Lexington-based printer maker Lexmark International announced Tuesday it plans to cut 825 jobs worldwide through 2011 as it works to make itself more efficient and deal with an economy that has dragged down revenues substantially.
The cuts will be focused primarily on the company's manufacturing, which is done overseas, in a bid to improve its supply chain. Other affected areas include service-delivery overhead, marketing and sales support, corporate overhead and development.
While some of the 825 jobs affected will be in Lexington, the company said it has been hiring in other areas and will continue to employ about 3,000 workers at its headquarters here. The cuts are not expected to be complete until the first quarter of 2011.
"We've been protecting our ability on sales coverage. We want to keep the coverage that we have," CEO Paul Curlander told analysts in describing the cuts. "We want to protect our ability on developing products. And what we want to work on is our overhead, on our infrastructure, be it supply chain or geographic sales support or corporate overhead."
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Discussing third-quarter results, Curlander said demand for Lexmark's products came in above the company's expectations.
Revenue fell 15 percent compared with a year ago, but it grew 6 percent compared with the second quarter. During three of the past four years, revenue has fallen between those quarters. It was also the first time sales of ink and toner grew between those quarters since 2003.
Net income was down 73 percent in the quarter compared with a year ago, but much of that difference is attributed to the restructurings that were taking place during both quarters. Factoring out restructuring charges in both quarters, Lexmark's earnings per share were up to 65 cents from 63 cents a year ago.
In fact, the last quarter in which Lexmark did not have a restructuring charge was the fourth quarter of 2005.
And though Lexmark has shifted its strategy and launched new products meant to appeal to customers who print more, it's tough to see whether it's working, observers said.
"With the restructurings over the past couple of years, there are enough moving parts that you may not be able to tell until next year whether this is working," said Tom Carpenter, vice president and senior equity analyst at Hilliard Lyons in Louisville.
Carpenter complimented the company's products. "This is the first time, in my opinion, in 10 years that you could make the argument that Lexmark's products are as good or better than the competition's," he said.
He added: "The key for Lexmark going forward is the sales of the new printers, and do they generate higher (ink and toner) usage than the older models they replaced?"
But the product introductions have come at a time when businesses have cut back on technology purchases and laid off workers, cutting the amount of printing done. And consumers and small businesses who use the company's inkjet printers are also struggling with the economy.
"While it could be a long recovery for the overall printer market to return to its prior level, we do believe we are making Lexmark into a leaner and stronger competitor," Curlander said of the latest restructuring.