Lexmark 2010 Annual Report Download - page 34

and priced inkjet hardware devices, focused on business users. The business focused users that select
these devices use them more extensively than non-business users, increasing printer and MFP supplies
usage. In 2010 the Company saw good growth in laser hardware unit sales, due to strong growth in laser
workgroup hardware unit sales. Inkjet hardware unit sales declined in 2010, as the growth the Company
experienced in business focused inkjet unit sales was more than offset by declines in lower performance
and lower priced consumer inkjets. The Company also saw growth in revenue from the sale of supplies, as
growth in sales of laser supplies more than offset declining revenue in inkjet supplies. The broad line of
workgroup printers and MFPs, including color printers and MFPs, continues to be very well received by
customers and channel partners. The inkjet professional series continues to be well received by and show
year-to-year growth in the Office superstore channel, significantly improving access to business focused
customers. The new laser and inkjet product introductions in 2010 have continued to strengthen the
breadth and depth of the Company’s workgroup laser line, color laser line, laser MFPs and business
inkjets.
To allow Lexmark to participate in the growing market to manage unstructured data and processes, and to
build upon and strengthen the current industry-focused document workflow solutions and managed print
services, the Company acquired Perceptive Software in the second quarter 2010.
Refer to the section entitled “RESULTS OF OPERATIONS” that follows for a further discussion of the
Company’s results of operations.
Trends and Opportunities
Lexmark serves both the distributed printing and electronic content management markets. Lexmark
management believes the total market opportunity of both of these markets in 2010 was approximately
$95 billion. Lexmark management believes that the total distributed printing market opportunity was
approximately $90 billion in 2010, including printing hardware, supplies and related services. This
opportunity includes printers and multifunction devices as well as a declining base of copiers and fax
machines that are increasingly being integrated into multifunction devices. Based on industry information,
Lexmark management believes that the market grew in 2010 due to a rebound from the downturn in 2009.
The distributed printing industry is expected to experience low to mid single digit annual revenue growth
rates over the next two years, assuming the global economic expansion continues, with the highest growth
likely to be attributable to multifunction products (“MFPs”), color lasers, business inkjets and stronger
emerging market demand. In addition, managed print services and solutions are expected to experience
double digit annual revenue growth rates over the next two years. Based on industry analyst estimates,
Lexmark management believes that the ECM market, including document process automation software
and services, is currently projected to grow 10% to 12% annually over the next few years and in 2010 had a
market size of approximately $5 billion including related services. However, management believes the total
addressable market is significantly larger due to relatively low penetration of ECM products worldwide.
Market trends driving long-term growth include:
• Increased adoption of color and graphics output in business;
• Advancements in electronic movement of information, driving more pages to be printed by end
users when and where it is convenient to do so;
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