Hard Copy Makers Speak in Unison: Business Ain’t Great, and the Outlook Isn’t Much Better

by John McIntyre

If you have spent any time reviewing the latest quarterly and/or annual financial reports from almost all the major OEMs in the printer/copier industry, you can’t help but be affected by the overall downbeat performance shown by these companies – and their less than enthusiastic comments about what the future may hold for their firms.

In short form summary below, we have looked at the highlights (or lowlights if you will) of Xerox, Canon, Epson, Ricoh, Lexmark, Oki and Brother. If we included HP, the overall tone would be even worse as HP’s most recent numbers were down significantly in the printing/imaging unit. In a simple (unweighted) averaging, revenues across the seven companies listed were down about 5 percent, while earnings were down almost 25 percent. Often, detailed comparisons are very difficult to make because the business compositions of these companies’ print/copier units vary, and their reporting preferences also are different; that noted, none had good news for investors however they framed or categorized their activities.

Notables:

Print-copy related revenues Y/Y % (+/-), Q-Q, (CC):
Xerox: -10%
Canon: -14.1%
Epson: -5.7%
Ricoh: -3.1%
Lexmark: -12.7%
Oki: -3.6%**
Brother: -8.4%
Average: – 4.8% (unweighted)***

Earnings, print/related, Y/Y % (+/-), Q-Q, (CC)*:
Xerox: -2.5%
Canon: -37.7%
Epson: +18.7%
Ricoh: – 39.3%
Lexmark: -62.7% (Loss, fl company)
Oki: -79.1%**
Brother: +28.3%
Average: – 24.9% (unweighted)***

Outlook: Trending higher or lower
Xerox: Lower
Canon: Lower
Epson: Lower
Ricoh: Lower
Lexmark: Not provided (acquisition pending)
Oki: Higher
Brother: Lower

* If reported separately

** Oki did not report Q4 results separately; data shown is for full FY as reported by Oki

*** Percentage calculation is a simple average of the reported performance, not weighted by company revenue or income representation in the overall category

Notable among the company reports:

• Many companies reported weaker hardware placements, often pointing to emerging economies as slow sectors
• Many companies reported very weak monochrome printer sales
• Many companies reported weaker supplies sales
• Many companies missed estimated revenue and earnings targets
• All companies were cautious when forecasting future results, most projecting revenue declines
• None of these companies says it is expecting home/consumer printer sales to ever rebound; if anything, they continue to erode.

It is reasonably understood that the United States economy has continued its cautious expansion, while the EU and Japan have stagnated, Russia and Brazil are in political or trade turmoil, growth in China has cooled substantially, and economic activity in emerging economies has seen dropping demand (and prices) for primary resources such as oil and overall weak exports to major buyers — such as the EU, Russia, Brazil and China. So, one could suggest that the poor performance from many of these companies is triggered by far larger forces than a segment-specific decline in hard copy. Concern among these firms could be heightened if the U.S. economy shows possible signs of slowing down, which it has recently.

Several big players such as Canon and HP have acknowledged that they are intentionally shifting away from sales of lower-end units, and several laser-based OEMs have also commented that inkjet may erode or is eroding sales in the business market. Since one of the important cards B2B inkjet offerings play is lower cost of ownership, any pages taken away from laser by inkjet will lower overall industry revenues automatically. Inkjet hardware usually sells for less than equivalent laser models, so again, the revenue line takes a hit. While not quantified by any OEM, several have noted weaker supplies sales while acknowledging aggressive aftermarket supplies sales trends. While several of the firms included here are (or claim to be) important participants in the MPS sector, that presence apparently hasn’t saved them from the forces which are affecting the entire sector.

In general, most of the companies listed here have offered the following as directions they are or intend to take to brighten their financial picture:

• Staff reductions or other internal cost savings measures
• A continued emphasis on color devices and other higher value markets
• A continued emphasis on higher speed devices and markets/applications
• A continued emphasis on MPS or other market strategies which are focused on selling motions/programs which have supplies sales retention as a key goal

If these trends continue – or accelerate – over the next four to six quarters, there will be intense investor and management pressure in the industry toward consolidation/acquisitions, or an outright selloff and exit by one of more players. Lexmark as a whole was just sold (and sold off its inkjet unit several years ago), and Sharp was just sold – both to companies that are not currently printer OEMs. Kodak sold off its inkjet unit a while ago. HP split up. Xerox is splitting up. Three years from now, the lineup of OEMs in this business will look quite different than it does today – with fewer players and even more intense competition for every page printed.

As Bette Davis says in “All About Eve,” “Fasten your seatbelts. It’s going to be a bumpy night.”

John McIntyre serves as a senior analyst for BPO Media. With more than 40 years of experience in the printing industry as an analyst, product developer, strategist, marketer, and researcher, he has covered the printing and supplies sectors for prominent market research firms such as Lyra Research, InfoTrends, and BIS Strategic Decisions, and served with major OEMs such as Samsung, NEC, and Diablo Systems/Xerox. McIntyre is the former managing editor of Lyra’s Hard Copy Supplies Journal and has conducted research and consulting engagements examining issues such as market and business strategies, product positioning, distribution channels, supplies marketing, and the impact of emerging technologies. Follow John on Twitter @John2001S.