Almost $1.8bn was wiped off the stock market valuation of the company as its shares plunged 26.14% to $45.01 on what the market concluded was evidence that Lexmark was being mauled badly in its battle with larger competitor Hewlett-Packard.
The company, which had been riding high on its position as Dell’s main supplier, now expects its third quarter revenue to decline 4% to 5% compared with its guidance in July of low-single revenue growth.
It predicts that earnings per share will be in the $0.40 to $0.50 range compared with an original forecast of $0.95 to $1.05. The consensus of analysts’ estimates, according to Reuters Estimates, was $1.02 per share. Trimming its workforce by 275 employees cost Lexmark the equivalent of $0.05 per share.
Lexmark said lower laser and inkjet supplies revenue, due to a reduction in channel inventories and to lower end user demand, was the main reason for the revenue shortfall.
It also said laser and inkjet printer revenue was less than expected, due to more aggressive product pricing and promotion and slower demand.
Lexmark expects these unfavorable factors to hit its fourth quarter figures when revenue and earnings per share will be significantly below the current average of analysts’ expectations.
Lexmark was successful last year when net income rose 29.5% to $568.7m on revenue 11.8% higher at $5.3bn. But it has faced growing problems this year and a 41.5% drop in second quarter income to $79.9m on revenue just 2.8% higher at $1.28m signaled what CEO Paul Curlander described as difficult market conditions.
