Lexmark 2010 Annual Report Download - page 35

• Continued convergence in technology between printers, scanners, copiers and fax machines into
single, integrated multifunction and all-in-one devices;
• Increasing ability of multi-function devices and all-in-one devices to integrate into process workflow
solutions and enterprise content management systems;
• Continued digitization and electronic distribution of information driving the rapid expansion of
unstructured digital information, such as office documents, email, web pages and image scans;
• Customer desire to have a third party manage their output environment;
• Ongoing emphasis on improving business process efficiency and driving costs out of the
organization by better managing enterprise content;
• Increasing need to capture, manage and access content from any location or any device, including
mobile access and mobile workflow participation, while ensuring content security; and
• Growing desire to unify structured data in business systems with unstructured content to make the
unstructured content more valuable and actionable within business functions.
As a result of these market trends, Lexmark has growth opportunities in monochrome laser printers, color
lasers, laser MFPs and inkjet AIOs as well as ECM software and document workflow solutions.
Color and MFP devices continue to represent a more significant portion of the laser market. The
Company’s management believes these trends will continue. Industry pricing pressure is partially
offset by the tendency of customers to purchase higher value color and MFP devices and optional
paper handling and finishing features. Customers are also purchasing more print and document
management software solutions and services to optimize their document-related infrastructure in order
to improve productivity and cost.
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. Customers are increasingly seeking productivity-related features that are found in inkjet
multifunction products designed for office use such as wireless and ethernet connectivity, automatic
document feeders and duplex capabilities, as well as access to web-based applications to automate print
and document related work functions. This trend represents an opportunity for the Company to pursue
revenue growth opportunities with its inkjet products and solutions targeted at SOHO and business market
segments.
While profit margins on printers and MFPs have been negatively affected by competitive pricing pressure,
supplies sales are higher margin and recurring. In general, as the hardcopy industry matures and printer
and copier markets converge, management expects competitive pressures to continue.
Lexmark’s dot matrix printers include mature products that require little ongoing investment. The Company
expects that the market for these products will continue to decline, and has implemented a strategy to
continue to offer high-quality products while managing cost to maximize cash flow and profit.
The enterprise content and document management software and services market primarily serves
business customers. It includes solutions for capturing and digitizing hardcopy information and
intelligent tagging and indexing of hardcopy and electronic information and documents in order to
streamline and automate document process workflows. These solutions help companies manage their
documents and other enterprise content in the context of their business processes and enterprise
applications with the result being higher productivity, lower costs, and increased customer satisfaction.
Management believes the deployment of ECM systems and document workflow solutions to effectively
capture, manage and access unstructured information is a significant long term opportunity.
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