Lexmark raised prices from
about 5 to 15 percent on over 20 of its inkjet cartridges and tanks. The
new 100 and 100XL tanks experienced the sharpest increases—between 10
and 15 percent. Despite an advertising campaign claiming that Vizix
machines offer some of the lowest printing costs in the industry, most
of the models in Lexmark’s new line of inkjet all-in-ones are some of
the most expensive to operate. Now, with higher-priced cartridges, those
operating costs are even higher. We should point out, however, that we
have not heard that Lexmark raised the price of its 105XL tank. It
continues to retail for about $5, so machines that accept this tank can
print a black-and-white page for under a penny.

We view Lexmark’s
sudden move with great interest and wonder if it may be a sign of
things to come. We’ve seen the price of other inkjet products increase
recently as oil prices rise (see News Briefing, “Sun Chemical Raises Ink
Prices”), which is reminiscent of a similar occurrence in the second
half of 2008. At that time, OEMs announced they would implement price
increases on both hardware and consumables after months of higher oil
prices. The announcements led to the channels stuffing warehouses with
lower-cost products ahead of the price increases. OEMs watched in horror
as orders vanished when the economy tanked and demand evaporated early
in 2009. Inventory levels in the channels remained high, which resulted
in supply-chain nightmares for many OEMs including Lexmark.

With
the price of oil beginning to climb, we wonder if Lexmark may be in the
vanguard of hardware manufacturers raising prices. If that’s true, it
will be interesting to see if Lexmark’s competitors use the same tactic
of raising prices without warning to avoid any channel stuffing.
Moreover, we will be watching to see if prices increase for hardware and
toner supplies to keep pace with the growing price of a barrel of
crude.

As an aside, we must wonder if Lexmark’s move to higher
inkjet cartridge prices will be unique to the company. Could it be that
the firm is attempting to grab as much revenue as possible from its
inkjet line before it pulls the plug on the business? The firm announced
last year that it was restructuring to combine its inkjet and laser
businesses (see News Briefing, “Lexmark Combines Laser, Inkjet Printing
Divisions into Single Organization”). After seeing inkjet sales wither
for a number of years, many industry watchers wondered if  the
reorganization signaled the end of the road for Lexmark’s ailing inkjet
business. A sudden increase in cartridge prices may be a sign that the
company plans to maximize revenues before it turns the lights out in the
inkjet factory.