Lexmark To Lay Off 143 Employees At Headquarters

As a part of its plan to shed more than 1,000 employees to save money, printing vendor Lexmark will lay off 143 workers at its headquarters in Lexington Ky., according to a document it filed with Kentucky state officials.

About 2,300 are employed at the main campus, according to a local news outlet, WKYT, which reported that the layoffs would take effect between May 25 and June 8.

During the company's second-quarter 2015 earnings call in July, CEO Paul Rooke said Lexmark would cut 500 people worldwide at that time and, during its fourth-quarter and year-end earnings call last month, announced it would drop another 550.

The announcement took Bob Nitrio, CEO of Ranvest Associates, a longtime Lexmark partner based in Orangevale, Calif., by surprise.

"My relationship with them has always been absolutely terrific," he said, adding that he feels Lexmark has always provided well-made products, and that the loss of so many employees – about 1 percent of its global workforce -- seems out of character.

In an email response Thursday to CRN, Lexmark said it does not comment on human resource matters and declined to comment further.

According to Ken Stewart, an analyst at Photizo Group, based in Mauldin, S.C., Lexmark is paring its global workforce of about 14,000 to prepare to sell the company.

In October, Lexmark said in a statement that it had hired Goldman Sachs to "explore strategic alternatives." In the company’s earnings call for the third quarter of 2015, Lexmark officials said those alternatives could include a sale of the entire company or the spinoff of part of the company to either strategic or financial buyers.

’The board does not believe Lexmark’s current share price fully reflects the intrinsic value created by the company, and the board has concluded it is appropriate to explore strategic alternatives as the next step to unlock this value,’ Jean-Paul Montupet, lead director of Lexmark’s board, said in the statement.

"Lexmark is getting ready for a sale," said Stewart, who added that the company has been rushed into selling itself following a "series of strategic missteps."

Those missteps include the firing of about 120 Mexican factory workers who demanded a 35-cents-per-day pay raise, and an accounting mistake that led to an overhaul of the company's accounting controls for income taxes following the departure of the company's vice president who oversaw taxation.

"What they are basically signaling with the restructuring of the workforce is that they are slimming down for a sale," Stewart said, explaining that he is seeing positions targeted for elimination – such as R&D engineers -- that would "duplicate" those within another company that might be interested in buying Lexmark.

According to Nitrio, the layoffs make sense in light of the possibility of a sale. He said Lexmark would want to present a "meaner, leaner" company to put its best foot forward in hopes of grabbing the best price.

However, Nitrio said that if a sale leads a new owner to cut expenses at the cost of engineering quality, "that would give us pause for thought," he said, and potentially lead him away from partnering with Lexmark.

According to Bloomberg Business, Lexmark has already received initial purchase bids from private equity firms Thoma Bravo and Vista Equity Partners for its software division, and fielded interest from competitors Canon and Ricoh for its hardware unit. However, Bloomberg reported that although Lexmark would prefer to sell the company whole, no one has come forth with an interest to buy the entire firm.

However, Bloomberg and Reuters reported that Lexmark may split its hardware and software assets to draw more potential buyers.

In July, the company reported that the 500 employees it planned to release over the next several months were to come from its general and administrative staffs, and marketing and development units. Last month, Lexmark announced that the layoffs would primarily impact its Imaging Solutions and Services (ISS) division, which covers printer sales, services, marketing and research and development (R&D). However, according to Lexmark, much of the work done by the impacted positions will be "shifted to low-cost countries."

According to Lexmark's earnings reports, the two rounds of layoffs are expected to generate approximately $67 million in savings for 2016 and $165 million in 2017.

Lexmark -- which has a market value of $1.7 billion -- reported a drop in revenue of 4 percent, from $3.71 billion in 2014 to $3.551 billion in 2015, and also reported net debt of $903 million after it acquired software developer Kofax for $1 billion in March 2015.