) to sell from hold.
Analyst Charles Wolf says increasing ink consumption in the wake of a shift from single function to multi-function inkjet printers is not sufficient to offset the short-term negative impact of Lexmark's partnership with Dell. He says gross and operating margins are likely to be hurt as Lexmark sells printers to Dell at a loss in order to build an installed base of Dell printers.
Further, he notes the likelihood that Dell will soon partner with other printer cos. Wolf says Lexmark is expensive; he estimates the fair value at $55 even under generous growth and margin assumptions. He sees $3.05 2003 earnings per share, and $3.30 for 2004.