Lexmark opts for offshore model

The channel community is abuzz with the news that Lexmark is folding its
Indian operations. Pradeep Kamath, GM, Lexmark International India confirmed the
company will soon 'adopt an offshore model in India', but refused to comment
further.

It is also reliably learnt that Kamath has put in his papers. Kamath, was
earlier the VP-Marketing of Ingram Micro and had moved to Lexmark India in
2002 to take up charge as Country GM. He had replaced the then Country Head,
Frances Duggan who was based in Chennai and later moved back to Lexmark
Singapore.

Kamath maintained that the channel community would not be affected by
Lexmark's decision. "We are committed to the channel and will make sure
that their interests are safeguarded. We will release an official statement
shortly about this," he noted.

Some segments of the trading industry are not entirely surprised by this
development, especially some of the people working with their erstwhile national
distributors (ND). One of the managers of a former Lexmark ND said that the
vendor made a major mistake by getting into the regional distribution model last
year. "The vendor wanted more business and thought that by having more
distributors, this can be achieved, which is not true," he noted, on
conditions of anonymity.

Meanwhile, Lexmark has appointed Cyberstar Infocom as its ND to expand its
business in India. An official press release stated that this new distribution
model will allow Lexmark to maintain high levels of customer satisfaction and
fully utilize Cyberstar's strong distribution network. It will provide strategic
direction and support for operations in India through its South East Asian
headquarters in Singapore.

Vu Tran, Country Manager- Regional Offshore, (South East Asia) Lexmark,
said the new distribution agreement would provide Indian customers with greater
reach, more efficient and effective service. "Cyberstar has an unequalled
knowledge and capability in the Indian market. They will continue to provide
Lexmark customers with the best products and services," said Tran.

Speaking about this new tie-up Raj Rathi, MD, Cyberstar India said,
"This is a major achievement for Cyberstar. We are extremely happy that
Lexmark has chosen Cyberstar as their national distributor. With our focus, good
geographic reach and the support from Lexmark, we are confident of making
Lexmark a big success in India”.

With regards to warranty and customer service, Rathi said, "The Lexmark
team has put together an after sales service model which has delivered the
highest level of customer satisfaction among the ASEAN countries. We do not see
any reason to change this model. Customers will continue to get the same level
of service on all their products through the same service arrangement in
India."

Talking about the impact of Lexmark's exit from the Indian market, one of the
company's regional distributors, Kolkata-based Galaxy Computech's Narendra
Dhanuka said that he would have to consider whether he would continue selling
the brand. Ultimately, as long as the company offers good pricing and support,
he saw no reason why business would be affected. At the same time, he added that
local office support is also needed. "Also, if I have to import goods from
Lexmark International, it will add to my cost and it might affect my
margins," he mused.

There is a lot of speculation about the reason why Lexmark would wind up its
Indian operations and remote control operations from overseas. Said one partner,
"The brand name was good, the products were stable, their pricing was
competitive and their people were helpful. However, the brand never took off in
a big way, because of the company's policy of not investing in marketing or
publicity."

Another dealer seconded this saying that the company wanted to rely entirely
on word of mouth publicity. It worked at some level, but ultimately some
branding had to be created for the end-customers as well, which Lexmark was not
doing. And he claimed that it was the Singapore office, which was holding back
the funds, asking its Indian team to only come up with dealers schemes or
incentives.

Currently, the news is buzzing across phone lines, as partners are informing
their peers about this development. Almost all the partners spoken to are
worried about the monies that they are owed by the company, in way of
reimbursements or incentive prizes. They are also pondering about the Lexmark
inventory lying with them and whether they should sell these products to
customers, when they themselves are unsure about the post-sales support that
will be offered through them.

VINITA BHATIA