Lexmark 2010 Annual Report Download - page 47

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Revenue by reportable segment:
(Dollars in Millions) 2010 2009 % Change 2009 2008 % Change
ISS . . . . . . . . . . . . . . . . . . . $4,162.4 $3,879.9 7% $3,879.9 $4,528.4 (14)%
Perceptive Software. . . . . . . 37.3 — N/A ——N/A
Total revenue . . . . . . . . . . . . $4,199.7 $3,879.9 8% $3,879.9 $4,528.4 (14)%
ISS Segment
During 2010, revenue in ISS increased $282.5 million or 7% compared to 2009 due to a 13% increase in
hardware revenue and a 6% increase in supplies revenue.
The increased hardware revenue was due to a 23% growth in laser hardware revenue, partially offset by an
11% decline in inkjet hardware revenue. The higher laser revenue was driven by an 8% increase in laser
hardware unit sales, further enhanced by a favorable mix impact. Laser hardware average unit revenue
(“AUR”), which reflects the change in pricing and mix, increased approximately 14% due to a positive mix
shift towards workgroup laser products and laser MFPs. The decline in inkjet hardware revenue was due to
a 23% decline in inkjet units, partially offset by a 15% improvement in AUR, both of those changes year on
year originating from the continuous shift towards high-end focused inkjets and away from low-end
devices.
The supplies revenue grew 6% year on year, primarily driven by a strong unit growth in laser supplies,
somewhat offset by a decline in inkjet supplies as a result of the decrease in the installed base of inkjet
hardware devices.
During 2009, ISS revenue declined $648.5 million or 14% compared to 2008 due to a 22% decrease in
hardware revenue and a 12% decrease in supplies revenue.
The decreased hardware revenue was due to laser hardware revenue decreasing 19% and inkjet
hardware revenue decreasing 28%. The decline in laser hardware revenue was due to lower unit
volume and the negative impact of currency, partially offset by a positive mix of workgroup and MFP
devices. Laser hardware unit shipments decreased approximately 21% YTY primarily due to fewer low-
end mono-laser units, partially offset by unit growth in laser MFPs and single function color devices. Laser
hardware AUR, which reflects the changes in both pricing and mix, increased approximately 4% YTY due
to a positive product mix shift toward workgroup and MFP devices. Inkjet hardware revenue declined
28% YTY due to lower unit shipments and negative net price impacts as well as negative foreign currency
impacts, partially offset by an improvement in mix toward higher end devices. Inkjet hardware AUR
increased 13% due to favorable product mix.
The supplies revenue declined in 2009 versus 2008 primarily due to the inkjet supplies decline. Laser
supplies revenue experienced a decline as well. Management believes that the broad global economic
weakness of 2009 and the shrinkage in the installed base of inkjet products due to the strategic shift away
from the sale of low-end inkjet devices were the key drivers of the supplies revenue decline.
Perceptive Software Segment
The acquisition of Perceptive Software was completed on June 7, 2010 and revenue for the year reflects
only the period from June 8 to December 31, 2010. Perceptive Software revenue includes $13 million of
acquisition-related adjustments, which reduced revenue. See “Acquisition-related Adjustments” section
that follows for further discussion.
In the fourth quarter of 2010, Perceptive Software grew its revenue by 15% sequentially versus the third
quarter of 2010.
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