Back in late April Lexmark announced that their quarterly profits were below their estimated target. This in turn caused their stock share prices to drop. We could go on for a while about the stock market and the relationship between missing your target earnings and plummeting stock prices, but that is probably a topic for a completely different blog.

Instead we will discuss what Lexmark decided to do about the problem. At the time they made the announcement they said that a part of the problem was a decline in inkjet and laser printer sales (inkjet sales were down by 10% while laser were down by 6%). They also said that sales of supplies — printer cartridges — was flat.

In 2006 Lexmark presented a plan that would reduce the sales of unprofitable inkjet and laser printers. Such a plan is the complete opposite of plans used by HP, Canon, Dell, and just about every other printer manufacturer out there. We are not fully aware of the level of profitability these other companies have on printers they sell, but we do know that they depend more on the sale of the cartridges that go in those printers to make the real money.

This move by Lexmark would seem to be a form of suicide. Reducing sales means reducing the number of printers in the market place and thus reducing the number of printers in homes and offices. Bottom line is then that the number of printer cartridges sold for these printers would decrease.

Now we see the results of their plan. Declining printer sales, flat printer cartridge sales, earnings below target.

Hopefully Lexmark can find its way out of this. We just found it strange that they presented a plan that would have them sell less printers (and therefore less printer cartridges), like their competitors. Or, a plan that would have been more like the one Kodak is deploying (more expensive printers and lower priced ink).

Pacific Ink wants to know what do you think?