Who makes money off $49 printers?

Navigation: Main page

Author: Feldman, Amy

Word on the Street

Lexmark International Group (LXK), which dominates the low-end market. How does the IBM spin-off do it? "Everybody has got to go out and buy these ink cartridges," says Mark Herskovitz, portfolio manager of the Dreyfus Premier Technology Growth fund, which holds $15 million of Lexmark stock. And, at $30 a pop, the cartridges aren't cheap.

Now, having run over Hewlett-Packard in the bargain category, Lexmark wants to up its 11% share of the laser printer business. It recently introduced six models starting at $699.

At a recent $84.75, or 37 times 1999 earnings, Lexmark stock doesn't look like a bargain. But profits are expected to increase 20% annually over the next five years, compared with 7% for the S&P 500. That growth story has gained a notable fan: Goldman Sachs guru Abby Joseph Cohen.

GRAPH: CHEAP IS GOOD

~~~~~~~~

By Amy Feldman