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Canon, Xerox, Ricoh, Kodak, Konica reporting season – news commentary by Andy McCourt

Thursday, 28 July 2005
By Print 21 Online Article
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Xerox in the US (in this region Fuji Xerox is in a much better position) reported its Q2 results this week with lower than expected earnings as its sales of lower-end equipment increased, but at sacrificed margins. Revenue did rise two per cent to USD$3.85 billion, but profits dipped.

CEO Anne Mulcahy indicated costs would be cut further, with 2,600 job losses already announced. However, Mulcahy expects a stronger second half as revenue from more profitable colour products grew 17 per cent and shows no sign of abating. iGen 3 and DocuColor 8000 placements were better than expected and hold good forward orders.

Canon, about to report in Tokyo, will fare better but is expected to suffer from higher materials costs from oil-derived inputs. Ricoh, FujiFilm and Konica-Minolta are all expected to post disappointing results and analysts are tipping Seiko-Epson to post a very disappointing result, despite good sales of inkjet printers. Apparently, poor margins on low-end LCDs used in mobile phones and consumer cameras are the culprits. Lexmark suffered a 42 per cent profits drop, again due to low margins despite higher printer sales

Hewlett Packard’s Mark Hurd last week announced a huge workforce reduction of 15,000 and internal restructuring as it attempts to rectify the profligacy of the Fiorina years. However, its printing and imaging business remains lucrative and there has even been talk of a ‘spinning off’ of this sector.

Océ experienced a 60 per cent drop in operating profits, but also recorded increased demand for colour products. Its shares have been on the slide since March, languishing towards record lows

Kodak, as reported here last week, has posted three consecutive quarterly losses and announced a further 10,000 job cuts, due largely to a faster than anticipated decline in traditional film sales.

Most of the above suppliers have been active in the core graphic arts market for only a few years, having escalated their product offerings from office machines and duplicators to production mono and colour with variable print options.

The question is; is there a digital ceiling for the high-end, where it runs slap-bang into CtP-driven automated offset presses with much lower TCOs (total cost of operation)? Or is digital inventing new markets that did not exist before?

With Canon taking a record area at IPEX 2006 next April and portending an entry into ‘Big Bertha’ machines, and Xerox now into its eighth year with a dedicated ‘Graphic Arts’ division – what does the future hold for true digital printing? Will it claw into non-digital printing as it climbs up market, or Icarus-like, fly too close to the offset, flexo and gravure sun?

My Call At least for the foreseeable future, there is indeed a digital printing ceiling, a point beyond which the technology becomes non-applicable. I’m talking of course of the printing end and not the processes leading to it, which are becoming increasingly digital.

Equally, there is a limitation for offset printing, areas in which it cannot compete – variable printing for example. But it could be argued that this was always ‘transactional’ type printing once carried out by dot matrix line printers.

A printed phone account can carry personalized advertising messages in full colour and more but this is an evolution of past technology, not a displacement of exiting ones. Then, there are the new markets that variable colour brings, but in percentage terms of the whole industry, they are still small beer.

The driving factor, even with very high production machines such as the iGen3, is cost-per-page. All of the abovementioned companies are experiencing margin erosion as cut-throat competition bites, and yet the cost per A4 digital page is still many times higher than an offset printed page.

Short runs and variable data are helpful and great marketing tools but there comes a time when a press running at a rate of three million impressions a month (which can be 48 million pages of A4 colour on a 102cm perfector), makes much better financial sense. According to the ‘click charge’ business model on which digital is predicated, 48 million digital ‘click’ charges would be $4.8 million at 10 cents per A4. That‘s never going to break through the digital ceiling.

How high the ceiling is, I don’t know, but I know it is there. Perhaps IPEX 2006 will define it.

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