Lexmark International has decided to restructure the company by doing away with its inkjet printer hardware division. The company announced today that it’s laying off around 1,700 employees around the world.
The move, said the company, will allow it to save around $95 million annually. Lexmark however, said that it will continue to offer support, service, and supplies to its products already in the market.
Never been a major player in selling laser printers, Lexmark said it would continue to sell its set of printers as it beefs up its print services division after several acquisitions over the last few years.
Company CEO Paul Rooke says: “Today’s announcement represents difficult decisions, which are necessary to drive improved profitability and significant savings. Our investments are focused on higher value imaging and software solutions, and we believe the synergies between imaging and the emerging software elements of our business will continue to drive growth across the organization.”
Positions affected by the restructuring include R&D, other support functions, and supply chain related to its inkjet business. Its manufacturing site in Cebu, Philippines making inkjet supplies will be closed in 2015. About 1,100 employees are working under the manufacturing arm.
Lexmark says that its trying to sell its inkjet-related technology to potential interested parties. There are about 1,000 inkjet-related patents up for grabs for buyers.
The plan to reduce its workforce and manufacturing capability will result in $160 million in pre-tax cost. The company will also proceed with its repurchase plan by $100 million increasing its total current authorization to $251 million.
Many printer makers including Lexmark are struggling with decreased sales as consumers are gradually switching over to personal computing and use of smartphones and tablets.
The company expects that revenue from inkjet hardware and supply will decrease to about 10 percent next year from about 21 percent of 2011. Epson Corp, HP, and Canon Inc all account for about 90 percent of total inkjet sales around the world.
With aggressive market pricing and a sizeable capital investment required to maintain a profitable return, Lexmark said it is quitting the business so the company can refocus its resources.
Lexmark has initially cut off 625 jobs related to ink manufacturing last January as part of the company’s solution to solve patterns of issues in the industry.
Its competitors such as Xerox Corp has reduced its full one year profit prediction in July. Canon also decreased its operating profit outlook as it braces for a tough economic situation in Europe. HP reported a decrease of about 3 percent in printing and imaging sales in the third quarter.
The company’s investors seem to like the move of the company as indicated by the rise of its market trading up to 12.8 percent or about $2.44. Pre-market trading was at $19.38 before the announcement.