Executives with printer maker Lexmark International made their first public comments last week about the company's recent acquisition of European software firm Pallas Athena, which will become part of Lexmark's Perceptive Software division.
Pallas Athena specializes in helping businesses best manage their work processes and put out the documents that are produced as part of those processes.
The acquisition "expands our market for revenue growth and now provides cross-selling opportunities between imaging products, fleet management, content management, business-process management and document-output management solutions," Lexmark CEO Paul Rooke told analysts during a third-quarter earnings conference call. "And as with Perceptive, there is good opportunity to grow Pallas Athena worldwide, leveraging Lexmark's global presence."
The $50.2 million all-cash transaction was funded using the company's non-U.S. cash.
While Lexmark does not have a manufacturing presence in Thailand, the Lexington-based company expects to see an effect on operations because it has a number of suppliers affected by recent flooding in the country.
"We're working closely with them to understand the impacts to the supply of materials and components and working on alternative solutions as needed," Rooke told analysts during last week's conference call.
He noted that only printer hardware and not ink and toner would be affected by the crisis.
"We believe the impact to hardware availability in the fourth quarter is expected to be about $10 million of hardware revenue, or roughly 1 percent of total revenue," Rooke said. "We are currently evaluating whether there will be any impact to future quarters."
Some core inkjets decline
While revenue from Lexmark's printer hardware grew 2 percent in the third quarter, there was some weakness in what the company considers its core products going forward. While it saw revenue growth of 17 percent in sales of high-end devices, sales of low-end printers fell 16 percent. Those low-end printers include small workgroup and personal lasers and newer business-focused inkjet printers.
Chief Financial Officer John Gamble Jr. said the decline was driven by weakness in inkjets priced under $200, while more expensive inkjets continued to show growth.
"What you see us doing is, continue to move up in our line toward more higher-performance, higher-usage segments," Rooke told the Herald-Leader. "Seeing some drop-off in sub-$200 isn't a surprise. It's just part of our ongoing shift."
Gartner calls Lexmark a 'leader' in fields
Lexmark was recently named a leader in several fields by acclaimed research firm Gartner Inc. Gartner positioned Lexmark as a leader in its "Magic Quadrant" analysis of printers, multi-function printers and worldwide managed print services.
Both reports measure "completeness of vision" and "ability to execute," according to Gartner. They also examine breadth of product lines, dedication to research and development, and service delivery.
"We believe being positioned in the 'Leaders' quadrant by Gartner affirms that the innovation in Lexmark's sophisticated smart multi-function printers extends them beyond just output and into providing productivity-enhancing workflow solutions," Lexmark Executive Vice President Marty Canning said in a statement.
Update on certain costs
Also during the earnings announcement, Lexmark leaders said they expect to soon resolve issues that have caused the company to spend more to deliver its products from factories to customers.
Those extra costs came from the company's efforts in the latter half of 2010 to restructure its North American distribution infrastructure.
"We continue to make progress in resolving the non-manufacturing cost issues we experienced," Gamble said. "We have resolved the bulk of the issues and expect to have the issues fully resolved by the end of the year."
CR Magazine, which covers corporate responsibility, recently named Rooke as one of its three 2011 Responsible CEOs of the Year.
Alongside the leaders of The Clorox Company and Environmental Defense Fund, Rooke was honored for living up to the CR Magazine philosophy to "do well by doing good," according to a news release.
Rooke was recognized for Lexmark's environmental and corporate social-responsibility initiatives "positively impacting the way they design their products, the way they operate their facilities, and the way they interact with the community," according to a news release about the awards.