Lexmark SA will be negligibly affected by the head office's decision to stop production of its inkjet range, as the local unit stopped bringing in new inkjets in February.
Lexmark said last week that it would ditch its inkjet range of printers, which is essentially its consumer arm. The group expects to save about $95 million a year in costs once the restructuring is fully implemented.
Country GM Mark Hiller says Lexmark SA stopped bringing in next-generation inkjets in February and communicated this shift to the channel.
Hiller says Lexmark, which sells most of the devices through the retail channel, has a low amount of inventory, which it will sell in the next few months. He says the group is shifting away from consumer-focused products to higher margin business services.
Absorbing staff
supply chain and other support functions.
The printing company will close its Philippines inkjet supplies manufacturing facility by the end of 2015, eliminate inkjet development worldwide, and scrap in-process inventory. About 1 700 jobs will be cut globally, including 1 100 manufacturing positions.
As most of the discontinued products went through the retail channel, there has been a negligible effect on local staff, notes Hiller. He says most employees have been absorbed into the rest of the business.
Lexmark says it will continue to provide service, support and aftermarket supplies for its inkjet installed base. Hiller expects demand in ink to continue for about the next three years and says the group will continue to produce cartridges and will still offer telephonic support and honour warranties.
Tough situation
Chairman and CEO Paul Rooke said the company had to take “difficult” decisions to drive improved profitability and significant savings.
“Our investments are focused on higher value imaging and software solutions, and we believe the synergies between imaging and the emerging software elements of our business will continue to drive growth across the organisation.”
Lexmark's actions will lead to $85 million in savings in 2013, increasing to ongoing annualised savings of $95 million beginning in 2015. Most of the savings will come from operating costs.
The printer's second quarter results came in below its guidance due to weaker than expected demand, particularly in Europe, and unfavourable currency impacts. In the third quarter, it expects revenue to drop between 9% and 11%, while earnings per share will also be lower.
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