Leading printing and imaging product manufacturer Lexmark International Inc. (LXK) recently announced the formation of a division called Lexmark Government solutions, specially targeted to sell the company’s products to federal government agencies. 

The new department will be specially designed to suit the needs of government agencies. The department will focus on providing solutions to help government departments reduce cost, enhance the security of the information sharing process, with an eye on the environment. 

We believe that the printing and imaging major has adopted this strategy, which is in line with its competitor Hewlett-Packard Co. (HPQ), who is taking aggressive steps to revive its printing business and rolling out similar products in the market, to secure more government customers, as it leads to an assured revenue flow over a considerable period of time. 

This apart, Lexmark is a printing pureplay, consistently introducing new, attractively priced printers that cater to customers in every segment. This has enabled it to maintain its competitive edge and expand into new growth areas. The company has outlined a strategy that would expand its product lines, providing exposure to new rapidly growing areas such as color laser printing, multi functional printing etc., which will help it sustain growth. 

As per this strategy, Lexmark has introduced color photo inkjets, business inkjets, a low-end monochrome laser, color lasers and laser Multi Functional Printers (MFPs). The company owns and develops most of the technology used in its printers and cartridges in-house. This has helped it maintain a low cost structure, which enables competitive pricing of products. 

The company’s fourth quarter 2009 results have exceeded our expectations and it also provided a positive outlook for the fourth quarter. Lexmark recorded 4.0% and 11.0% year-over-year revenue increases in the Printing Solutions and Services Division and Imaging Solutions Division, respectively. 

Lexmark is a leading player in the printing and imaging market and is currently enhancing the quality and quantity of its product portfolio. While things look encouraging for the company, intense competition from players like Canon (CAJ), Epson, Samsung and Hewlett-Packard coupled with increasing availability of cheaper substitutes like ink/consumables supplies may pose some challenges going forward.
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