Lexmark 2007 Annual Report Download - page 20

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The entrance of additional competitors that are focused on printing solutions could negatively impact
the Company’s strategy and operating results.
• The entrance of additional competitors that are focused on printing solutions could further intensify
competition in the inkjet and laser printer markets and could have a material adverse impact on the
Company’s strategy and financial results.
The Company’s inability to perform satisfactorily under service contracts for managed print services
may negatively impact the Company’s strategy and operating results.
• The Company’s inability to perform satisfactorily under service contracts for managed print services
and other customer services may result in the loss of customers, loss of reputation and/or financial
consequences that may have a material adverse impact on the Company’s financial results and
strategy.
Decreased consumption of supplies could negatively impact the Company’s operating results.
• The Company’s future operating results may be adversely affected if the consumption of its supplies
by end users of its products is lower than expected or declines, if there are declines in pricing,
unfavorable mix and/or increased costs.
Increased competition in the Company’s aftermarket supplies business may negatively impact the
Company’s revenues and gross margins.
• Refill, remanufactured, clones, counterfeits and other compatible alternatives for some of the
Company’s cartridges are available and compete with the Company’s supplies business. The
Company expects competitive supplies activity to increase. Various legal challenges and
governmental activities may intensify competition for the Company’s aftermarket supplies business.
Any failure by the Company to successfully outsource the infrastructure support of its information
technology system and application maintenance functions and centralize certain of its support
functions may disrupt these systems or functions and could have a material adverse effect on the
Company’s systems of internal control and financial reporting.
• The Company has migrated the infrastructure support of its information technology system and
application maintenance functions to new third-party service providers. The Company is in the
process of centralizing certain of its accounting and other finance functions and order-to-cash
functions from various countries to shared service centers. The Company is also in the process of
reducing, consolidating and moving various parts of its general and administrative resource, supply
chain resource and marketing and sales support structure. Many of these processes and functions
are moving to lower-cost countries, including China, India and the Philippines. Any disruption in
these systems, processes or functions could have a material adverse impact on the Company’s
operations, its financial results, its systems of internal controls and its ability to accurately record
and report transactions and financial results.
The Company’s failure to manage inventory levels or production capacity may negatively impact the
Company’s operating results.
• The Company’s performance depends in part upon its ability to successfully forecast the timing and
extent of customer demand and reseller demand to manage worldwide distribution and inventory
levels of the Company. Unexpected fluctuations in reseller inventory levels could disrupt ordering
patterns and may adversely affect the Company’s financial results. In addition, the financial failure or
loss of a key customer or reseller could have a material adverse impact on the Company’s financial
results. The Company must also be able to address production and supply constraints, including
product disruptions caused by quality issues, and delays or disruptions in the supply of key
components necessary for production, including without limitation component shortages due to
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