Dragged down by a number of issues including lower printing volumes and the decision last year to end its inkjet operations, Lexmark International reported lower-than-expected fourth-quarter and annual earnings Tuesday.
Analysts had expected quarterly earnings per share of 90 cents excluding one-time items, but under that measure, the company posted profit of 61 cents per share.
The company's shares (LXK:NYSE) fell 15 percent Tuesday, or $4.21, to close at $23.74.
The fourth-quarter results continued to illustrate Lexmark's strategic shift as it looks to shed the less-than-profitable inkjet offerings of yesteryear and add to its highly profitable portfolio of software products.
Compounding the shift, though, has been a slowdown in demand for printing at workplaces.
While some analysts have proposed the decline is due to people printing less because of mobile devices, Lexmark CEO Paul Rooke has said it appears to be temporary belt-tightening by companies.
Rooke reaffirmed that belief Tuesday, saying the "more dramatic downturn" last year suggests it's being driven by a goal of saving costs.
He said leaders of companies are beginning to pay more attention to what has historically been inefficient printing structures in their businesses.
"There's just waste out there in many companies," he said, noting more and more companies are signing deals to have their printing managed by firms such as Lexmark.
"It has more to do with bringing them from an inefficient state to efficient state," he said.
And he expects another "stagnant" year for printing in 2013.
That comes as Lexmark will continue to deal with sales declines caused by its decision to stop selling inkjet printers. The company announced in late August it would gradually shut down its inkjet operations, which accounted for 15 percent of overall revenue in the fourth quarter. The revenue from those operations fell 26 percent year over year.
The move came a few years after the company stopped producing inkjet printers aimed at home consumers because customers weren't printing enough to meet profit expectations. Instead, the company had used the inkjet technology to complement its laser printer lines aimed at businesses.
But the move to inkjets for businesses wasn't profitable enough, leading to the decision to lay off 1,700 employees worldwide during the next couple of years. The bulk of those being cut, 1,100 people, are overseas workers employed in the production of inkjet cartridges. An additional 350 are full-time employees at Lexmark's Lexington headquarters, where 200 contractors also are being cut.
Rooke said the majority of the inkjet restructuring has been completed, moving the company closer to its reimagined look.
"If you stand back and look at 2012 with four software acquisitions, a launch of a new laser line and the exit of our inkjet business, you can see we're continuing this strategic shift," he said. "That's an important perspective ... we're excited about these strategic areas."
4Q12: $967.4 million
4Q11: $1.06 billion
2012: $3.8 billion
2011: $4.17 billion
4Q12: $6.3 million
4Q11: $69.3 million
2012: $106.3 million
2011: $320.9 million
EARNINGS PER SHARE
4Q12: 10 cents (61 cents excluding one-time charges)
4Q11: 94 cents ($1.25 excluding one-time charges)
2012: $1.53 ($3.51 excluding one-time charges)
2011: $4.12 ($4.71 excluding one-time charges)
Sales of printer hardware declined 15 percent year over year in the fourth quarter to $222 million.
Large workgroup: These laser printers accounted for 78 percent of hardware revenue and saw sales decline 11 percent year over year, with unit shipments down 1 percent.
Small workgroup: These laser printers accounted for 17 percent of hardware revenue and saw sales fall 11 percent year over year, with unit shipments down 13 percent.
Inkjet: These printers being phased out accounted for 5 percent of hardware revenue and saw sales fall 57 percent year over year, with unit shipments dropping 42 percent.
Sales of ink and toner declined 10 percent year over year in the fourth quarter.
Toner: Laser toner accounts for 79 percent of supplies revenue and saw sales drop 6 percent year over year.
Ink: Ink accounts for 21 percent of supplies revenue and saw sales drop 22 percent year over year.
Lexmark expects first-quarter revenue to be down 11 percent to 13 percent year over year. The company forecast earnings per share in the range of 43 cents to 53 cents. Excluding one-time charges, earnings per share are expected to be in the range of 80 cents to 90 cents. Analysts expected earnings per share of $1, excluding one-time charges, before Tuesday's announcement.