The Printer Market Playground

Posted on July 7, 2011 by Darin Stahl

 

The printer market is like a schoolyard playground, social hierarchy included.

You’ve got the cool kids with their slick gear like Xerox, HP, Canon. Then there are the kids who have no style, still use CD players; but you just can’t bring yourself say anything bad about them.

Now this is not because there’s nothing wrong with them. On the contrary, even though they’re so eager and trying so hard, you feel bad for them because there’s actually a lot wrong with them.

These kids are Ricoh, Toshiba and Lexmark.

There’s no doubt that the recession rocked a lot of industries, and the printing industry was no different.

It was enjoying a quiet existence, so much so that it didn’t even feel like spicing it up to keep things interesting. This particular industry has seen little in the way of innovation since companies decided to start producing MFPs, allowing enterprises to consolidate their printing needs while saving them money and helping them implement some greener IT practices by using fewer machines.

So when the recession hit, printing companies were woken from their slumber to a rude reality – they needed to shape up, or get shipped out (or bought out – either one).

Which brings us back to the present-day playground. Some of these companies are still getting their footing in the new market landscape, namely the three already mentioned. The champions in this area have weathered the hit and are currently dominating the market share.

What did they do differently? They realized the old business model wasn’t working. They acknowledged that customers’ needs were changing. It’s evolving from consolidation and cutting back on printing completely, to managed printing and creating the possibilities to print whenever, wherever and from any device.

Green printing options, including double-sided printing and energy management, should be thrown in there as well.

Beyond the printers themselves, leading vendors solidified their already global presence by improving sales and service offerings. Xerox is a great example, with a go-to-market strategy involving the around 10,000 resellers in North America (they have sales in 160 countries total), an impressive direct sales team, and service available all over the globe.

Then there are the stragglers. So what’s happening with vendors like Ricoh, Toshiba and Lexmark? Why can’t they figure it out?

Let’s take Lexmark. Lexmark’s stock was recently reported at a new 52-week low at $28.62 in early June 2011, a noticeable decrease from their previous 52-week position of $48.07. But they’ve been struggling since the beginning when they spun out from IBM in 1991 on their own, with no patents (they paid for those eventually), no big name behind them and no resources to compete against the bigwigs.

So what’s happened? Well, since 2006, their revenue has been dropping. Lexmark has had some success in industry verticals, but its products are not ideal for the SME space. They’ve attempted to break into this market, but with decreasing revenue comes decreased R&D funding. They just don’t have the resources to expand their product offerings in a way that would be competitive in the mid-size market.

Both Ricoh and Toshiba are struggling with similar situations. After suffering a 93% net income loss in 2009, Ricoh recently announced in May 2011 that it would be laying off 10,000 employees this year, claiming it would increase revenue. Toshiba also faced a net loss in 2009 and was forced to forgo dividends in 2009 and 2010, giving them an uphill battle as well.

Now, what could happen to these companies as they struggle financially and fail to produce innovative or game-changing products?

Well, they could be ripe for acquisition. But first there will be a few warning signs for enterprise buyers.

• Decrease in channel programs, and a subsequent erosion of channel space.
• Partners start to be wooed away by other companies.
• Training and conferences, aimed at channel partners and VARS, will suffer; the latter could cease to exist. This will ultimately impact the quality for enterprise buyers. What this means is that VARs may end up placing customers with whatever product fits under the price bar since it’s an easy sale. However, this could result in a poorly sized solution and an angry customer who’s going to be mad at the vendor, not the VAR.
• Research and development will receive less and less funding.
• On a sunnier note, the vendors may expand into managed printing.

Lagging vendors are coming out with options in the area of managed print services, which involves helping enterprises manage their physical fleet of printers through optimization into the enterprise’s current architecture and preventive maintenance, as examples.

Branching out into this field is a smart move for vendors who can’t compete product-wise; however, they’ve still got a way to go before they can be accepted into the top tier of the playground before becoming a dodgeball…I mean, acquisition target.

This entry was posted in Analyst's Angle and tagged cannon, hp, Lexmark, mfp, printers, Ricoh, Toshiba, xerox. Bookmark the permalink.