Lexmark 2008 Annual Report Download - page 22

The Company’s reliance on international production facilities, international manufacturing partners and
certain key suppliers could negatively impact the Company’s operating results.
• The Company relies in large part on its international production facilities and international
manufacturing partners, many of which are located in China and the Philippines, for the
manufacture of its products and key components of its products. Future operating results may
also be adversely affected by several other factors, including, without limitation, if the Company’s
international operations or manufacturing partners are unable to perform or supply products reliably,
if there are disruptions in international trade, trade restrictions, import duties, “Buy American”
constraints, disruptions at important geographic points of exit and entry, if there are difficulties in
transitioning such manufacturing activities among the Company, its international operations and/or
its manufacturing partners, or if there arise production and supply constraints which result in
additional costs to the Company. The financial failure or loss of a sole supplier or significant supplier
of products or key components, or their inability to produce the required quantities, could result in a
material adverse impact on the Company’s operating results.
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.
Increased competition in the Company’s aftermarket supplies business may negatively impact the
Company’s revenue 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.
New legislation, fees on the Company’s products or litigation costs required to protect the Company’s
rights may negatively impact the Company’s cost structure, access to components and operating
results.
• Certain countries (primarily in Europe) and/or collecting societies representing copyright owners’
interests have commenced proceedings to impose fees on devices (such as scanners, printers and
multifunction devices) alleging the copyright owners are entitled to compensation because these
devices enable reproducing copyrighted content. Other countries are also considering imposing
fees on certain devices. The amount of fees, if imposed, would depend on the number of products
sold and the amounts of the fee on each product, which will vary by product and by country. The
financial impact on the Company, which will depend in large part upon the outcome of local
legislative processes, the Company’s and other industry participants’ outcome in contesting the
fees and the Company’s ability to mitigate that impact by increasing prices, which ability will depend
upon competitive market conditions, remains uncertain. The outcome of the copyright fee issue
could adversely affect the Company’s operating results and business.
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