Lexmark breaks even in third quarter

Dragged down by a recent decision to end its declining inkjet operations, Lexmark International reported break-even earnings Tuesday.

The Lexington-based company would have earned 94 cents per share for the quarter, but one-time charges related to closing inkjet and acquiring software companies dropped that to zero.

The third-quarter results illustrated 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.

"We remain confident in our strategy," CEO Paul Rooke told analysts during a morning conference call.

Lexmark announced in late August that it would gradually shut down its increasingly small inkjet operations, which accounted for 16 percent of overall revenue in the third quarter. The revenue from those operations fell 29 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 to be cut, 1,100 people, are overseas workers employed in the production of inkjet cartridges. An additional 350 are full-time employees at its headquarters in Lexington, where 200 contractors also are being cut.

Rooke declined to say how many Lexington-based workers had already been laid off but said that full-time employees here are receiving severance packages.

The majority of the restructuring affecting inkjet is expected to be completed by the end of 2013, he said.

The company recorded $64 million in one-time charges in the third quarter related to the inkjet restructuring. The entire process is expected to cost $160 million.

"We're doing everything we can to get people connected," Rooke said, referencing other job opportunities. "Many of these are longtime employees who have been loyal employees for us, and we're trying to do everything we can to help them."

The company is trying to sell its inkjet operations, but Rooke provided few details on that effort Tuesday.

"We have an investment banker now that we're working with," he said. "The process is fully engaged.

"We're not putting out any projections of timing there, but we're deep in the process."

Rooke emphasized that Lexington continues to be vital to the company with its corporate functions, including marketing, and research and development focused on the laser printers that are crucial to the company.

He cited the company's announcement last week of 42 new laser printers, among its largest product launches in history.

"It's a wonderful example of the investments we're making here in Lexington in developing our core laser technology," he said.

For the quarter, the company's laser printer hardware and toner sales saw weakness because of a few factors, including lower demand, particularly in Europe.

"What we see in these sluggish economic times is customers do decide to pause and defer their purchases," Rooke said. "They have printers, and the usage continues.

"It's just when they want to refresh them."