* Third-quarter adjusted earnings $0.94/share vs est $0.78
* Third-quarter revenue $919 mln vs est $911.6 mln
* Margins grow as focuses on software, cuts back on hardware
* Shares rise 4.2 pct
Oct 23 (Reuters) - Printer maker Lexmark International Inc reported better-than-expected third-quarter earnings due to lower restructuring charges and said margins were rising as it switches its focus to software and imaging.
Lexmark is part way through its change in direction, which will see it quit making low-margin inkjet printers in pursuit of corporate business.
Sales declined 11 percent in the quarter and the company forecast another 10-12 percent decline in the fourth quarter, with its strategy switch also hit by a soft market across the technology sector, particularly in Europe.
But its shares were up 4.2 percent mid-session on the New York Stock Exchange, as the company reported a jump in gross profit margins to 40 percent from 37.4 percent a year ago, and said it hoped to recapture some big sales deferred from the third quarter.
"In North America, although we are disappointed that several large transactions did not close in the quarter, the majority of that we believe were deferred and not lost," Chief Financial Officer John Gamble said on a conference call.
"We expect them to close over the next several quarters," he said.
To ease the transition in a soft market, Chief Executive Paul Rooke said Lexmark would slow investment in its software business until revenue caught up.
Lexmark barely broke even in the third quarter, down from a profit of $67 million, or 86 cents per share, a year earlier.
But, excluding items, the company earned 94 cents per share, topping analysts' expectations of earnings of 78 cents per share on revenue of $911.6 million. Revenue, at $919 million, was also ahead of expectations.
"Despite the headwinds ... we had a decent execution quarter. We are continuing to focus on our strategy of moving from a hardware centric to a solutions company," Rooke told Reuters.
Rooke said the shift was behind the higher margins but the company warned this would be hit in the fourth quarter by the sale of Lexmark's remaining inkjet hardware and a reduction in laser supplies inventory.
Lexmark's bigger rival, Hewlett Packard Co, earlier this month warned of an unexpectedly steep earnings slide in 2013, with revenue set to fall in every business division except software.
Lexmark forecast fourth-quarter adjusted earnings of 82 cents to 92 cents per share.
Analysts on average were expecting earnings of $1.03 per share on revenue of $939.2 million, according to Thomson Reuters I/B/E/S.
Shares of the company were up 2.2 percent at $22.12 in afternoon trade.
Lexmark's better-than-expected results may have caught some short investors on the hop.
The short interest position in Lexmark for the most recent period was 20.7 percent of shares outstanding compared with 4.2 percent for HP, according to Thomson Reuters StarMine data.