An Analysis Of Lexmark

Februari 07, 2026

Introduction

Lexmark is a well-known global technology company with a long history in the printing and imaging industry. Best recognized for its printers, multifunction devices, and enterprise printing solutions, Lexmark has evolved from a traditional hardware manufacturer into a company increasingly focused on services, software, and managed print solutions.

This article provides an educational and AdSense-friendly analysis of Lexmark, examining its business model, competitive position, strategic direction, and the broader industry environment. The content is intended for informational purposes only and does not constitute financial or investment advice.

Company Overview

Lexmark was originally established as a standalone company after being spun off from IBM. Over the years, it built a strong reputation in laser printers and enterprise imaging solutions, serving both small businesses and large organizations worldwide.

Today, Lexmark operates globally, with a strong presence in:

Enterprise and office printing hardware
Managed Print Services (MPS)
Document management and workflow software
Industry-specific printing solutions

The company’s focus has shifted toward long-term customer relationships rather than one-time hardware sales.

Business Model and Revenue Streams

Hardware Sales

Printers and multifunction devices remain a core part of Lexmark’s business. These products are primarily targeted at office environments, government institutions, healthcare providers, and large enterprises.

While hardware margins are often competitive, printers serve as a foundation for recurring revenue from supplies and services.

Supplies and Consumables

Ink and toner cartridges represent a recurring revenue stream for Lexmark. Consumables typically offer higher margins than hardware and provide predictable cash flow over the life of a device.

This model has historically been central to profitability within the printing industry.

Managed Print Services (MPS)

Managed Print Services have become a major strategic focus for Lexmark. Under MPS contracts, Lexmark manages an organization’s entire print environment, including:

Device deployment and maintenance
Supplies replenishment
Print optimization and cost control
Security and compliance support

MPS creates long-term contracts and strengthens customer retention.

Software and Digital Solutions

Lexmark has invested heavily in software platforms that support document management, workflow automation, and data security. These solutions are especially valuable in regulated industries such as healthcare and finance.

Software-driven services help offset declining demand for traditional printing.

Industry Environment

Declining Print Volumes

One of the biggest challenges facing Lexmark is the long-term decline in office printing. Digital transformation, cloud storage, and paperless workflows have reduced overall print demand.

This trend has forced printing companies to rethink their value propositions.

Enterprise Demand and Stability

Despite overall decline, enterprise and institutional customers continue to require secure, reliable printing solutions. Compliance, data protection, and workflow integration remain critical needs.

Lexmark’s enterprise focus helps stabilize revenue in a shrinking market.

Competitive Landscape

Lexmark competes with other major players in the printing and imaging space, including companies offering both hardware and managed services. Competition is based on:

Total cost of ownership
Reliability and device lifecycle
Software integration
Customer support and service quality

Differentiation increasingly depends on services rather than devices alone.

Strategic Direction

Lexmark’s strategy emphasizes:

Expanding Managed Print Services
Increasing software and solutions revenue
Focusing on high-value enterprise customers
Reducing reliance on low-margin consumer markets

By prioritizing long-term contracts and industry-specific solutions, Lexmark aims to maintain relevance in a changing technology landscape.

Strengths and Challenges

Key Strengths

Strong enterprise relationships
Expertise in managed services
Global distribution and support network
Focus on security and compliance

Ongoing Challenges

Structural decline in print volumes
Intense industry competition
Need for continuous innovation
Balancing cost efficiency with service quality

Managing these challenges effectively is essential for long-term sustainability.

Lessons for Business and Technology Analysts

Lexmark’s evolution highlights broader lessons for technology companies:

Hardware businesses must evolve toward services and software
Recurring revenue models offer greater stability
Industry specialization can create defensible niches
Adaptation is critical in mature or declining markets

These insights are relevant beyond the printing industry.

Conclusion

An analysis of Lexmark reveals a company navigating a mature and contracting industry through strategic transformation. While traditional printing demand continues to decline, Lexmark’s focus on enterprise customers, managed services, and software solutions provides a path toward long-term relevance.

For readers and analysts, Lexmark serves as an example of how legacy technology companies can adapt by shifting from product-centric models to service-driven strategies. Understanding this transition offers valuable perspective on the future of enterprise technology and business services.

Summary:

In 2005, Berkshire Hathaway bought about a million shares of Lexmark. I haven�t followed this story closely, but I assume the stock was purchased by Lou Simpson rather than Warren Buffett. I have only two reasons for believing this: the total purchase was small relative to Berkshire�s investable assets and the Lexmark purchase is typical of Simpson�s investment philosophy (or at least, what little I can glean about his investment philosophy from his past purchases). Regardles...

Keywords:

Lexmark, LXK, Lexmark (LXK), (LXK), printer, printers, stock, stock market, investing, investor

Article Body:

The commentary on Lexmark has been almost uniformly negative. Even many value investors have a very dim view of Lexmark at these prices. Now, I am not a contrarian investor. Psychology and sentiment do not enter into my considerations at all. I�ve bought stocks trading near five year lows, and I�ve bought stocks trading near five year highs. I just try to be rational. I�m not afraid to agree with the consensus, if it�s an accurate representation of reality. Here, it isn�t. The model of Lexmark that has emerged in my mind over the past few weeks bears little resemblance to the Lexmark I�ve seen described elsewhere.

Most of the negative comments about Lexmark have focused on the consumer segment. Yet, more than 75% of Lexmark�s profits come from the business segment. The business segment is Lexmark�s franchise. There, the company has managed to build a moat, not a very wide moat, but a moat nonetheless. Lexmark is the only focused, integrated printing company of any consequence. It understands its business customers� needs, and provides specially tailored solutions that none of its competitors can offer. Worldwide, some very large companies use Lexmark�s products for some very specialized tasks. Among these are retailers, banks, and pharmacies. Lexmark has complete control of their product including the printing technology itself and the software used to manage its printers (i.e., to interface with the user�s computer). Businesses that care about getting these specialized tasks done right (and getting them done cheap) use Lexmark.

Even Lexmark�s competitors have to concede the fact that Lexmark knows printing better than anyone else. Lexmark is the only company that develops its own ink � jet, monochrome, and color laser technologies. It is a vertically integrated printer business like no other. The two competitors most often mentioned as threats to Lexmark are HP and Dell. While everyone will suffer from deep price cuts; I think it�s HP and Dell who should be scared.

Lexmark has the much stronger competitive position. For years to come, it will be launching the best printing products for high ink consumption tasks. Lexmark hasn�t been focused on competing directly with these companies in the consumer segment; that�s going to change because of the emerging photo printing market.

Lexmark isn�t interested in selling hardware. It�s interested in selling ink. Now that there is real demand emerging for high quality printing within the home, Lexmark is going to start going after the consumer market. Over the next few years, Lexmark will be selling more printers in this segment. A few years after that, the company will see strong recurring revenues from ink sales.

Generic ink cartridges are the biggest threat to the high margin printing business. However, I believe, of all the players in this industry, Lexmark will be the least affected. Its highest margin sales are its most insulated sales. Its lowest margin sales, in its least dominant businesses, are where generic ink will hurt the most.

There is also some concern that Dell could always move away from using Lexmark printers. Let them. From what I can see, sales to Dell will not be a particularly significant high free cash flow margin business. There�s no benefit to the Lexmark brand either. That brand is going to become stronger over the next decade, because the quality is already there. Lexmark simply hasn�t been that visible to consumers. The Dell deal doesn�t help build the Lexmark brand. Honestly, I wouldn�t be terribly troubled if Lexmark�s sales to Dell dropped to zero tomorrow. Such an occurrence would not materially affect my valuation of Lexmark.

As far as I can tell, Lexmark�s management is excellent. They understand the printer business better than anyone (they also happen to understand the science of printing better than anyone � CEO Paul Curlander has a PhD in electrical engineering from MIT). Lexmark�s management also sees highly profitable opportunities in printing long � term, despite a very competitive situation short � term. I agree with that assessment.

Within the printer business, there is a real danger of ferocious price competition. However, I do not believe there is a real danger of prolonged ferocious price competition. Lexmark is the company best positioned to weather the storm. It will generate tons of free cash flow, none of which has to be siphoned off to other lines of businesses, as it does at all of Lexmark�s competitors. Lexmark�s high free cash flow margin recurring revenue stream will supply it with more than enough ammunition to outlast its competitors. They may be deep pocketed, but eventually, they will have to answer to Wall Street. Long � term, they can�t compete with Lexmark. It will take them some time to realize that. But, Lexmark has the time.

That�s my assessment of Lexmark on qualitative grounds. How does the stock look quantitatively?

The stock is selling for about 15 times earnings and 10 times cash flow. Right now, a dollar of Lexmark�s stock buys you a dollar of sales. I think that�s a bargain. Not many companies of this caliber sell at a price � to � sales ratio of one.

For the last ten years, Lexmark�s return on equity has not fallen below 20%. During the same period, the company�s return on assets never fell below 10%. The free cash flow margin has generally been in the 5 � 10% range.

I wouldn�t be surprised to see Lexmark�s ROE and free cash flow fall substantially in the next few years. However, long � term, I believe a return on equity of 15 � 20% and a free cash flow margin of 8 � 10% are sustainable. In fact, if I was forced to pick an exact ROE that Lexmark could sustain I would pick 20%. But, I would also caution you not to expect that for the next five years or so.

The important estimate is the 8 � 10% free cash flow margin. That�s the best way to value Lexmark. At one times sales, you have an 8 � 10% yield, if you think sales can be sustained. If you think sales can grow, you have to factor that into your analysis. At present, a discount rate of 8% seems appropriate.

I never do a discounted free cash flow analysis on this blog, because I feel the variables that go into are something you have to decide on for yourself. I don�t want to slap an exact figure on the value of a company, because I don�t want to suggest that kind of precision. But here, you can clearly see how I�d value Lexmark. I gave you what I think Lexmark�s free cash flow margin will be (8-10%), you know what Lexmark�s sales are ($5.4 billion), and I gave you the discount rate I thought was most appropriate (8%). The only necessary variable I haven�t provided is a sales growth estimate, and I�m not going to provide that, because I don�t want you to think it has anything to do with the next five years.

It doesn�t. I�m looking at this company well beyond that point, and I like what I see. Lexmark will strengthen its brand (with consumers), and people will still be printing. So, yes, I am projecting revenue growth for Lexmark; and yes, it is enough to suggest Lexmark is worth substantially more than $5.5 billion.