The leading printing and imaging solutions provider, Lexmark International Inc. (LXK) won a 5-year contract from the U.S. Department of Agriculture (USDA) for a sum of $50.0 million. The contract was awarded under a BPA (Blanket Purchase Agreements) program. The U.S. government uses BPAs for the procurement of services and products that are required on an ongoing basis.
Per the contract terms, Lexmark will provide its Managed Printing Services (MPS) for managing the printing needs of each department of the U.S. agency. Lexmark’s comprehensive MPS solution will include professional services, output optimization, workflow solutions and business process transformation. This would help the UDSA to organize its business, become efficient in daily operations and save the cost of printing.
In January, Lexmark got a similar contract from the renowned brewer Anehuser-Busch InBev (BUD) for an undisclosed sum. Per the contract terms, Lexmark will deploy an identical fleet of printers across Anehuser-Busch locations in the United States.
As a new development in the printing business, MPS is attracting major industry players. Gartner sees this as the service provider’s capability of taking up the primary responsibility of meeting customers’ office printing needs, including printing equipment, supplies, service and overall management. Moreover, the service helps to cut costs and reduce the time employees spend on print-related activities. Lexmark is becoming a key player in this arena.
Lexmark operates in a highly competitive market. So there is a constant price war among major players such as Xerox Corp. (XRX) and Hewlett-Packard Co. (HPQ) to snatch market share from one another. The market is narrowing as digital technology and e-commerce are becoming more prevalent.
Lexmark reported lackluster third quarter results, with the bottom line missing our expectation. The company also provided an unimpressive revenue outlook for the fourth quarter. Though new products launched during the quarter could win back the lost market share, their impact on results could still take some time.
However, Lexmark may benefit from its retail presence as it sells through Best Buy Co. (BBY) stores in the U.S.
Currently, Lexmark has a Zacks #2 Rank, implying a short-term Buy rating.
