Lexmark 2011 Annual Report Download - page 24

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investment portfolio may also be adversely impacted. The interest rate environment and
general economic conditions could also impact the investment income the Company is able to
earn on its investment portfolio.
• Continued softness in certain markets and industries, constrained IT spending, and uncertainty
about global economic conditions could result in lower demand for the Company’s products,
including supplies. Weakness in demand has resulted in intense price competition and may
result in excessive inventory for the Company and/or its reseller channel, which may adversely
affect sales, pricing, risk of obsolescence and/or other elements of the Company’s operating
results. Ongoing weakness in demand for the Company’s hardware products may also cause
erosion of the installed base of products over time, thereby reducing the opportunities for
supplies sales in the future.
The competitive pricing pressure in the market may negatively impact the Company’s operating results.
• The Company and its major competitors, many of which have significantly greater financial,
marketing and/or technological resources than the Company, have regularly lowered prices on
their products and are expected to continue to do so. In particular, both the inkjet and laser
printer markets have experienced and are expected to continue to experience significant price
pressure. Price reductions on inkjet or laser products, including related supplies or the inability
to reduce costs and expenses, could result in lower profitability and jeopardize the Company’s
ability to grow or maintain its market share. In recent years, the gross margins on the
Company’s hardware products have been under pressure as a result of competitive pricing
pressures in the market. If the Company is unable to reduce costs to offset this competitive
pricing or product mix pressure, and the Company is unable to support declining gross margins
through the sale of supplies, the Company’s operating results and future profitability may be
negatively impacted.
The Company’s ability to be successful in shifting its strategy and selling its products into the higher-
usage segments of the inkjet market could adversely affect future operating results.
• In January 2012, the Company introduced its new OfficeEdge series of color MFPs focused on
higher usage business markets. The introduction of the OfficeEdge series is a continuation of
the Company’s strategy to transition its inkjet business to the higher-usage segments of the
inkjet market. The Company’s future operating results may be adversely affected if it is unable
to successfully market and sell its high-end inkjet printers designed for high usage business
customers, as well as develop and manufacture additional products, designed for the
geographic and customer and product segments of the inkjet market that support higher usage
of supplies.
The Company’s failure to manage inventory levels or production capacity may negatively impact the
Company’s operating results.
• The Company’s performance depends in part upon its ability to successfully forecast the timing
and extent of customer demand and reseller demand to manage worldwide distribution and
inventory levels of the Company. Unexpected fluctuations (up or down) in customer demand or in
reseller inventory levels could disrupt ordering patterns and may adversely affect the Company’s
financial results, inventory levels and cash flows. In addition, the financial failure or loss of a key
customer, reseller or supplier could have a material adverse impact on the Company’s financial
results. The Company must also be able to address production and supply constraints, including
product disruptions caused by quality issues, and delays or disruptions in the supply of key
components necessary for production. Such delays, disruptions or shortages may result in lost
revenue or in the Company incurring additional costs to meet customer demand. The Company’s
future operating results and its ability to effectively grow or maintain its market share may be
adversely affected if it is unable to address these issues on a timely basis.
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