Lexmark International Inc. is opting out of the keyboard manufacturing business. The Lexington, Ky., company, formerly IBM's keyboard division and now a publicly traded, independent company, is focusing its resources on the laser and color inkjet printer markets, which have become its primary business.
Lexmark will sell the molds and equipment, including 32 presses and all the auxiliary equipment, used to injection mold components for a line of keyboards it made primarily for IBM. By April 1996 it will be completely out of keyboard production.
Gary Olsen, director of purchasing for Lexmark's network printer division, said the equipment for sale represents a portion of the company's molding operations it no longer needs. Lexmark will retain its molding operations connected with printer manufacturing.
However, Olsen said Lexmark's goal in printer manufacturing is to ``outsource the majority of the molding to custom molders and focus on those operations core to our business.''
Keyboard sales accounted for 11 percent and 5 percent, respectively, of the company's revenue and gross profit for 1994. Lexmark claims a 15 percent market share of all laser network printers in the United States.
In 1994 the firm entered the retail printer market in large volumes and now has products in 3,000 retail outlets nationwide. Olsen said Lexmark is moving rapidly toward capturing an 8.5 percent share of the retail color inkjet printer market. Currently, Lexmark has one laser printer model in the retail arena and one multifunction printer on the market.
John Shotwell, spokesman for Lexmark, said the company had a contract with IBM to continue manufacturing keyboards for it for a certain period of time.
``Now, that agreement is nearing conclusion and being re-worked,'' Shotwell said, ``and we're turning at least a portion of that business back to IBM.''
Under terms of the amended contract, Shotwell said IBM agreed to pay Lexmark $36.5 million; $24 million of that relates to business recorded by Lexmark through September, with another $6 million to be paid by March 1996. IBM will pay $6.5 million for the purchase of certain keyboard assets, tooling, equipment, manufacturing information and licenses.
``This gives Lexmark greater ability to focus on our core business and allow IBM the flexibility to source their keyboards with other vendors,'' Shotwell said.
Tucson, Ariz.-based Maxi Switch Inc. bought Lexmark's manufacturing rights, patents, and assets for the Select-Ease and Rubber Dome computer keyboards.
Lexmark has big plans to expand its line of printers. A recently announced agreement between Lexmark and Fujitsu Ltd. of Japan calls for the two companies to offer a range of inkjet printers in Japan and to selectively bundle the printers with Fujitsu DeskPower PCs.
The alliance also will enter joint discussions on the codevelopment of laser-based products including Lexmark's Markvision software and the formation of an executive-level steering committee to oversee the relationship.
Printers and related supplies produced by the alliance will be branded Fujitsu/Lexmark. Both companies already have developed double-byte character capability for the inkjet printers, which is necessary to print the Japanese characters and support Japanese applications. Lexmark will produce the printers at its Lexington plant.
Lexmark's largest business expansion is in the area of inkjet cartridges for its printers. Shotwell said the company would have to manufacture 12 million cartridges annually just to supply the printers the company already has sold.
To accommodate that growth, Lexmark announced plans to renovate an existing 150,000-square-foot building formerly used as a cargo and receiving
area into a manufacturing facility housing five clean-room production areas. Manufacturing of color and monochrome cartridges will begin sometime in the first quarter of 1996, creating 1,000 jobs.
Not only will product output increase with the new facility, but Lexmark will realize an 80 percent decrease in the time needed to produce a cartridge due to a major overhaul of the manufacturing layout and flow. Olsen said the company has no plans to add any in-house molding capacity in the near term, citing the company's reliance on custom molders to produce the majority of plastics components needed.
In October, the company announced plans to open a $42 million inkjet cartridge manufacturing plant in Rosyth, Scotland, to increase Lexmark's international cartridge production capacity and serve its European markets. The 90,000-square-foot facility also will produce color and monochrome cartridges beginning in the second quarter of 1996, creating 500 new jobs.
Currently, Lexmark employs 6,600 worldwide.
Its executive offices are in Greenwich, Conn.