Near the end of today's (Thursday July 24) markets, the shares of LXK are near a six-week high, up for the second day in a row and trading at over $36 and within striking distance of 2008's closing high of $37.68, achieved on February 1st. While a far cry from its early 2007 range in the $60's and even briefly the $70's, the stock is up an impressive 20% in just ten days, when it seemed all was despair and the stock closed at $30.28. This in light of what looks like what will be a $200+ loss day in the DJIA. Tuesday, LXK announced a year-over-year quarterly revenue decline of 6% but a quarterly profit increase of 30% ($83.7 million, or 89 cents a share, versus $64.2 million, or 67 cents) that exceeded Wall Street expectations. The results are a reflection of the execution of their previously announced strategy of de-emphasizing the lower-end and lower-profit inkjet business and stressing higher-end products for business customers.
From Xerox (NYSE XRX), shares are down today, following this morning's pre-market announcement of higher revenues (+8%) but lower earnings (-19%). Trading nearing the day's close is at about $13.25 a share, a 5% decline against Wednesday's close. Interestingly, The Wall Street Journal's morning summary concludes:
Gross margin decreased 1.1 percentage points to 39.2%, primarily due to the effect of more revenue coming from services and developing markets, the company said.
Xerox projected third-quarter earnings of 28 cents to 30 cents a share. Xerox also reiterated its full-year earnings forecast of $1.26 to $1.30 a share.
Xerox -- which has a large market share in digital industrial printing and a long history of selling big printers along with professional services -- is expected to face fresh competition now that rival Hewlett-Packard Co. is offering these services. H-P, moving engineering and marketing resources away from smaller printers, has been looking for growth in new areas, including large-scale commercial printing and photo processing.
While the threat across a range of businesses from HP (NYSE HPQ) doesn't come as a surprise, it's interesting that the services business is blamed (partly anyway) for declining gross margins, as they are typically considered the richer part of the mix.