Lexmark 2010 Annual Report Download - page 14

decommissioning services, consumables management, optimization services and utilization
management. These services can be tailored to meet each customer’s unique needs and give them
more extensive knowledge and optimization of their printing assets and infrastructure.
ISS’ printer products generally include a warranty period of at least one year, and customers typically have
the option to purchase an extended warranty.
• Marketing and Distribution — ISS
ISS employs large-account sales and marketing teams whose mission is to generate demand for its
business printing solutions and services, primarily among large corporations as well as the public sector.
Sales and marketing teams primarily focus on industries such as financial services, retail, manufacturing,
education, government and health care. Those teams, in conjunction with ISS’ development and
manufacturing teams, are able to customize printing solutions to meet customer needs for printing
electronic forms, media handling, duplex printing and other document workflow solutions. ISS also
markets its laser and inkjet products increasingly through SMB teams who work closely with channel
partners. ISS distributes and fulfills its products to business customers primarily through its well-
established distributor and reseller network. ISS’ products are also sold through solution providers,
which offer custom solutions to specific markets, and through direct response resellers.
ISS’ international sales and marketing activities for business customers are organized to meet the needs of
the local jurisdictions and the size of their markets. Operations in EMEA, North America, Latin America and
Asia Pacific focus on large-account and SMB demand generation with orders primarily filled through
distributors and resellers. In North America, inkjet AIO products are primarily distributed through large
discount store chains, consumer electronics stores, office superstores, wholesale clubs, online, as well as
through distributors. EMEA, Latin American and Asia Pacific operations distribute inkjet AIO products
through major distributors and information technology resellers and in selected markets through key
retailers.
Supplies are generally available at the customer’s preferred point-of-purchase through multiple channels
of distribution. Although channel mix varies somewhat depending upon the geography, most of ISS’ laser
supplies products sold commercially in 2010 were sold through the ISS network of Lexmark-authorized
supplies distributors and resellers, who sell directly to end-users or to independent office supply dealers
with inkjet supplies primarily distributed through large discount store chains, consumer electronics stores,
office superstores, wholesale clubs, online, as well as through distributors.
ISS also sells its products through numerous alliances and OEM arrangements. During 2010, 2009, and
2008, one customer, Dell, accounted for $461 million or approximately 11%, $496 million or approximately
13%, and $596 million or approximately 13% of the Company’s total revenue, respectively.
• Competition — ISS
ISS continues to develop and market new products and innovative solutions at competitive prices. New
product announcements by ISS’ principal competitors, however, can have, and in the past, have had, a
material adverse effect on the Company’s financial results. Such new product announcements can quickly
undermine any technological competitive edge that one manufacturer may enjoy over another and set new
market standards for price, quality, speed and functionality. Furthermore, knowledge in the marketplace
about pending new product announcements by ISS’ competitors may also have a material adverse effect
on the Company as purchasers of printers may defer buying decisions until the announcement and
subsequent testing of such new products.
In recent years, ISS and its principal competitors, many of which have significantly greater financial,
marketing and/or technological resources than the Company, have regularly lowered prices on hardware
products and are expected to continue to do so. ISS has experienced and remains vulnerable to these
pricing pressures. ISS’ ability to grow or maintain market share has been and may continue to be affected,
resulting in lower profitability. Lexmark expects that as it competes with larger competitors, ISS’ increased
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