scotland; Juarez, Mexico; Chihuahua, Mexico and Lapu-Lapu City,
Philippines. The company also has customization centers in each of the major
geographies it serves. The company's manufacturing strategy is to retain control
over processes that are technologically complex, proprietary in nature and
central to the company's business model, such as the manufacture of inkjet
cartridges, at company owned and operated facilities. The company shares some of
its technical expertise with certain manufacturing partners, which collectively
provide the company with substantially all of its printer production capacity.
Lexmark oversees these manufacturing partners to ensure that products meet the
company's quality standards and specifications.

The company's development and manufacturing operations for laser printer
supplies, which include toners, photoconductor drums and charge rolls, are
located in Boulder. The company also manufactures toner in Orleans, France. Over
time, the company has made significant capital investments to expand toner and
photoconductor drum capabilities. Laser printer cartridges are typically
assembled by third party contract manufacturers in the major geographies served
by the company.

Ticker

LXK

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Lexmark