Lexmark is based in Lexington Kentucky, which is where WhatTheyThink.com is based. A good friend I have known over the years is Ed Crowley who is the Managing Partner of Photizo Group. Ed worked for Lexmark for several years and is a contributor to our sister site OnDemandJournal.com.

I asked Ed to comment on Lexmark's recently announced industrial inkjet announcement.

The Facts

Last week Lexmark announced an industrial inkjet for industrial printing applications. According to Lexmark, the key specifications for printer include:

2 inch swatch print heads which can ganged together to create up to an 8 inch swatch print head. The first implementation we are aware of for this is a bulk mailing application, which an 8 inch swath is more than capable of handling.

They claim a print speed of up to 760 feet per minute, however, this is at 158 dpi. At the highest resolution (600 dpi) speed drops to 200 feet per minute (still very fast).

Each module includes 2,560 nozzles. The imaging modules can be configured either with disposable cartridges (for short runs and spot-color jobs0 or bulk ink cartridges (for lower cost). Bulk ink cartridges are replenished via a 400 ml bulk ink tan that can be replaced by the operator.

Lexmark provides a Windows driver and (at their web site) they tout compatibility with FlexMail 3.1. application. The initial configuration appears to be configured just for bulk mail applications. We believe this will only be offered through OEM channels.

Analysis

We have long touted that one of Lexmark's key strategic issues has been their focus on winning by focusing on developing the better mouse trap (i.e. winning through offering faster and less expensive printers and MFPs), versus focusing on driving deeper into their core strength - vertical market relationships and industry expertise. This technology is clearly a step in the right direction. The technology allows Lexmark (with the right partners) to offer very flexible, highly customized solutions for high volume customer applications.
Having said that, Lexmark faces several key challenges:

- First, the industrial inkjet model has many well entrenched competitors (Xaar, Spectra, Ricoh, and Konica to name a few). While this technology is interesting, it is not breakthrough and as such it will face stiff competition from the entrenched competitors.

- Secondly, Lexmark has traditionally used the spaghetti approach with these technology extensions. Essentially, they will throw an OEM sales person or two at the technology and try to gain a quick win. However, if they do not achieve the quick win, they often lose interest and ultimately they will not enhance or expand the technology beyond its initial implementation.

- Finally, the industrial inkjet market is a fairly close-nit community with long established relationships. It is also a fairly niche market (< $200M) when compared to Lexmark's traditional business and consumer markets. Will Lexmark have the commitment and patience to establish a presence in this market segment?

In summary, we believe this is a step in the right direction for Lexmark. It could even be a stepping stone to the profitable, and larger, wide format inkjet market. But the question is, will Lexmark take advantage of it? Or will they simply dip their toe in the water and decide it's too hot, or to cold, and not take the full plunge. In any case, we do not see Lexmark gaining significant share (at least in the near term) against the entrenched set of industrial inkjet competitors.

The Photizo Group is a consulting and marketing intelligence firm which focuses on the full range of the imaging industry from inkjets to digital presses, and supplies to software and services. The firm consults to both industry OEMs and vendors, and to Wall Street firms including hedge funds and mutual funds. The firm can be reached at 859-873-4518 or [email protected]. The firm's web site is www.photizo-financial.com.