Lexmark 2008 Annual Report Download - page 18

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.
Unprecedented worldwide financial market disruption and deteriorating economic conditions could
adversely impact the Company’s revenue, operating income and other financial results.
• The United States and other countries around the world have been experiencing deteriorating
economic conditions, including unprecedented financial market disruption. If this trend in economic
conditions continues or deteriorates further, it could adversely affect the Company’s results in future
periods. During an economic downturn, demand for the Company’s products may decrease.
Restrictions on credit globally and foreign currency exchange rate fluctuations in certain
countries may impact economic activity and the Company’s results. Credit risk associated with
the Company’s customers, channel partners and the Company’s investment portfolio may also be
adversely impacted. Additionally, although the Company does not anticipate needing additional
capital in the near term due to the Company’s strong current financial position, financial market
disruption may make it difficult for the Company to raise additional capital, when needed, on
acceptable terms or at all. The interest rate environment and general economic conditions could
also impact the investment income the Company is able to earn on its investment portfolio.
• Continued softness in certain markets and industries, constrained IT spending, and uncertainty
about global economic conditions could result in lower demand for the Company’s products,
including 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 competitive pricing pressure in the market may negatively impact the Company’s operating
results.
• The Company and its major competitors, many of which have significantly greater financial,
marketing and/or technological resources than the Company, have regularly lowered prices on
their products and are expected to continue to do so. In particular, both the inkjet and laser printer
markets have experienced and are expected to continue to experience significant price pressure.
Price reductions on inkjet or laser products or the inability to reduce costs, including warranty costs,
to contain expenses or to increase or maintain sales as currently expected, as well as price
protection measures, could result in lower profitability and jeopardize the Company’s ability to grow
or maintain its market share. In recent years, the gross margins on the Company’s hardware
products have been under pressure as a result of competitive pricing pressures in the market. If the
Company is unable to reduce costs to offset this competitive pricing or product mix pressure, and
the Company is unable to support declining gross margins through the sale of supplies, the
Company’s operating results and future profitability may be negatively impacted. Historically, the
Company has not experienced significant supplies pricing pressure, but if supplies pricing was to
come under significant pressure, the Company’s financial results could be materially adversely
affected.
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