Lexmark Inks 5-Yr Deal with FAA

The leading printing and imaging solutions provider, Lexmark International Inc. (LXK - Analyst Report) has won a 5-year contract worth $21.0 million, from the Federal Aviation Administration (FAA). The contract has one base year with four one-year options. The FAA is an arm of the U.S. Department of Transportation (DoT) that regulates and oversees all aspects of civil aviation.

The contract entails Lexmark, as the sole supplier of comprehensive printing solutions to the FAA, to optimize output, enhance productivity and reduce the cost per print and printer downtime. Lexmark will provide the agency with its solution “Print Release,” which allows utmost security in printing activities.

Print Release, introduced in October 2011, allows users to print documents from any networked device on the premise after the user furnishes personal details to authenticate the activity. Moreover, the solution also takes printing requests from smartphones or tablets, thus helping a mobile workforce.

Apart from 900 FAA offices, other departments under DoT will also enjoy Lexmark’s solutions for better management of their printing environment.

Earlier this year, Lexmark clinched two deals from the U.S. Department of Agriculture and brewer Anehuser-Busch InBev (BUD - Snapshot Report).

Lexmark operates in a highly competitive market where there is a constant price war between major players such as Xerox Corp. (XRX - Analyst Report) and Hewlett-Packard Co. (HPQ - Analyst Report) to snatch market share from one another. The market is narrowing as digital technology and e-commerce are becoming more prevalent.

To spur growth and reduce its dependence on hardware devices, Lexmark is therefore introducing software solutions. In March, the printing solutions vendor acquired three companies, namely ISYS Search Software, Nolij Corp. and BDGB Enterprise, along with its U.S. subsidiary Brainware Inc. All these acquisitions were made to strengthen its Perceptive Software business, which was itself acquired in May 2010 to help it enter the enterprise content management market.

Lexmark reported lackluster third quarter results, with the bottom line missing our expectation. The company also provided an unimpressive revenue outlook for the fourth quarter. Though new products launched during the quarter could win back some lost market share, their impact on results could still take some time.

Currently, Lexmark has a Zacks #3 Rank, implying a short-term Hold rating.