ANALYSIS: Takeover Of IBM Printer Ops Last Big Move Of Outgoing Ricoh Chief

Taken from Nikkei Net Interactive:

OKYO (Nikkei)--Slated to take over the digital business printer operations of IBM Corp., Ricoh Co. (7752) will likely move to the top spot in that market sector. The move will complete the firm's preparations for the retirement of President Masamitsu Sakurai, now in his 11th year in the post, and his move to the chair of the Japan Association of Corporate Executives.

To promote Ricoh's expansion, Sakurai had been looking for "a field of high added value that's worth the money."

While Ricoh's core multifunction office copiers face a maturing market, annual demand for digital printers is projected to grow by 10% annually worldwide. The 700 million dollar takeover will be Ricoh's biggest, but Sakurai has shown no hesitation. In meetings with IBM CEO Samuel Palmisano in December, he quickly wrapped up the deal.

The digital printing products that Ricoh will take on are those used for corporate ledgers and forms, from which IBM makes about 120 billion yen a year. The business offers stable income from the supply of toner and other consumables, and will become key to the growth strategy of Sakurai's successor.

Sakurai's first move to prepare for the next president was reflected in Ricoh's consolidated settlement in March 2005. Interrupting 12 consecutive years of net profit growth, he chose a decrease in profit to invest in sales promotion and R&D and withdraw from the optical disk-drive market.

The rule of thumb is that copiers, including multifunction machines with copying capabilities, produce profit for two years for the manufacturer if nothing is spent on promotion, because office maintenance services are charged by the number of pages made. So it is practical for firms to hold back on sales spending to secure immediate profit. Sakurai decided to go the opposite way.

Before nominating Sakurai as his successor, former president Hiroshi Hamada made similar preparations, taking over several foreign office-machine makers in 2005 and paving the way for Ricoh's international expansion.

"Acting on insight about the future may be the highest mission of a top executive. Investment is risky, but missed opportunities can cause irreversible damage," said Sakurai.

-- Translated from an article written by Nikkei staff writer Shimao Ojima.

(The Nikkei Business Daily Friday edition)

ANALYSIS: Ricoh Seeks New Revenue Stream From IBM Deal

Taken from Nikkei Net Interactive:

TOKYO (Nikkei)--Ricoh Co.'s (7752) decision to acquire IBM Corp.'s digital business printer operation is part of a strategy designed to rapidly secure new sources of revenue.

For its part, IBM has been gradually concentrating resources in its flagship software and services businesses, while shedding its hardware operations at a fast clip.

Competition is intensifying in the market for copiers and other office equipment, with South Korean giant Samsung Electronics Co. making a major push in Europe and the U.S. The young digital business printer market is technology-driven, raising barriers to entry for newcomers. Ricoh, which entered the field through the 2004 acquisition of Hitachi Ltd.'s (6501) printer subsidiary, boasts state-of-the-art technology in products tailored for corporations.

The acquisition is aimed at taking possession of IBM's global sales and service network for the printers. Ricoh will be able to immediately boost sales by supplying toner cartridges and other consumables to the new customers. It may also give Ricoh a beachhead from which to attack Xerox Corp.'s stronghold in the market catering to printing companies.

On the other hand, the sale is part of IBM Chief Executive Officer Samuel Palmisano's structural reform plan. Since becoming CEO, Palmisano has focused on the lucrative software and services businesses while jettisoning the highly volatile hardware and multiuse-component operations. IBM sold its hard-disk-drive operations to Hitachi in 2003 and its personal computer business to China's Lenovo Group Ltd. in 2005.

(The Nikkei Thursday morning edition)

Ricoh To Buy IBM Digital Business Printer Op To Snag Top Spot

Taken from Nikkei Net Interactive:

TOKYO (Nikkei)--Major office equipment maker Ricoh Co. (7752) plans to acquire IBM Corp.'s digital business printer operation in April, a move that would catapult the Japanese firm to the top of the world market, The Nikkei learned Wednesday.

The acquisition -- Ricoh's largest ever at an estimated 700 million dollars, or about 85 billion yen -- is aimed at tapping growing corporate demand for printers that can receive data directly from computers and churn out large volumes of documents. The deal is likely to be financed mainly with Ricoh's own capital.

Ricoh is positioning digital printers as the next growth business after copiers and other office equipment. IBM, for its part, is accelerating its shift to a software and service provider in the information technology field.

Digital business printers are connected to companies' backbone systems to print various types of invoices, contracts, slips and other documents in high volume and at high speed. Manufacturers can derive a stable stream of revenue through the sale of toner cartridges and other consumables in addition to the printers themselves.

Ricoh will take over all global sales and maintenance service divisions of IBM's digital business printer business, with the employees likely to be transferred gradually. The staff in charge of developing the software that controls the printing process will also move to Ricoh.

Ricoh entered the digital business printer business through the 2004 acquisition of Hitachi Ltd.'s (6501) printer subsidiary, which has sales of approximately 60 billion yen. The global market for digital printers, including those sold to printing companies, is estimated at about 3 trillion yen and is expected to enjoy annual growth of roughly 10%.

Ricoh has grown its business around domestic sales of office copiers. Its ratio of overseas to total sales came to about 30% in the mid-1990s. To catch up with Canon Inc. (7751) and others, Ricoh has been snapping up office machine sales companies in the U.S. and Europe. In the year ending March 2007, overseas are expected to surpass domestic sales for the first time ever.

IBM has been on a spree to unload its hardware businesses, selling its hard-disk-drive operations to Hitachi in 2003 and its personal computer business to China's Lenovo Group Ltd. in 2005. In a strategic shift, IBM is concentrating resources on the software and service businesses, and the firm is expected to use the proceeds from the sale to fund acquisitions in the field.

(The Nikkei Thursday morning edition)