Lexmark shares tumble on first-quarter earnings report

ctruman@herald-leader.comApril 22, 2014 

Lexmark International's shares tumbled Tuesday after the Lexington-based printer maker and software company issued its first-quarter earnings report.

Shares of Lexmark (LXK) closed down 11.2 percent at $41.52, making it the day's top decliner on the New York Stock Exchange.

However, the stock overall has been up more than 30 percent for the year. Financial news site TheStreet.com's ratings service listed Lexmark stock as a "buy," saying, "We do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Lexmark's adjusted first-quarter earnings of 92 cents a share for the Lexington company were above analysts' average estimate of 87 cents.

However, using generally accepted accounting practices and figuring in $3 million of acquisition-related adjustments, earnings for the quarter that ended March 31 were 46 cents a share, or $29.3 million, down from 62 cents a share, or $40 million, for the same quarter last year.

The adjusted earnings of 92 cents a share were down from 95 cents in the first quarter of 2013.

Lexmark chairman and CEO Paul Rooke said in a news release that the company's managed print services division and Perceptive Software grew 18 percent to $244 million, accounted for 28 percent of Lexmark's total revenue and is expected to exceed $1 billion this year.

Total revenue for the quarter ticked down 0.8 percent to $877.7 million.

Analysts surveyed by Thomson Reuters had estimated Lexmark's earnings to be 87 cents a share on $856 million in revenue.

Managed print services and Perceptive Software enable Lexmark to move beyond its longtime hardware-based business to provide, control and innovate more of a client company's information flow.

Rooke said in a telephone interview that the period was a "solid quarter" considering the continued buffeting of "the inkjet exit headwind" as the company evolves to a different corporate focus.

Rooke said the inkjet business would continue to shrivel during 2014. The company projects a total revenue decline of 2 percent to 4 percent compared with last year from its decision to discontinue its inkjet printer business.

Lexmark has set a goal to achieve $500 million in software revenue by the end of 2016, and "the acquisition element is a part of our strategy," he said.

In the last quarter of 2013, Lexmark's net income had soared, led by robust growth in its Perceptive Software unit and record revenue in its managed print services segment. Its adjusted results for the last quarter of 2013 beat Wall Street predictions.

The company has been big on acquisitions in recent years.

In addition to acquiring Perceptive Software in 2010, Lexmark bought Germany-based Saperion AG in 2013. Saperion is a developer and provider of enterprise content management and business process management software. In 2011, Lexmark acquired Netherlands-based Pallas Athena, a move the company said strengthened its end-to-end managed print services and business process solutions. Lexmark also bought ISYS Search Software, based in Australia; Massachusetts-based Nolij Corp.; and Luxembourg-based Brainware.

Last year, the company bought Twistage, a San Francisco company with a pure cloud software platform for managing video, audio and image content; Seattle-based AccessVia, which has software that prints on demand; Pacsgear, a Pleasanton, Calif., company that provides document and multimedia connectivity solutions; and Acuo Technologies of Minneapolis, a leader in clinical management software and the medical imaging industry.

Cheryl Truman: (859) 231-3202. Twitter: @CherylTruman.

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