Lexmark 2007 Annual Report Download - page 18

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Item 1A. RISK FACTORS
The following significant factors, as well as others of which we are unaware or deem to be immaterial at this
time, could materially adversely affect our business, financial condition or operating results in the future.
Therefore, the following information should be considered carefully together with other information
contained in this report. Past financial performance may not be a reliable indicator of future
performance, and historical trends should not be used to anticipate results or trends in future periods.
The Company’s ability to be successful in shifting its strategy and selling its products into the higher-
usage segments of the inkjet market.
• The Company’s future operating results may be adversely affected if it is unable to successfully
develop, manufacture, market and sell products into the geographic and customer and product
segments of the inkjet market that support higher usage of supplies.
The Company may experience difficulties in product transitions negatively impacting the Company’s
performance and operating results.
• The introduction of products by the Company or its competitors, or delays in customer purchases of
existing products in anticipation of new product introductions by the Company or its competitors and
market acceptance of new products and pricing programs, any disruption in the supply of new or
existing products as well as the costs of any product recall or increased warranty, repair or
replacement costs due to quality issues, the reaction of competitors to any such new products
or programs, the life cycles of the Company’s products, as well as delays in product development
and manufacturing, and variations in cost, including but not limited to component parts, raw
materials, commodities, energy, products, distributors, fuel and variations in supplier terms and
conditions, may impact sales, may cause a buildup in the Company’s inventories, make the
transition from current products to new products difficult and could adversely affect the
Company’s future operating results.
Weak economic conditions could negatively impact sales of the Company’s products and future
operating results.
• Unfavorable global economic conditions may adversely impact the Company’s future operating
results. The Company continues to experience some weak markets for its products. Continued
softness in certain markets and uncertainty about global economic conditions could result in lower
demand for the Company’s products, particularly supplies. Weakness in demand has resulted in
intense price competition and may result in excessive inventory for the Company and/or its reseller
channel, which may adversely affect sales, pricing, risk of obsolescence and/or other elements of
the Company’s operating results. Ongoing weakness in demand for the Company’s hardware
products may also cause erosion of the installed base of products over time, thereby reducing the
opportunities for supplies sales in the future.
The revenue and profitability of our operations have historically varied, which makes our future
financial results less predictable.
• Our revenue, gross margin and profit vary among our hardware, supplies and services, product
groups and geographic markets and therefore will likely be different in future periods than our
current results. Overall gross margins and profitability in any given period is dependent upon the
hardware/supplies mix, the mix of hardware products sold, and the geographic mix reflected in that
period’s revenue. Overall market trends, seasonal market trends, competitive pressures, pricing,
commoditization of products, increased component or shipping costs and other factors may result in
reductions in revenue or pressure on gross margins in a given period.
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