Lexington-based printer maker Lexmark International has far exceeded the profit expected by Wall Street analysts so far this year, and driving that performance has been the company's laser printer division.
That segment's revenue has grown 20 percent in both the first and second quarters of 2010 compared to the same periods a year earlier. As recently as the third quarter of 2009, the division's revenue was down year over year, as the throes of the recession wore on the company.
But the company has been quicker to recover than its rivals. Lexmark's leaders boast that the company's total revenue has grown faster than its major competitors in each of the past seven quarters. The company's laser division has outperformed the market average the past 10 quarters and outperformed each competitor in the market the past four quarters.
The company's market share has also picked up in one of the key product segments: workgroup laser printers. In the second quarter, Lexmark had 15.1 percent of the market, up from 13.8 percent a year ago.
"If anybody can sustain growth, Lexmark can," said Angele Boyd, a group vice president and general manager at market researcher IDC. "They're nimble ... and they can move fast to execute certain things."
Quick reaction to customer needs has been key to Lexmark's laser strategy in recent years, and it's now paying off. Laser division leader Marty Canning explained the company's strategy as threefold: Invest in printer technology, offer specialized products for specific industries, and be willing to work closely and customize printers and software for customers.
"We took those visions and invested in them heavily over the past several years, and what you see are a series of results that are really growing," Canning said.
In early 2006, Lexmark began investing significantly more year over year in its research and development. The company, as Canning explained, needed to fill out its product lineup.
The result was a spate of new printers — 72 debuted from October 2008 to spring 2009 — and six new product segments for the company.
Lexmark has dialed back some of its research-and-development spending in recent quarters, consolidating projects. Canning said that's because the company needed to spend more in the past to close product gaps.
"That always takes more energy, more investment, more work," he said. "Now we feel we accomplished much of that, and now it's about maintaining and growing and advancing, and we do think we have the appropriate level of resources."
Focus on industries
The company's laser division has been focused for years on working closely with specific industries, becoming the go-to printer company for the finance industry, retailers and pharmacies.
It has done so by offering specific types of printers and so-called solutions, essentially software that helps perform common tasks for those industries.
In recent years, the company has expanded to industries like health care by offering a printer that helped with tasks like scanning documents into electronic medical records and routing physician orders to hospital pharmacies.
Customizing for customers
For the past few years, though, Lexmark has focused not just on industries but specific customers in the burgeoning field of managed print services (MPS). That field has seen Lexmark and its competitors take over all the responsibilities of printing for companies.
"It's been our greatest weapon in growing new customer opportunities," Canning said. "Just over the past nine months we've won a whole variety of customers. Fourteen of them have been global ... Fortune 500-type of companies where we have taken that business directly from HP or Xerox."
Because it generally locks customers into four- to five-year contracts, MPS has also provided a revenue stream less prone to the fluctuations of normal information technology spending, which plummeted during the recession.
"This market is brand new," Canning emphasized. "There are many, many customers that aren't under a managed contract right now, and there are some that are renewing and we are competing aggressively."
Even though it's smaller compared to rivals like HP and Xerox, Lexmark has been able to succeed in MPS, and it's because of just that, the company's smaller size, said Ed Crowley, founder of The Photizo Group, a Versailles-based MPS research firm.
"The strategy they're taking is to be very focused and customized for the customer, so much that maybe the bigger guys wouldn't do that much, and it's working well," he said. "But can they continue to outmaneuver the other guys? That's the big question."
Canning said the company is up to the challenge and added to its competitive arsenal recently by acquiring Perceptive Software, a Kansas-based company that sells software that helps businesses manage content.
And while he acknowledged that it will become much tougher to maintain growth rates similar to what Lexmark is experiencing now, Canning said the company's results prove it's well on the way to continuing to grow.
"All of the marketplace has gone through a very challenging last few years. We set out with an objective of coming out of this a leaner and stronger company, and I believe the results you're seeing are bearing that out right now," he said. "The commitment and the effort put forth by the Lexmark community has been unbelievable.
"You've seen us literally transform to a leadership position out there."