Printer Price War Hits Lexmark

Lexmark reported first-quarter earnings per share of 96 cents, compared to the Wall Street forecast consensus of $1.03 per share. Overall, the document-technology company turned in sales of $1.36 billion and a profit of $124 million, compared with sales of $1.26 billion and a profit of $121 million for the same quarter a year earlier.

The Lexington, Ky., company turned in a "solid operational performance," but was "impacted by challenging market conditions," Lexmark CEO Paul Curlander told financial analysts last week.

Curlander said weak demand colored the company's consumer market performance while in commercial segments, Lexmark "saw a return to aggressive price competition."

Those market conditions may stretch through the second quarter, he added. "I think the story in the market conditions was in the aggressive pricing competition, particularly in inkjet," Curlander said.

Solution providers say they're feeling the effects of this competition on their margins, pinning some of the blame on Dell, Round Rock, Texas, which has OEM agreements with both Lexmark and Fuji Xerox to provide Dell-branded printing systems.

"You've got Dell fighting in this market, and Lexmark has to lower their prices," said Floyd Eden, president of Ready Data, a New York-based solution provider. "This is channeling down to the reseller."

Eden said he has been able to remain competitive with a value-added business model, but has never seen Dell so aggressive in printers and related products. Moreover, Eden said he has been contacted by at least one significant customer recently seeking pricing on Dell printing consumables. That same customer a year ago was buying Lexmark products, Eden said.