Lexmark 2008 Annual Report Download - page 3

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To my fellow shareholders:
During 2008, we made important progress on our core strategic initiatives. These initiatives are to increase our pres-
ence and our product offerings in key high usage segments in the business market, to shift our inkjet strategy to con-
centrate on higher page generating products and customers, and to lower our cost and expense structure. However,
as we progressed through the year, we were impacted by the global economic slowdown. This slowdown, combined
with our inkjet strategy transition, negatively affected both our revenue and earnings. As we start into 2009, we are pre-
paring ourselves for an extended market slowdown, but also ensuring that we continue the key strategic investments
that we believe are important for the long term growth and success of Lexmark.
Preparing for an Extended Market Slowdown
We have taken and continue to take actions to reduce our fixed infrastructure and business support costs, as well as to
improve our productivity and efficiency. As we finished 2008, we had substantially completed the restructuring actions
announced in 2007 and 2008. These actions will provide annualized savings of about $70 million starting in 2009. In
response to the weakening economic conditions, in January 2009 we announced an additional restructuring program
that will be substantially complete this year, and will generate about $50 million of annualized savings starting in 2010,
for a total of about $120 million in annualized savings thereafter.
Focusing our Key Strategic Investments
As we implement these actions to reduce our cost and expense structure, we remain committed to driving Lexmark’s
long term success. We plan to continue to invest in the important strategic product segments of color lasers, laser
multi-function products (MFPs) and business inkjets that better position us to capture pages in high usage segments.
We are also very focused on retaining and improving the productivity of our sales coverage for enterprise customers
and channel partners. Overall, our objective is to improve our competitive position so that we are a stronger company
when we eventually exit this current economic downturn.
Repositioning our Inkjet Business
During 2008 we continued to reposition our inkjet business to focus on products and customers that drive a higher
page usage, and eliminate lower page-generating units. As a result, our inkjet hardware and supplies revenue de-
creased significantly during the year. However, we did improve our overall average unit selling price and the average
projected lifetime page generation per unit, and we believe that in the long term we will build a stronger business
on the foundation of higher usage devices. In 2008, we introduced our new Lexmark Professional Series of inkjet
products targeted to meet the needs of small office, home office, and small and medium business customers. The
award winning Professional Series products include business class features such as automatic document feeds,
two sided printing capability, wireless connectivity, high capacity ink cartridges, extended warranty offerings, and
lifetime phone support. During the year we continued our R&D investments in new inkjet technology and products
Paul J. Curlander
Chairman and CEO