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)