how about lexmark.

**vin** Tue Oct 04, 2005 9:29 am

how about lexmark.
Blastinv:

how about lexmark. lxk. WB lost 25%+ as of now. is company cheap enough?

**blast_investor** Tue Oct 04, 2005 9:51 pm

Hi vin:

When Buffet invested into this stock, I looked into this and I was not impressed.

Right now, the stock is down a lot, but I am still not impressed. Buffet historically has not been fan of tech stocks. But I do not know why he is into this.

Of course, Lexmark stock is not expensive and it is generating quite bit of profit margin. That is good sign. However, printer companies historically make lots of money on ink by selling very cheap printers. that srategy may be in trouble because lots of consumers would find that and ditch expensive ink (lexmark) and buy laser printers instead.

**yhan** Tue Oct 04, 2005 10:09 pm

The company also manufactures laser printer. I just do not know how it compete with other companies such as HP, Samsung.

**vin** Wed Oct 05, 2005 9:22 am

not cheap enough
WB suppose to find stock that has monopoly advantage or dirty cheap stock. LXK definite does not fit into monopoly group(comparing with HD), he is bottom fishing and get caught.

**xxyygorich** Wed Nov 09, 2005 2:32 pm

I think The key is not black/white printing although peopel might need it every day. The growth and dramatic growth will come from color printing, which includes Photo printing and Color laser printing. Most refill kits are mainly for b/w and low end color printing. For high quality printing, the low price refill kits might not a big problem.

**ghg777** Mon Jan 09, 2006 12:18 am

I Think Lexmark Is Attractive Right Now
I wouldn't call Lexmark a tech stock. Its real business is selling ink. Of course, the printers are important to get the installed base.

There are three big threats: Dell, HP, and generics. Long term the biggest problem is generic ink. HP is a threat because its prices will cut into Lexmark's installed base (and thus future ink sales). Dell is a potential threat because it may squeeze Lexmark on pricing. I don't think that's as big an issue as some people do. If Dell demands Lexmark offers it printers on the cheap, it's unlikely the upfront loss from the printer sale will not be covered by the earnings from subsequent ink sales. Lexmark is also behind the times in a few ways, but I think its financial resources and good R&D will close any gap quite quickly. One thing a lot of people tend to overlook is that Lexmark's future profitability is at least as dependent upon printer sales to businesses as it is dependent upon printer sales to individuals. Focusing too much on the market for personal printers may lead investors to a faulty analysis of the company's prospects. Having said all that, Lexmark's future will be far dimmer than its recent past.

Lexmark has long earned an extraordinary return on capital. It has also deployed capital in a very efficient, very shareholder friendly manner. It's hard to see a way this stock underperforms the market over the next five to ten years. However, there may be a lot more bad news going forward. Some analysts are predicting revenue growth over the next few years. In my own analysis of Lexmark I assumed revenue five years out would be no greater than today (and in one scenario somewhat less).

The real question is truly free cash flow. The amount generated in recent years is far more than enough to justify Lexmark's current stock price. Of course, if all these threats are real, you have to assume there will be a drop in truly free cash flow generation. I just don't think that drop will be big enough to erase the margin of safety. The next five years may be real tough on Lexmark's business, but I wouldn't be surprised if you see the stock rise while business conditions are still poor. There is already an excess of pessimism baked into the current stock price.