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Lexmark Profit Jumps 29%

Printer maker cites improved margins and increased sales of ink cartridges.
Printer maker Lexmark International Inc. on Monday reported a 29% jump in third-quarter net income from the same period a year ago, thanks to better margins and improved sales of ink cartridges for its ink-jet printers. And while the No. 2 maker of ink-jet printers also raised its fourth-quarter outlook, it remains cautious because of weak technology spending, a sluggish consumer market, and aggressive competition.

The profit boost is a sharp contrast to the same quarter last year, when Lexmark struggled with the beginning of a soft economy and the terrorist attacks. CFO Gary Morin the company has since put a premium on trimming overhead, warranty, and distribution costs.

"Hardware margins are benefiting from our cost initiatives, a stronger euro, and the success of ink-jet all-in-ones. Supplies margins are benefiting from improved yields and capacity utilization," Morin told analysts on a conference call.

Lexmark says net income for the quarter ended Sept. 30 was $90 million, or 70 cents a share, compared with $70 million, or 52 cents per share, a year earlier. Excluding a write-down for the abandonment of a software project, Lexmark earned 79 cents a share in the latest quarter. Total revenue rose to $1.0 billion from $996 million.

Revenue from laser and ink-jet supplies was $568 million, a 19% increase from $476 million a year ago, and represents 55% of total revenue. Laser and ink-jet printer revenue was $381 million, down 3% from $393 million a year ago.

Lexmark sees fourth-quarter revenue growth in the low to mid-single digits and earnings per share ranging from 70 to 80 cents--3 cents more than the outlook it gave Oct. 10.