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Major printer vendor exits inkjet printer business

Lexmark announces restructuring that could lead to layoffs

Lexmark International Inc. announced restructuring plans today that will see the long time printer manufacturer exit the inkjet marketplace.

The Lexington, Ky.-based company said by exiting the development and manufacturing of the inkjet products would lead to an annualized savings of roughly $95 million. They assured customers and channel partners that Lexmark would continue to support and service inkjet products sold including aftermarket supplies.

Last quarter the worldwide inkjet market declined about 13 per cent, according to IDC figures.

Paul Rooke, the CEO of Lexmark, said the announcement represents difficult decisions, which are necessary to drive improved profitability and significant savings. Rooke, who took over for Paul Curlandar as CEO in 2010, added that Lexmark’s investments are now focused on higher value imaging and software solutions. “We believe the synergies between imaging and the emerging software elements of our business will continue to drive growth across the organization. As we move forward, we remain confident in our strategy, competitiveness and ability to create value for shareholders,” he said.

Part of the restructuring will include the closing of the inkjet supplies manufacturing facility in Cebu, the Philippines by 2015. These actions are expected to result in the elimination of approximately 1,700 positions worldwide, including 1,100 manufacturing positions, Lexmark said.

The company is working with strategic advisors to explore the sale of the company’s inkjet-related technology.

Currently, Lexmark produces inkjet printers for Dell Computer and IBM on its InfoPrint line.

Savings, as a result of these cuts, should see Lexmark bank $85 million just next year with ongoing annualized savings of $95 million beginning in 2015. These savings will be split approximately 65 per cent to operating expense, and 35 per cent to cost of goods sold. The total program pre-tax cost for these actions is expected to be $160 million, with $110 million incurred in 2012, $30 million incurred in 2013, and the remaining $20 million incurred in 2014 and 2015. The total program cash flow impact for these actions is expected to be $75 million, with $40 million impacting 2012, $30 million impacting 2013, and the remaining $5 million impacting 2014 and 2015.

Lexmark was formed in 1991 when IBM divested its printer business because it believed in the paperless office,which end up being one of IBM CEO John Akers biggest mistakes.

Meanwhile in Canada, Todd Hamblin was appointed president of Lexmark Canada. In this role, Hamblin will be responsible for developing and implementing business strategies to further drive Lexmark Canada towards profitable growth in the enterprise, government and SMB market segments.

Previously, Hamblin was a vice president and general manager of worldwide sales and marketing for Lexmark’s former Imaging Services Division (ISD).