Lexmark 2010 Annual Report Download - page 8

primarily managed along two segments: Imaging Solutions and Services (“ISS”) and Perceptive Software.
Refer to Part II, Item 8, Note 20 of the Notes to Consolidated Financial Statements for additional
information regarding the Company’s reportable segments.
Revenue derived from international sales, including exports from the United States of America (“U.S.”),
accounts for approximately 57% of the Company’s consolidated revenue, with Europe, Middle East and
Africa (“EMEA”) accounting for 36% of worldwide sales. Lexmark’s products are sold in more than
170 countries in North and South America, Europe, the Middle East, Africa, Asia, the Pacific Rim and the
Caribbean. This geographic diversity offers the Company opportunities to participate in emerging markets,
provides diversification to its revenue stream and operations to help offset geographic economic trends,
and utilizes the technical and business expertise of a worldwide workforce. Currency exchange rates had a
negligible impact on international revenue, costs and expenses in 2010 compared to 2009. Refer to
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Effect of
Currency Exchange Rates and Exchange Rate Risk Management for more information. A summary of the
Company’s revenue and long-lived assets by geographic area is found in Part II, Item 8, Note 20 of the
Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.
Market Overview
1
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 recovery 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.
In general, as the printing industry matures and printer and copier-based product markets converge, the
Company’s management expects competitive pressures on product prices to continue. However,
management believes that this convergence represents an opportunity for printer-based product and
solution vendors like Lexmark to displace copier-based products in the marketplace. The Company’s
management believes that the integration of print/copy/fax/scan capabilities enables Lexmark to leverage
strengths in network printing and related document workflow solutions. Lexmark management also
believes that it is well positioned to capture faster growing software and services opportunities that are
associated with providing managed print services and ECM and document workflow software and services
that are focused on streamlining and automating document-intensive business processes, as well as
reducing unnecessary print. Lexmark sees a significant opportunity to take a leadership role in providing
innovative print and document and content solutions and services to help customers improve their
productivity and business performance.
2
1
Certain information contained in the “Market Overview” section has been obtained from industry sources, public information and
other internal and external sources. Data available from industry analysts varies widely among sources. The Company bases its
analysis of market trends on the data available from several different industry analysts.