Thursday, July 12, 2012

Stocks for Printer Makers Drop Significantly

Laser and inkjet printer maker shares fell recently after Lexmark joined a whole host of other technology companies warning of falling sales in Europe. Lexmark's stock dropped as much as 17%, making it one of the biggest losses on the New York Stock Exchange. In addition to that, Lexmark's drop dragged down Xerox and HP, two rivals of the company.

Deteriorating economic conditions in Europe and a stronger dollar have led to grim forecasts from several American technology companies, including Advanced Micro Devices and Applied Materials. HP shares decreased by 3% to $18.77, the lowest in over a year, while Xerox saw stocks decrease as much as 3% as well. Japanese rival companies Canon and Ricoh both closed down on the Tokyo Stock Exchange as well.

Michael Holt, an analyst for Morningstar, stated that printing, which is always one of the most dispensable parts of a company's budget, is always the first target of cost-cutting measures. According to Holt, "When you see times of macro economic distress, printing is one of the areas most susceptible to changes in demand. Even if we have long term negative trends in printing, they can be exaggerated in the short run by economic conditions."

Lexmark derives nearly 40% of its sales from Europe, the Middle East and Africa, though it recently cut its profit outlook on Thursday and said second quarter revenue would decrease by nearly 12%, a number greater than what was initially anticipated. Lexmark also stated that it would be hurt by a strong dollar in the second quarter as well. The euro has shed 5.5% against the U.S. dollar this year alone.

Unlike Lexmark, HP has other business ventures that it can fall back on, including its Personal Systems Group, which is currently being merged with its printing group. HP derives nearly 20% of its revenue from its Imaging and Printing Group, which the company considers a steady cash flow due to recurring sales of printer cartridges. According to Holt, "Lexmark is focused on mainly business printing but HP has exposure to both businesses and consumers. We see consumer printing as declining much more rapidly than business."

Source: Reuters - Lexmark's outlook warning pulls down printer makers

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