Lexmark To Post Earnings Amid Tough OEM Market

The Lexington, Ken.-based printer manufacturer is scheduled to announce earnings before the stock market opens. The report should provide an indication of whether the company's effort to strengthen channel sales of its Lexmark-branded products is making up for the slower part of its business building printers for companies including Dell and IBM.

In recent months, solution providers said they've noticed improvements in both Lexmark's product line and channel program, and the company itself has seen marked improvement in its sales of branded products through the channel.

"Lexmark is one of our better vendors," said John Callahan, CEO of O'Callaghan Technology, a North Smithfield, R.I., solution provider. "I've been very pleased with them."

James Thomas, president of Printer Solutions, a San Antonio-based solution provider, said Lexmark has remained a strong partner, but aggressive competition from rivals continues. "All of the big boys have been pretty tough this year," Thomas said.

But Lexmark has remained hamstrung by its relationship with Dell -- which makes up a full 15 percent of Lemark's revenue. According to Lexmark's most recent annual report, filed last month with the U.S. Securities and Exchange Commission, its sales to Dell plunged last year by $38 million to $744 million.

In addition, IBM, one of Lexmark's other large OEM customers, has announced it is exiting the printer business and transferring its operations into a joint venture with Ricoh. Aside from what it has reported in its annual report, Lexmark executives have declined to comment about the company's OEM relationships. But Lexmark is not the only document hardware company that has experienced sluggish OEM sales. Last week, Xerox, Stamford, Conn., said that despite strong profit growth, sales of color products to OEM customers lagged; Xerox has also listed Dell among its OEM customers.

According to Thomson Financial, the average of analyst expectations is for Lexmark to report a profit of $1.03 per share on revenue of $1.26 billion.