Lexmark (NYSE:LXK) has continuously lost market share in the
laser printer market due to slowing printer hardware industry and
increased competition from market leader HP (NYSE:HPQ) and other
players Xerox (NYSE:XRX), Canon (
), and Kyocera (NYSE:KYO). Moreover, increased digital consumption
of information through mobile devices like e-readers and tablets
has reduced the usage of paper. This trend of digital content
consumption may adversely affect Lexmark's printer & cartridges
sales. While we estimate Lexmark's laser printer market share will
gradually rise to 4% by the end of our forecast period, Trefis
members predict a slightly higher share of 4.6%, translating into
just under 10% upside to our LXK stock price estimate.
The company is focusing on two key areas: work group color
lasers and enterprise content management (ECM) solutions, and this
could improve its market position.
Growth in Digital Content Consumption
Growth in digital communication in the form of email, PDFs and
digital forms over the years is one of the key reasons for slowing
printer demand. Greater availability of wireless broadband
Internet, shared network printers, and mobile computing has made it
easier for groups to share printers and put additional downward
pressure on demand for printers and prices.
With the recent surge in demand for tablets, e-readers and
smartphones, users can access documents, anytime, anywhere, which
will also reduce demand for printers and more importantly for
cartridges that provide recurring revenues for players like
Are Tablets Bad News for Lexmark?
Lexmark's Key Focus Areas
Lexmark mainly targets enterprises through its laser printer
business and saw market share growth in 2010 due to its focus on
laser printers for branded work groups among businesses, and this
will continue to be a key growth segment for the company.
The company benefits from increasing penetration into high-end
work group printers given the higher margin nature of this
business. Lexmark is also focusing on providing end-to-end content
management solution, through its Perceptive Software acquisition,
which will help users capture, manage and access key information
within their businesses. During the first quarter of 2011, it
released "My e-Task", a bundled solution that gives users the
flexibility to access and print from any enabled multi-function
printer (MFP) on their company's global network.
We believe that despite market share concerns, we maintain our
Trefis price estimate of $36.70 for Lexmark's
. This is about 20% above the current market price.
complete analysis for Lexmark's stock is here