Was Buffet wrong on Lexmark?

**blast_investor** Wed Nov 09, 2005 1:20 am

Was Buffet wrong on Lexmark?
Did Buffett make a wrong investment in Lexmark International (LXK)? After Warren Buffet invested into this stock, the stock price dropped quite bit from from $60 to now only at $41.

Post your opinion here.

**balaoko** Thu Nov 10, 2005 5:22 pm

Don't know the printer industry, so I just have a brief impression.

By data from yahoo, it sounds that the market is too sensitive to its 3Q report. A single Q's result cannot say too much about a stock, as pointed out by Graham. Although there are only 3 years result in yahoo, the annual financial data looks quite stable. The question is: "what happen to LXK in the 3rd quarter?"

By browsing some oppinions from web, It is found that the main problem may be the marketing or business model. The company do inkjet OEMs for other brand and fail to compete with those product made by itself. That is not a big problem if the management adopt some good policies. So it is expected that the company can scratch the market back again in the future and make profit as before.

However, I don't know how large the inkjet market is. Many people nowadays are using laser jet at all, because I don't see much people using inkjet for a long time. Actually the only guy I know who has a inkjet at home told me that the ink is too expense that he seldom use the printer. And in laser jet market, the company has to fight again HP to survive.

Anyway, Buffet must have had his own oppinion on the stock, so it is a good example that we can learn from Buffet. I am also keep an eye on PIR, which may tell us something in the future:)

**blast_investor** Fri Jan 27, 2006 10:55 pm

Yesterday's Wall Street Journal article reported that Wallgreen is offering printer ink refill service, which can save 60% for consumers.

Office max and office depot are also testing this business concept.

Link: A cheaper way to refill your printer

**grus2003** Tue Jan 31, 2006 12:19 pm

Buffet may think Lexmark stands on good position in ink industry. However, this industry is dying since people/business need less & less printing on paper.

**yhan** Tue Feb 07, 2006 12:11 am

I disagreed with grus2003. Somehow I read a report which said that paper consumption actually goes up when more content is online.

However, printer companies are trying to make money by selling inks. Dell several years ago tried to get into the printer industry, and seems not successful. so my take is that refilling will have impacts on Lexmark.

**springsnailt** Wed Mar 15, 2006 11:53 am

I think the major problem in the printer business is not the fundamental idea of selling cheap printers and expensive ink boxes. It is more of competition problem. LXK doesn't really command the usual buffett style consumer monopoly, nor is the customer loyalty or branding power mean much in the world of technology products.

BTW, according to gurufocus, WB has added LXK at $44 level.

**RT Wolf** Wed May 03, 2006 11:04 am

There are other people at BRK and I believe the best guess on another site I was checking was that probably wasn't Buffett himself but one of the youngins.