Lexmark 2010 Annual Report Download - page 33

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Consolidated Financial
Statements and Notes thereto presented under Part II, Item 8 of this Form 10-K.
OVERVIEW
Products and Segments
Lexmark makes it easier for businesses of all sizes to move information between the paper and digital
worlds, and to manage unstructured electronic content. Since its inception in 1991, Lexmark has become a
leading developer, manufacturer and supplier of printing, imaging and document workflow solutions for the
office. The Company also operates in the office imaging and ECM markets. Lexmark’s products include
laser printers, inkjet printers, multifunction devices, dot matrix printers and associated supplies, solutions
and services and ECM software solutions and services.
The Company is primarily managed along two segments: ISS and Perceptive Software.
• ISS offers a broad portfolio of monochrome and color laser printers, laser MFPs and inkjet AIOs
along with innovative software solutions and managed services to help businesses efficiently
manage their printer and MFP infrastructure as well as share information. Laser based products
within the distributed printing market primarily serve business customers. Inkjet based products
within the distributed printing market historically have served customers in the consumer market,
but there is an increasing trend toward inkjet products being designed for SOHO and business. ISS
employs large-account sales and marketing teams whose mission is to generate demand for its
business printing solutions and services, primarily among large enterprises 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. 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 also sells its products
through numerous alliances and OEM arrangements.
• Perceptive Software offers a complete suite of ECM software products and solutions. The electronic
content and document management software and services market primarily serves business
customers. Perceptive Software uses a direct to market sales and broad lead generation
approach, employing internal sales and marketing teams that are segmented by industry
sector — specifically healthcare, education, public sector/government, and cross industry, which
includes areas such as retail, financial services and insurance. Perceptive Software also offers a
direct channel program that allows authorized third-party resellers to market and sell Perceptive
Software products and solutions to a distributed market. Perceptive Software has two general forms
of software agreements with its customers, perpetual licenses and subscription services.
Refer to Part II, Item 8, Note 20 of the Notes to Consolidated Financial Statements for additional
information regarding the Company’s reportable segments, which is incorporated herein by reference.
Operating Results Summary
2010
The Company exited the 2009 downturn with a strong portfolio of products and solutions resulting from
ongoing and focused R&D investments as well as with a reduced base of operating costs and expenses
due to restructuring initiatives conducted in 2009 and before. As a consequence, the revenue growth
experienced by the Company in 2010 resulted in improvement in its operating margin. The Company also
continued to execute on its strategic focus on workgroup laser hardware devices and higher performance
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