Lexmark 2013 Annual Report Download - page 9

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Part II, Item 8, Note 20 of the Notes to Consolidated Financial Statements for additional information regarding the Company’s
reportable segments.
In August 2012, the Company announced it is exiting the development and manufacturing of inkjet technology. The Company will
continue to provide service, support and aftermarket supplies for its inkjet installed base. In April of 2013, the Company and Funai
Electric Co., Ltd. (“Funai”) entered into a Master Inkjet Sale Agreement of the Company’s inkjet-related technology and assets to
Funai. Included in the sale were one of the Company’s subsidiaries, certain intellectual property and other assets of the Company. The
Company will continue to sell supplies for its current inkjet installed base. The sale closed in the second quarter of 2013.
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 37% of worldwide
sales. Lexmark’s products are sold in various 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 2013 revenue compared to 2012. Refer to
Part II, Item 7, 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 Overview1
Lexmark serves both the distributed printing and imaging, and content and process management markets with a focus on business
customers. Lexmark’s enterprise content and process management platform supports traditional business content as well as rich media
and medical image content, and includes enterprise search, intelligent capture, DOM, and business process and case management.
Lexmark’s healthcare offering includes an industry leading, standards based and highly secure, content repository and VNA that
integrates all patient unstructured information across the enterprise to enable easy access through an EMR system along with
workflow automation and information sharing within and between facilities. Lexmark management believes the total relevant market
opportunity of these markets combined in 2013 was approximately $80 billion. Lexmark management believes that the total relevant
distributed laser printing and imaging market opportunity was approximately $70 billion in 2013, 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 overall distributed printing market declined slightly in 2013. The distributed printing industry is expected to
experience flat to low single digit declining revenue overall over the next few years but, continued growth is expected in MPS,
multifunction products (“MFPs”), and color lasers which are all areas of focus for Lexmark. MPS and fleet solutions are expected to
continue to experience double digit annual revenue growth rates over the next few years and the relevant content and process
management software markets that Lexmark participates in, are projected to grow approximately 10% annually over the next few
years, both based on industry analyst estimates. In 2013, the total relevant content and process management software market was
approximately $10 billion, excluding related professional services. However, management believes the total addressable market is
significantly larger due to relatively low penetration of content and process management software solutions worldwide.
In general, as the printing and imaging market matures and printer and copier-based product markets continue to converge, the
Company’s management expects competitive pressures 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 MPS and content and process management
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 printing, imaging, content
and process solutions and services to help customers improve their productivity and business performance.
The content and process management software and services markets serve business customers. These markets include solutions for
capturing all types of unstructured information such as hardcopy, photographs, emails, images, video, audio and faxes as well as
intelligent indexing, archiving and routing of this information to streamline and automate process workflows while managing changes
to both content and processes and automating governance and compliance policies. These solutions help companies leverage the value
of their unstructured content by connecting it with existing enterprise applications and making it available in context within processes
so that businesses can make better and faster decisions to enhance growth, improve productivity, lower costs and improve customer
satisfaction.
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.
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