October 20, 2009 / 1:07 PM / 10 years ago

UPDATE 3-Lexmark profit better than expected; stock rises

* Q3 EPS 65 cents ex-items vs Wall St view 45 cents

* Revenue falls 15 pct to $958 million

* Sees Q4 adj EPS 50-60 cents vs estimates 47 cents

* Restructuring to affect 825 jobs, save $70 mln in 2010

* Shares rises 14 percent (Adds CEO, analyst comment, byline, updates stock activity)

By Franklin Paul

NEW YORK, Oct 20 (Reuters) - Lexmark International Inc’s LXK.N quarterly results and outlook beat Wall Street expectations, and the printer maker announced additional cost cuts that will affect 825 jobs, sending shares up 14 percent.

Third-quarter profit, excluding charges for restructuring and including a new round of cost-cutting, jumped to 65 cents a share, outpacing analysts’ view of 45 cents a share, according to Thomson Reuters I/B/E/S.

Overall, third-quarter net income for Lexmark, whose rivals include Hewlett-Packard Co (HPQ.N), Canon Inc (7751.T) and Samsung Electronics Co Ltd (005930.KS), fell to $10 million, or 13 cents a share, from $36.6 million, or 42 cents a share, a year earlier.

Revenue at Lexmark fell 15 percent to $958 million from $1.13 billion a year earlier, but exceeded analysts forecast of $901.3 million.

Analyst Shannon Cross said that while the results included showed improved sales of ink and toner, which earn higher profit margins, sales of inkjet printers failed to rebound follow the introduction of new models in recent months.

“While this quarter showed some relative stability in lasers, we were disappointed that inkjet did not see more of a rebound given channel fill surrounding the current product refresh,” said Cross, who advises her clients to sell Lexmark shares.

Lexmark, which had been boosting research and development spending on more advanced models aimed at customers who print a lot, said sales in its printing solutions and services unit fell 14 percent from a year earlier, but were up 5 percent from the second quarter.

Its gross profit margin edged higher in the period, while operating expenses declined.

Lexmark will take charges of about $120 million for the restructuring, which will include cuts in manufacturing, service delivery overhead, marketing and sales support, corporate overhead and development. The changes will be complete around the first quarter of 2011.

As a result, Lexmark expects to save $70 million in 2010, and $110 million on an ongoing basis beginning in 2011.

Lexmark Chief Executive Paul Curlander said the restructuring is an effort to “get even leaner” and remain competitive, not because the company anticipated problems on the horizon.

“We feel very encouraged by the pickup in demand that we saw in the third quarter. That said, overall, our revenue was still down,” he said. “We see a lot of competitive pressure in pricing ... and we continue to see our competition taking aggressive costs and expense actions.”

The company did not detail how the 825 positions will be affected, saying only that they are “across all regions of the world and across many different job functions.” Lexmark has about 14,000 employees.

Lexmark sees fourth-quarter earnings per share of 50 cents to 60 cents, excluding special items. Analysts had expected a profit of 47 cents a share, according to Thomson Reuters I/B/E/S.

Lexmark’s shares were up 13 percent at $25.59 on the New York Stock Exchange, where it was one of the biggest percentage gainers so far on Tuesday. (Reporting by Franklin Paul; Editing by Lisa Von Ahn, Maureen Bavdek, Derek Caney)

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