Lexington-based Lexmark International announced first-quarter earnings Tuesday that exceeded analysts' expectations but continued to show declines in revenue and profit.
For the quarter, the company had sales of $884.3 million, down from $992.5 million in the same quarter of 2012. But that was above analysts' expectations of $873.6 million, according to Yahoo Finance.
Quarterly profit also dipped from the same quarter a year ago but was above the average estimate of analysts.
The stronger-than-expected performance led Lexmark's shares (NYSE:LXK) to rise more than 8 percent to close at $27.51.
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"All in all, it was a solid first quarter here for us," said CEO Paul Rooke, who also said he saw "positive signs" for the company as it transitions from being focused on printers to a portfolio of products that include software.
Rooke said the company's software division saw sales rise 54 percent year over year. But the division continued to post an operating loss.
"We're working hard to get to profitability for Perceptive," he said.
Meanwhile, managed print services, in which Lexmark manages the printing requirements of companies, saw growth of 10 percent to $160 million.
Compounding the shift, though, has been a slowdown in printing demand at workplaces.
That slowdown comes as Lexmark continues to deal with sales declines caused by its decision to stop selling inkjet printers.
Rooke has said he thinks the slowdown is coming from companies looking to clamp down on costs during a still-fragile economy. Some analysts, though, have questioned whether it's instead a fundamental shift as people become more accustomed to viewing information on mobile devices and so forth.
"In reality, it's probably a combination of both," Rooke said. "But part of our strategy with managed print services and software is to work with our customers to make sure their printing is optimized and information that is on paper, they can seamlessly get it off paper."
Meanwhile, inkjet operations continued to be a drag on earnings. The company announced in late August that it would gradually shut down its inkjet operations, which accounted for 14 percent of overall revenue in the first quarter. The revenue from those operations fell 34 percent year over year.
A few years earlier, 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.
The move to inkjets for businesses wasn't profitable enough, leading to the decision last year to lay off 1,700 employees worldwide over a 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.
The majority of the inkjet restructuring has been completed, moving the company closer to its new look. Lexmark also struck a deal in April to sell its inkjet assets to Funai Electric Co. for $100 million.
1Q13: $884.3 million
1Q12: $992.5 million
1Q13: $34.8 million
1Q12: $60.8 million
EARNINGS PER SHARE
1Q13: 54 cents (88 cents excluding one-time charges)
1Q13: 84 cents ($1.05 excluding one-time charges)
Sales of printer hardware declined 9 percent year over year in the first quarter to $181 million.
Large workgroup: These laser printers accounted for 83 percent of hardware revenue and saw sales decline 2 percent year over year, with unit shipments down 4 percent.
Small workgroup: These laser printers accounted for 16 percent of hardware revenue and saw sales fall 19 percent year over year, with unit shipments down 18 percent.
Inkjet: These printers being phased out accounted for 1 percent of hardware revenue and saw sales fall 78 percent year over year, with unit shipments dropping 77 percent.
Sales of ink and toner declined 16 percent year over year in the first quarter.
Toner: Laser toner accounts for 80 percent of supplies revenue and saw sales drop 11 percent year over year.
Ink: Ink accounts for 20 percent of supplies revenue and saw sales drop 31 percent year over year.
Lexmark expects second-quarter revenue to be down 6 percent to 8 percent year over year. The company forecast earnings per share in the range of 42 cents to 52 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 89 cents, excluding one-time charges, before Tuesday's announcement.