) is reportedly selling its non-profitable inkjet business to
Japan-based consumer electronics provider Funai Electric Co. for
$100.0 million. The decision to divest its inkjet business is in
line with Lexmark's restructuring plan announced in Aug 2012.
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As part of its restructuring initiatives, Lexmark planned to
abandon its consumer-based inkjet hardware (printers) business,
which failed to generate profits for the past few quarters.
Instead, the company intended to focus more on the high-margin
imaging and software solutions business.
Further, Lexmark also announced plans to shut down its inkjet
supplies manufacturing facility in Cebu, Philippines, by 2015,
resulting in a headcount reduction of 1,700 employees. The exit
from the Inkjet business is expected to save roughly $85.0
million of cash annually in 2013 and roughly $95.0 million
annually by 2015. But the company will record a pre-tax severance
charge of $30.0 million in 2013 and $10.0 million in 2014 and
Per the contract, Funai will take over all the assets of inkjet
business along with 1,500 inkjet patents, inkjet-related research
and development assets and tools, the manufacturing facility in
Philippines and inkjet-related technologies.
Funai shares a longstanding business tie with Lexmark.
Previously, Funai supplied hardware for Lexmark's inkjet
printers. Hence, it will be easier for Funai to integrate the
business within its operations. The quick integration will also
help Lexmark's existing inkjet customers as they can get the
services, software and supplies without any interruption.
Having divested the inkjet business, Lexmark is now busy focusing
on the software space through consecutive acquisitions. Since Jan
2013, Lexmark has acquired printing software solutions providers
Twistage, AccessVia and Acuo Technologies, LLC. In 2012, Lexmark
acquired Australia-based ISYS Search Software, which is a leading
provider for search and text mining software; Boston-based Nolij
Corp., which develops web-based document imaging and workflow
software targeted toward the education sector and
Luxembourg-based software company BDGB Enterprise, along with its
U.S. subsidiary Brainware Inc. These acquired units became part
of its Perceptive Software business.
During the fourth quarter of 2012, Lexmark generated a solid
37.0% year-over-year growth within its Perceptive Software
Lexmark's fourth quarter results were not encouraging as its
earnings per share missed the Zacks Consensus Estimate by a wide
margin. Revenues came below the year-ago period but were better
than expected due to improved performances in Perceptive Software
and Managed Printing Services. Guidance for the first quarter was
deterring, too, reflecting inkjet exit and macro uncertainty. But
management looked confident with growth in software, which could
offset the legacy headwinds.
Currently, Lexmark has a Zacks Rank #3 (Hold). Other technology
stocks that are performing well and are worth considering include
NetSol Technologies Inc.
). All the stocks have a Zacks Rank #1 (Strong Buy).