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Lexmark to Cut 1,700 Jobs, Explore Sale of Inkjet Technology

Tuesday, 28 August 2012 07:25 AM

Shares of Lexmark International Inc.  rose the most in more than a year after the printer maker announced plans to cut 1,700 jobs and shut a factory in the Philippines as it explores a sale of its inkjet technology.

Lexmark was up 13 percent at $21.46 at 9:50 a.m. Tuesday in New York, for the biggest gain since July 2011. Through Monday, the stock had dropped 43 percent this year.

The inkjet manufacturing facilities in Cebu will be closed by the end of 2015, Lexington, Kentucky-based Lexmark said in a statement Tuesday. The company will cut 1,100 manufacturing positions and also reduce positions in research and development, supply chain and support functions. The reorganization will generate annual savings of $95 million.

Printer makers Canon Inc. and Xerox Corp., along with Lexmark, have cut their earnings forecasts this year, citing weaker office equipment sales in Europe. Lexmark Chief Executive Officer Paul Rooke said last month that the company plans to expand its management services and software business to help overcome the economic slump in Europe.

“Today’s announcement represents difficult decisions, which are necessary to drive improved profitability,” Rooke said in the statement. “Our investments are focused on higher value imaging and software solutions.”

The cuts will cost the company $160 million, with $110 million of that this year, Lexmark said. Cash flow will be reduced by $75 million, with a $40 million impact in 2012.

Margin Forecast

Lexmark’s operating income margin will be 11 percent to 13 percent over the long term, the company said Tuesday on a conference call. Last month, the company reported a second-quarter margin of 10.1 percent, down from 14.2 percent in the same period a year earlier.

Separately, Lexmark said Tuesday it will buy back an additional $100 million in its own shares, and that the board has authorized a potential $251 million in future repurchases.

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Tuesday, 28 August 2012 07:25 AM
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