Lexmark 2011 Annual Report Download - page 15

comprised of authorized maintenance and repair, technical support, warranty support and parts
operations. From basic service coverage to comprehensive support, Lexmark offers a range of plans to
meet the specific demands of the customer’s output environment and reduce costly downtime.
ISS printer products generally include a warranty period of at least one year, and customers typically
have the option to purchase an extended warranty. Extended warranties may be purchased at any time
during the printer’s base warranty year(s) and are available to give ISS laser, dot matrix, or inkjet
devices a total warranty period of two, three, or four years.
• Marketing and Distribution — ISS
ISS employs large-account sales and marketing teams whose mission is to generate demand for its
business printing solutions and services, primarily among large corporations as well as the public
sector. These sales and marketing teams primarily focus on industries such as financial services, retail,
manufacturing, education, government and health care, and in conjunction with ISS’ development and
manufacturing teams, are able to customize printing solutions to meet customer needs for printing
electronic forms, media handling, duplex printing and other document workflow solutions. ISS also
markets its laser and inkjet products increasingly through SMB sales and marketing 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’ international sales and marketing activities for business customers are organized to meet the
needs of the local jurisdictions and the size of their markets. Operations in EMEA, North America, Latin
America and Asia Pacific focus on large-account and SMB demand generation with orders primarily
filled through distributors and resellers. In North America, inkjet AIO products are primarily distributed
through national office superstores, wholesale clubs, and e-tailers. EMEA, Latin American and Asia
Pacific operations distribute inkjet AIO products through major distributors and information technology
resellers and in selected markets through key retailers.
Supplies are generally available at the customer’s preferred point-of-purchase through multiple
channels of distribution. Although channel mix varies somewhat depending upon the geography, most
of ISS’ laser supplies products sold commercially in 2011 were sold through the ISS network of
Lexmark-authorized supplies distributors and resellers, who sell directly to end-users, or to
independent office supply dealers. Inkjet supplies are primarily sold through large office superstores,
discount store chains, distributors, online, wholesale clubs, and consumer electronics stores.
ISS also sells its products through numerous alliances and OEM arrangements. During 2011, 2010,
and 2009, one customer, Dell, accounted for $415 million or approximately 10%, $461 million or
approximately 11%, and $496 million or approximately 13% of the ISS’ total revenue, respectively.
• Competition — ISS
ISS continues to develop and market new products and innovative solutions at competitive prices. New
product announcements by ISS’ principal competitors, however, can have, and in the past, have had, a
material adverse effect on the Company’s financial results. Such new product announcements can
quickly undermine any technological competitive edge that one manufacturer may enjoy over another
and set new market standards for price, quality, speed and functionality. Furthermore, knowledge in
the marketplace about pending new product announcements by ISS’ competitors may also have a
material adverse effect on the Company as purchasers of printers may defer buying decisions until the
announcement and subsequent testing of such new products.
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