November 2017: “The Hospice Option”
As I’ve often remarked to subscribers of The MFP
Report, the editorial page is typically the last, most challenging and most invigorating part of each issue I write.
After more than two decades and over 260 issues, I wonder occasionally if I’ve exhausted the list of available topics
on which to pontificate. To help allay that anxiety, I keep a folder of possible subjects, tidbits and reminders to inspire
me. It’s a simple system that works.
A case in point is
an article I put aside during the summer. The title was “Why It Might be ‘Dangerous” for IBM to Turn
Itself Around.” It was written by Daniel Howely, and appeared on the Yahoo Finance news page on July 22.
The article was inspired by the fact that IBM four days earlier had announced its 21st consecutive quarterly revenue decline.
But what particularly intrigued me were some quotes from Aswath Damodaran, a professor who teaches corporate finance and valuation
at the Stern School of Business at NYU.
Damodaran was quoted
stating the following: “Not all companies last forever. There is a life cycle to a company. They
are born, grow and then decline.” He added that “Trying to force growth in older companies like IBM could
actually have a negative impact on them, because they might end up simply throwing good money away.” Wow! In what
other industry have we seen companies experience years of revenue declines and billions wasted on misguided strategies to
reinvigorate growth? As Damodaran concluded, “When you’re 75, you’d love to be 35 again, but you’re
not going to.”
What was lacking in the article was
advice on what geriatric companies are actually supposed to do when additional investments made in the hope of rejuvenation
simply don’t or won’t pay off. At the risk of sounding tasteless, impractical or even insensitive, I’d like
to suggest an option. I call it Corporate Hospice Care. Absent a competent strategy to regain growth, aging companies in declining
industries at some point will need to come to terms with death. So why not make it easy, dignified, and as painless as possible?
I speak from some experience. Sort of. In the past four years, I’ve
lost two parents and a dear friend to cancer. In each case, we relied on some form of hospice care. Although the specifics
can vary, hospice care is generally an approach that focuses on palliation of the chronically ill, terminally ill, or seriously
ill patient's pain and symptoms, while also attending to the patient’s emotional needs. In an era in which the law
increasingly ascribes personal rights to corporate entities, why not hospice care for corporations?
Fundamental to the concept of hospice care is the idea that death is just a part of life.
At some point, the focus must shift from remedies and cures, to acceptance and a managed demise. In that context, hospice
care for corporate patients would seem to be a natural and even logical next step consistent with Professor Damodaran’s
view that ”Not all companies last forever.”
goes without saying the hardcopy companies most vulnerable to terminal print-itis are those who have the greatest dependence
on hardcopy revenue. There’s still a pretty long-list of vendors who obtain roughly 50% or more of their sales from
printing: Fujifilm, Epson, Brother, Canon, Ricoh, Konica Minolta, RISO, Xerox and Lexmark. And the degree
of print dependency becomes more disconcerting as one goes down this list. Perhaps ironically, while HP is certainly a top-tier
hardcopy company, printing generated just 36% of its total revenue in FY2017.
This is not to argue that all of these companies are doomed, or that each faces an equal chance of mortality. But it’s
certainly true that past efforts by Xerox and Lexmark to diversify away from printing have not exactly panned out. Indeed,
Xerox, Ricoh, Lexmark and RISO presently have shared no significant or credible path to lessen their hardcopy dependence,
except for some efforts to grow industrial printing. Conversely, expansion in the medical/biological field by Canon, Konica
Minolta and Fujifilm seems so far to be more promising.
might corporate hospice care actually look like? Foremost, it would require acceptance of a continued downward trend in revenue,
quite possibly with an accelerating level of decline after some negative inflection point. It would also necessitate a laser-like
focus on maximizing operating profit. Fortunately, that’s easier in printing than in many other industries. To accomplish
this, one would likely see further slashing of R&D expenditures, even lower capital investment, reduced headcount, greater
outsourcing of manufacturing, and further de facto “outsourcing” of sales to channels. There’s also something
to be said for treating remaining employees with the utmost compassion.
Interestingly, one might argue Xerox, Ricoh and Lexmark are to varying degrees already operating in accordance with such
a prescription. But of course, this kind of trajectory is easier to pursue for private firms than for public companies. Because
of that, I would expect to see one or some hardcopy companies undergo private equity buyouts. Indeed, one might argue it’s
more likely for some print-centric companies to go private than to be acquired by competitors in that oft-predicted final
wave of consolidation.
October 2017: “Go Fourth
and prosper? … I Hope Not”
As the old saying goes, “Once is an incident, twice is a coincidence, and three times is a
pattern.” So what do you call it when the same stupid scenario plays out in the hardcopy industry for the fourth
time in 15 years? Well, I call it a fiasco.
I’m talking here about the massive financial fraud that’s engulfed Ricoh India and Fuji Xerox New Zealand
(and Australia) in recent months. But lest we forget, these twin disasters were preceded by the original “Blame
It on Brazil” debacle Xerox revealed in 2002 — which actually entailed problems across Europe, Latin America
and Canada — and the “Pain in Spain” mess OKI confessed to in 2012. These four events clearly evidence
a pattern of inattention at best and malfeasance at worst when it comes to basic financial controls and fundamental management
oversight among multiple vendors in governing various overseas sales subsidiaries.
Just to recap, although none of these disasters alone was life-threatening
to the company involved, each was a major mishap with serious repercussions for the respective vendor. And the implications
extended beyond just one territory.
Even after fifteen years, the Xerox situation remains the mother of all messes. Issues in Brazil and other overseas
sales subsidiaries were at the heart of Xerox being forced in 2002 to restate its revenue for 1997 through 2001 downward by
$1.9 billion, with a corresponding $368 million reduction in pretax earnings. Meanwhile, Xerox was dealing with its “unsustainable
business model” and was nearly on the brink of collapse.
Five years later in 2012 — and at the other end of the printer industry — OKI
had to restate its results for the prior six years because of irregularities in Spain. OKI took a hit of nearly $400 million
on net income and $100 million on sales.
In contrast, the messes at Ricoh India and Fuji Xerox New Zealand remain “works in progress.” Both vendors
would like to think all the bad news is out and accounted for, but no one really knows. What we do know is that between last
fall and next spring, Ricoh could end up taking a hit well in excess of a half-billion dollars to address years of fraud in
India. And Fuji Xerox has already taken a $340 million charge to net income for six years of fraud in Oceania.
That’s a combined total of more than
$1.6 billion in reduced earnings just for these four incidents! And that doesn’t include the consequences of reductions
in stock prices, market cap, headcount and sales. What’s so striking is the common themes I see across these four situations.
Despite different eras, vendors and locales, so much of what happened, why it happened, and how it was handled is strikingly
Consider that in each
case, the underlying malfeasance was widespread, long-standing, and significant in scope. The overstatements to sales and
income were so egregious as to very clearly be “too good to be true.” Yet even when employees raised questions
— as they did invariably in each instance — their concerns were easily and quickly ignored. In effect, the key
constituencies in both the local sales companies and the corporate headquarters were so vested in assuring that the subterfuge
continued, it was nearly impossible to recognize the underlying fraud and address it.
Of course, one could argue that for each of these vendors, the particular
problems were geographically isolated and have not been repeated ... at least as far as one knows. Indeed, it’s tempting
to believe that hardcopy vendors both individually and collectively have learned the requisite lessons from these past blunders.
But one wonders why the first one or two instances would not already have been sufficiently didactic. So I’m left to
ponder. Who’s next? Where? And when?
Putting that worry aside for now, there remain far more pressing questions that the hardcopy industry as a whole must
consider. From my perspective, the egregious lapses that transpired at Xerox, then at OKI, next at Ricoh, and then at Fuji
Xerox reveal three disturbing tendencies.
First, we’ve witnessed excessive readiness by management to accept unreasonably positive outcomes as evidence
of superior operational performance. Second, we’ve seen a willingness by executives to brush aside uncomfortable information
when it’s conveyed by outsiders, from those in the field, or from those who are lower down in the organization. And
third, we’ve observed how an underlying current of desperation during difficult times can cause leaders in effect to
say “Don’t look a gift horse in the mouth.”
We’ve also seen the same tendencies play out in situations that didn’t involve
fraud but still proved to be very detrimental. Look no further than Xerox’s unwillingness to confront the big problems
in its former BPO business; Lexmark’s failure to realize it was overspending to buy underwhelming software firms; or
the refusal by Dell or Panasonic or other vendors to admit their total irrelevance to the hardcopy industry.
At a time when the industry and every hardcopy
vendor must truly question old assumptions, diversify in uncomfortable new ways, and pursue change sooner rather than later,
it’s time now to consider the lessons from this sordid history.
September 2017: “Buy, Buy EFI”
Let’s face it. We’re well into the “everybody needs somebody”
stage in the printing industry. Acquisitions and diversification are the name of the game. But consolidation is proceeding
at a glacial pace. Vendors are more interested in businesses that are further afield. That can be good news (Canon and
medical) or bad news (Xerox and BPO). But there’s a much closer-in company that hardcopy vendors are ignoring
at their own peril as possible prey. And that company is EFI.
I’m not putting on my financial advisor hat. I don’t even own one. But what I
am saying is that from a strategic, tactical and competitive point of view, EFI could be a very logical acquisition for almost
any print vendor around today.
who think of EFI mostly as that pricey Fiery supplier for color office and production MFPs might be surprised to know those
RIPs are rapidly declining in importance at EFI. Fiery generated just 27% of EFI’s revenue in the most recent quarter,
and Fiery revenue was flat in the first half of the year versus three years ago. It’s just that the rest of EFI has
been growing so much faster, both organically and from acquisitions.
As a result, 2017 is expected to be the year EFI finally surpasses a billion dollars in revenue.
The company now gets twice as much revenue from its diversified industrial inkjet hardware and supplies business as compared
to the Fiery business. The rest of EFI’s sales are from its vast collection of software used by all sorts of print providers
to run their day-to-day operations.
All three of EFI’s businesses present interesting opportunities for hardcopy companies in the context of a would-be
acquisition. Let’s start with the Fiery business, since it’s the most familiar to MFP vendors. EFI is on track
to do around $250 million in Fiery sales this year. And with a 70% gross margin, the Fiery unit performs more like a software
operation than a hardware business. Not only are Fiery RIPs used by nearly every maker of A3 color MFPs, EFI has gradually
expanded its Fiery sales into the world of digital presses and inkjet devices, not to mention supporting its own diverse industrial
of a printer vendor taking control of the Fiery business would be twofold. It would cut out the middleman and some markup,
and it would put all competitors at a worrisome disadvantage. And those other vendors couldn’t simply stop buying Fiery
controllers. They have no ready alternatives in the short term, and perhaps not even in the longer run. Over time, a new owner
could even create differentiation between the features in its own Fiery RIPs and those available to competitors. And a new
owner would be ideally positioned to leverage all that Fiery technology for its own industrial printers.
Then there’s EFI vast and growing array of industrial
inkjet and LED printers and supplies. It’s everything from signage and labels, to textiles and tiles. And it should
produce $600 million in sales this year. That’s a lot more than small industrial digital print competitors like Xeikon,
and it’s arguably more than any of the big diversified hardcopy companies are doing in the industrial market. Adding
EFI’s industrial printing revenue would catapult Xerox, Canon, HP or Konica Minolta to the very top of the industrial
And then there’s
EFI’s easier-to-overlook “Productivity Software” business, which will do around $150 million in sales this
year. While this is EFI’s smallest business by far, it does have the highest margins. More importantly, these tools
put EFI in the enviable position of enabling industrial print providers to go digital, and wedding them to an EFI print ecosystem.
There are also very important but less quantifiable
pluses for EFI as a potential acquisition. Both the company and its management are exceedingly well-known to hardcopy vendors.
Moreover, EFI has demonstrated an effective and reassuringly conservative ability to make one acquisition after another ...
and leverage them. The deals have mostly been small, and all of them were paid in cash. Yet EFI still had $431 million in
cash on June 30. There have been no big failures on the list, and all these deals have helped EFI grow 2.5x in size since
the Great Recession. Talk about reducing the risk in a deal.
Still, EFI remains barely a mid-cap company in a stock market in which investors like large-cap
firms. Moreover, one has to ask how truly disruptive or dominant a company with $1 billion in sales across three businesses
can be in a truly massive industrial printing market transition.
Of course, timing can be everything, especially since EFI has an awkward history of pretty
big swings in its stock price and valuation. For the past five years, the stock has mostly bounced between $40 and $50. But
this year, the stock has careened from a high of $51, to a low of $26. A day after EFI scared the bejeezus out of investors
on August 3, when it warned of revenue recognition issues that turned out to be nothing, the stock plummeted 45%. That gave
EFI a market cap of just $1.2 billion. By the end of September, the share price was back up, pushing EFI’s valuation
to $2 billion. But that’s still below a recent peak of $2.3 billion back in April.
So who’s gonna open up the checkbook? You?
August 2017: “Healthy Choices”
For very good reasons, there’s been
more than a little handwringing amongst hardcopy vendors, investors, analysts and others when it comes to figuring out if,
when and how these companies will proactively plan for their “next act.” The context is a printing industry that
on an overall basis is slowly declining. Understandably, the concerns are greatest for the largest vendors and for those vendors
who are most dependent on printing for their current revenue and profit.
I, too, have worried that I don’t see enough of these vendors taking sufficient actions
to create new businesses with adequate scale and financial attributes to offset the decline in printing. Eventually, they’ll
have to replace the bulk of what they get from printing. I see three plausible explanations for these vendors’ slow
the addictive nature of the supplies-and-service annuity business model. It’s like asking why a drug addict doesn’t
stash away some money for a rainy day. The second issue is the self-soothing way vendors tend to believe all they need to
do is gradually move into comfortably adjacent markets, whether that’s production and industrial printing, or document
management and IT services. They tell themselves the transition will be natural, comfortable, uneventful. And the third and
perhaps biggest roadblock is a combination of plain old fear and denial, plus a belief there’s still plenty of time
But the past year
has somewhat surprisingly provided evidence vendors are waking up to the dangers and recognizing new possibilities. And some
of them have decided their “next big thing” will be healthcare. I’m not talking about healthcare as an interesting
vertical in the world of printing, document management or IT. No, I’m talking about horizontal healthcare as in medical
equipment, allied software and services. You know, the kind of healthcare that’s designed to help make people healthy
... or at least healthier.
less than a year, we’ve seen two top printing vendors make pretty important acquisitions that are likely to set them
on paths that will make healthcare an increasingly larger and transformative part of their respective businesses.
First, we saw Canon complete its $5.6 billion
acquisition of Toshiba Medical Systems Corporation (TMSC) late last year. I’d like to think this reflected a strategic
awakening at Canon, but the deal was probably justified as much or more to help a fellow Japanese corporation in dire financial
straits, than to bolster Canon’s long nascent efforts in diagnostic medical devices. After all, Canon had been talking
about expanding further into healthcare for years, while giving no indication it planned to do anything that was either tangible
or timely. However, owning TMSC for just six months has worked wonders for Canon’s financial results. It can’t
be lost on management that TMSC is by far the best thing that’s happened to Canon’s financial health in quite
some time. So look out for even more deals.
Then a few weeks ago, we saw Konica Minolta announce its billion-dollar purchase of US-based Ambry Genetics. It’s
the biggest acquisition since Konica and Minolta came together in 2003, and the most diversifying as well. Like Canon, Konica
Minolta had been talking about expanding its tiny healthcare business for some time without doing anything much to make that
happen. Now, there’s a good chance Ambry will have the same kind of fortuitous financial impact on Konica Minolta, and
prove to be a strategic catalyst for additional healthcare investments.
And it’s not just these two hardcopy vendors who are making “healthy choices.”
Consider that the company which had been bidding most aggressively against Canon to buy TMSC was none other than Fujifilm,
which owns three-quarters of Fuji Xerox. Like Canon and Konica Minolta, Fujifilm already has a smallish medical business that
it’s looking now to nurture and grow.
Other hardcopy vendors’ plans are more aspirational. Sharp wants to use its display technologies in the medical
field. Kyocera already has a medical and dental division. Xerox PARC is partnering “to tackle healthcare challenges
through collaboration in medical technology, engineering and robotics.” And both HP and Funai have spoken of leveraging
their inkjet technologies for biomedical and pharmaceutical purposes.
There aren’t lots of technological or even business synergies between printing and healthcare
beyond some underlying commonality in optics and digital imaging. The true impetus has much more to do with growth. Healthcare
and allied medical fields will be among the most dynamic and fast-growing sectors in the global economy in coming decades
due to technological momentum and demographic determinism.
And I also see a healthy difference in the mindset hardcopy vendors are bringing to this field.
In businesses closer to office and production printing, hardcopy vendors display a distinct sense of unearned entitlement.
It’s sort of “Don’t you know who I am?” But with healthcare and medical technology being so much further
afield and also exceptionally dynamic, these vendors seem to sense they’ll actually have to earn everything they want.
And that’s a healthy choice.
2017: “Sure, We Can Do That”
Sometimes we Southern Californians take for granted the inherent differences that come with living on
the Left Coast, like year-round sunshine, great ethnic food, and day laborers. That last one refers to the couple dozen immigrant
workers in any Home Depot parking lot every day of the year. They’re new to the country or down on their luck, and are
willing to help with almost any task for a reasonable cash payment. It’s sort of like the work I used to do as a kid
for my dad ... except there was no cash payment.
I’m starting to see the makings of an analogous trend in the US office MFP business. It’s
too soon to say if this development has legs, but it’s worth a look ... and some cautionary advice. What I’m talking
about are a couple of recent announcements from Ricoh and Konica Minolta. They’re about how both companies want to leverage
their MFP service people and infrastructure to pursue opportunities in new, not necessarily adjacent markets. My concern is
that these initiatives are very simplistic and not terribly sound.
In May, Ricoh announced Service Advantage, which it described as a “substantial addition
to its services suite.” The mission is “to help businesses accelerate their core strengths” and “enable
a significant competitive advantage.” To do this, Ricoh is offering a wide range of businesses access to its global
network of 25,000 skilled and certified service employees. Ricoh says they possess “extensive market knowledge and distribution
networks” and “understand the business conduct and laws” in 200 countries and regions.
Ricoh boasts that its MFP service techs can provide “cradle-to-cradle”
services. That’s not babysitting, although I’m sure Ricoh would do that too for the right price. It’s just
another bit of undefined industry argot. Ricoh touts its expertise in device lifecycle management, distribution, installation,
maintenance, training, and physical asset retirement. But Ricoh never really pins down what exactly any of these services
are; how many or what kinds of employees provide the services; or any options for service delivery.
Then in June, Konica Minolta announced it is investing
up to $3 million in Knightscope, a Silicon Valley maker of security robots. This follows a small initial investment in 2014.
It’s the rationale that’s interesting. The focus isn’t on robotics technology or the security market. Rather,
it’s “to leverage Konica Minolta’s service technicians.”
The common thread in what Ricoh and Konica Minolta have announced is a parallel
quest to find new things for MFP service technicians to do. When you break it down, the message is really pretty simple:
“We have lots of service techs who do lots of stuff, so why not let them do stuff for you?” We’re not talking
here about MFP vendors advising other companies on service infrastructure design, field service systems or software, or best
service practices. This is about providing MFP service tech bodies and hours far and wide so that other companies don’t
have to hire, train, deploy and maintain service techs of their own.
This type of offering is new in the MFP world, but the practice has a long history in the
IT market. Today, field service outsourcing is just another link in the booming logistics support and supply chain management
business. In some cases, it’s closely intertwined with IT outsourcing.
Now for the cautionary advice. Look back to the early days of field service
outsourcing in IT in the 1980s, and see who was doing it. And why. I stumbled across a “leaders” list IDC had
prepared over 30 years ago. It’s a veritable who’s who of old, largely forgotten mini and mainframe companies
like DEC, Prime, Data General, Tandem, Wang, Burroughs, Microdata, Basic Four, etc.
Now think back to what else was happening in the ‘80s. The PC
market was exploding, and these mini and mainframe computer companies were getting slammed. They too had lots of service techs
and were looking for a new way (or any way) to make money. Does this sound at all familiar? Nearly all of them got into field
service outsourcing, and it was a decent business ... for a while. But it wasn’t enough to help most survive. In fact,
only a few in that business managed to hang on (e.g., IBM, HP, Unisys, Honeywell), and none of them still do field service
So this early
interest among two MFP vendors who want to leverage thousands of service techs warrants some critical thought. Let’s
start with the most fundamental question. Either these vendors have too many service techs; or they think their techs can
easily take on totally new tasks; or they’re expanding their service forces to gain new outsourcing work and customers.
I have concerns with each of these scenarios.
MFP service needs are declining, which means fewer techs. If a vendor has too many techs, downsizing is the prudent
choice. However, if the idea is to build an outsourced service business, then the economics, competitive dynamics, prospects,
and business model for that endeavor deserve a harder look. Field service outsourcing faces a lot of pressure on pricing,
margins and profits. And the barriers to entry are hardly insurmountable. Ask Xerox about its experience with complementary
services. Just because a vendor can stretch the services it offers, does that mean it should?
June 2017: “Zis-Boom-Blah”
It’s been quite a while since I’ve
editorialized about what it’s like to be a print industry analyst. The last time was back in September 2010 (“That
Raised Eyebrow”). Then, the introspection had been brought on by the untimely death of a dear colleague. As I stated
at the time, “No one likes to defend what he does for a living, least of all an analyst who’s accustomed to examining
others.” I also emphasized the value of “inherent and inerrant skepticism.” As I said, “To be a thoughtful
and well-grounded skeptic is the epitome of what it means to be a strong analyst.” I still stand by those words.
But much has changed since then in printing,
and more generally in the way people today look at news and unvarnished analysis. In our own industry, too many vendors now
act as if all they need to do is string together trendy argot and add a few aspirational “change the world of work”
statements. They equate those modest efforts with actually delivering tangible news. And they look daggers at anyone who doesn’t
drink their hardcopy Kool-Aid. For some vendors, any contrary assessment that an analyst or a member of the press publishes
is treated as if it were “fake news” and a deep personal affront.
Here’s a case in point. I was recently admonished quite harshly by a
vendor for certain statements I had published months earlier about that company. The vendor complained long after my words
had appeared. Only now was I being told those words “were not necessarily interpreted as a token of trust or an interest
in building a good relationship.” If I knew it were a date, I would have brought flowers. I won’t say who the
vendor is as THAT wouldn’t really be newsworthy. In this instance, I choose to side with Shakespeare’s Henry IV.
“The better part of valor is discretion.”
And that wasn’t the worst of it. This wasn’t a case in which the vendor actually disagreed
with my assessment. Indeed, the vendor had long ago made very clear in a phone call that it agreed with me completely. During
the call, the vendor had told me other analysts and press people shared the same perspective. But now, many months after the
fact, I was informed the real problem was that I had had the temerity to express my views publicly and in writing. Quelle
horreur! I was to be punished because my feedback shouldn’t ever have gone beyond our call.
I’m not one to let sleeping dogs lie — especially
not when there’s an opportunity to enlighten and to be snarky all at the same time. Indeed, one of the few perks of
publishing is getting to have the last word. So, I asked this vendor a simple but telling question. Was his company equally
offended and morally pained when on several occasions since that fateful commentary I had dared to put in print certain genuinely
positive and occasionally even glowing assessments of other things the same company had done. The response? ... nothing but
precisely my point. I’m not here to be a cheerleader. I don’t do rah-rah. Not for any vendor, not for the industry,
not for a product category, not for a technology, not for a particular channel, not for any program. Nor am I here to serve
as a mere conduit. You know. You put your carefully crafted “news” in one end, and wait to see it pop out from
the other end. Nope. Not gonna do it.
Reasonable vendors and responsible executives have to understand they can’t have negative feedback shared quietly
behind the scenes, with only positive feedback deemed suitable for publishing.
In the abstract, I believe most vendors agree with me ... most of the time.
And all vendor certainly agree with me all of the time, as long as my critiques are focused on their competitors, or they
relate to a segment of the industry in which they don’t participate.
But as soon as I call YOUR baby ugly, all hell breaks loose. And as often as
not, it’s not really that your baby is ugly. It’s just that you’re marketing and ability to communicate
are lacking. You’ve failed to convey sufficient content and enough context in order to persuade and enlighten me. And
as I always tell vendors, if you can’t convince me, when I’m devoting time and effort to understand what you’re
saying, how are you ever going to use that same approach to win over customers or partners? I’m you’re off-Broadway,
out-of-town reviewer. Think ahead about how I’m going to react, take to heart what I say, and act accordingly. It’s
the things no one else bothers to tell you that will really hurt you.
I understand vendors and their employees aren’t dumb or lazy or uncaring. And I know
every company is under pressure to do more with less and do it faster. But no other important constituency cares enough to
dissect what you’re doing.
not going to change. I’m too old and cranky, and I’m way too cynical to move toward lighter and brighter. I’m
gonna keep saying things — sometimes mean and hurtful things. I’ll criticize you when I understand you, but I
don’t agree with you. I’ll explain why I don’t agree. Then you decide if you disagree with me. You’re
free (even encouraged) to pick apart my rationale for disagreeing. Whether you share that with me isn’t the point. It
will make you a better vendor. It’s the circle of life ... or at least it’s how I think life should be for an
industry analyst like me. Rah!.
May 2017: “In Search
are some big similarities between where hardcopy vendors should look to go from here, and the ongoing quest by astronomers
to locate habitable planets somewhere out in the universe. MFP industry executives and stargazers alike are focused on identifying
what’s known as the “Goldilocks Zone” — not too near and not too far, not too hot and not
too cold. Everyone is anxiously seeking a new place that’s just right.
In astronomy, that means pursuing rocky planets in the so-called habitable
zone. They’re not too big or small and not too close or far from their star. Temperature and atmospheric pressure there
coincide to maintain liquid surface water.
And in the hardcopy universe, logic and experience prescribe an equally narrow habitable zone. Those new business opportunities
must lie adjacent to the company’s current print technology or leverage its current business practices. And that basically
points toward two options.
vendor can use its inkjet technology to move into industrial printing. It can be anything, from labels and packaging, to signage
and wall coverings, to textiles and ceramics, and even additive manufacturing. Because high-speed, high-quality inkjet printing
is a complex and narrowly held technology, there are pretty good barriers to entry. And one also shouldn’t underestimate
the comfort factor for vendors who want to stay in the “printing” business. So it’s not surprising that
industrial inkjet printing is becoming the preferred path. But there’s not room for everyone.
The alternative is to make the big leap from managed print
services in the office, to a more broadly — but not too broad or distant — set of services for workflow, business
process improvement, or managed IT. While demand exists for all of these varied kinds of services, the risks are pretty high
when expanding into these new arenas. Above all, one can’t just ignore all the competitors who didn’t come from
the hardcopy world, as MFP vendors have been wont to do.
And just as astronomers have found that being even a little bit outside the Goldilocks Zone has profound
implications for the chances of life to exist, so too do the odds of business success appear to dissipate rapidly the further
vendors in our industry stray from their core business.
For better or worse, the experiences over the past half-decade at Xerox with BPO services and at Lexmark
with ECM software have closed the doors on areas that initially had seemed quite reasonable to pursue. It doesn’t matter
now if one argues the real problem was Xerox’s or Lexmark’s management, the companies they acquired, or the prices
they paid. No reasonable investor or lender is ever going to fund a repeat.
Even if one puts aside these two particular failed efforts to buy one’s
way into a diversified future, there are other examples playing out among top hardcopy companies today that have nothing to
do with recent acquisitions. And what they show is that different is not always synonymous with better.
Look no further than HP’s ordeals in the PC market, or Canon’s huge problems with cameras, or even the obstacles
confronting Toshiba TEC in the POS business. Not only is each of these product domains fraught with challenges, they all have
much worse profitability than the hardcopy business.
Yes, I know it’s easier for me to cajole, caution and criticize vendors than it is for those companies
who are dependent on the printing business to make such a huge leap. At the same time, I just don’t see a lot of other
options. Most vendors who choose not to move toward industrial printing or a broader services portfolio are left only with
different versions of what amounts to giving up.
Sure, a weak or small printing vendor can try to sell itself to a larger or stronger one. But this is
really just doubling down on print. One better hope the buyer is doing a better job planning for the future than the seller
did. Yet this is also the most likely outcome for several vendors today.
Or a vendor may be able to sell itself to an investment firm in what amounts to nothing more
than a financial transaction devoid of interest in technology or products. The buyer will gut R&D; slash administrative
and operational costs; perhaps undercut the competition on price; suck off the profits for five or so years in order to make
the deal pay off; and then let the doors close.
Or a vendor might try to find some IT-oriented buyer who sees value in a high-touch direct and indirect
B2B sales and support operation. Perhaps a printer company can be rejiggered and redeployed in another product or services
domain. But such buyers are bound to be few. And given the high degree of risk, the price a vendor would obtain in such a
deal is likely to be low.
only other option is really nothing more than the default choice. It’s a non-decision decision to stay the course. No
vendor is ever going to admit that’s the plan. But the financial results we’re seeing today tend to indicate this
is indeed what’s happening inside many firms. They’re still talking about change and transformation and plans
and finally “getting it.” But they’re really just hoping for a very gentle decline in the printing business
over an extended period of time — preferably until management is able to retire.
April 2017: “Easy, Breezy, Beautiful ... And Altogether Inadequate”
When assessing an MFP product launch, I
often tell vendors my simple rule of thumb. If I - an experienced and admittedly compulsive analyst - have a hard time finding
a reasonable level of detail on your products, what does that mean for customers who have far better things to do with their
Based on what I've
experienced over the past couple of months, there's been a definite downward trend in what vendors seem able or willing
to provide. I'm left to conclude there's a concerted effort among the industry's leading companies to obfuscate
when it comes to their new products. Tell me. How is this supposed to help sales?
The latest examples I've encountered are quite literally the biggest MFP
vendor announcements in recent memory: HP's massive new A3 product launch; Epson's pagewidth inkjet A3 device news;
Xerox's big WorkCentre-to-AltaLink upgrade; and Konica Minolta's Workplace Hub debut. In each case, the announcement
and the follow-through have been sadly subpar, to the point where I wonder if many customers will even bother trying to figure
out what's going on.
have to be some common reasons for the consistent bungling and missed opportunities. It's not a coincidence. So here's
my take on the top seven causes - and by implication the remedies - for these major marketing misfires.
Consumerization. Bringing consumer products and technologies
into business isn't a bad thing, but the misapplication of consumer marketing norms does a huge disservice to the office
MFP industry. What I call the CoverGirl approach - easy, breezy, beautiful - has unfortunately become all too common in the
business IT world. The focus has shifted to flavor, feeling and fluff at the expense of facts and functionality. Connect the
damn dots! It's not a marketing win when an analyst or would-be customer listens to your big pitch and walks away thinking,
"That's nice, but what is it this company's really delivering?"
The Two-Step. In each of the examples I cited, the vendor opted for a big emphasis
on the pre-shipment launch and a much more vague postpartum promise that the details would follow. But just as in Hollywood,
a sequel is never as good as the original. There can certainly be good reasons for announcing products months prior to their
availability. But those reasons should never include a desire to delay final collateral, setting prices, determining messages,
and fine-tuning everything else. Vendors have to be able to maintain a sense of urgency, even after the excitement of the
Big Picture. Somehow office imaging companies has convinced themselves their mission is only to solve their customers'
absolute biggest problems. It's all about security and workflow and mobility and content and cloud and happiness and world
peace and on and on. As a result, it doesn't seem to occur to vendors any longer that they still have to excel at the
basics, like speeds, features, options, economics, configurations. It's clarity on the details that enables buyers to
accept those loftier promises.
Doubt. I'm convinced a lot of the dysfunctional marketing I see these days around MFP product announcements can be
traced back a fundamental but uncomfortable truth. Vendors don't really believe their own hype any more. It comes down
either to believing more or hyping less. I'm convinced the best way to bridge the gap is for vendors to do a better job
providing details and explaining features that deliver real upside to customers. And that includes those pesky pecuniary facts
is the French word for boredom. But it connotes more than that ... a certain weariness, fatigue and apathy with a whiff of
wistfulness and a soupcon of sadness. Increasingly, I think the lack of depth and completeness in MFP announcements can be
attributed to vendors who deep down believe there's really nothing new, interesting, important or different in what they're
bringing to market. And all that fosters a certain laxity when it comes to satisfying the basic requirements of marketing.
Meanwhile, I suspect vendors tell themselves it's really about a lack of resources and too few personnel.
Buck-Passing. All too often too many vendors
behave as if there's some other group down the line that will compensate for their own marketing shortcomings. Offshore
vendors look to their regional sales companies to do the job; marketing pushes the task onto sales; and vendors assume channel
partners will pick up the slack. But too often, the buck stops before it gets there.
Paranoia. Implicit in some of the reluctance among vendors to perform
what used to be considered marketing basics is an irrational fear that such information "will only help my competitors."
News flash! ... Your competitors already know this stuff or they will very soon, regardless of what you do or don't do.
So does it really make sense to hobble the ability of your customers and prospects (and analysts and press) to fully appreciate
what you've got out of some misguided hope you're impeding competitors?
As the saying goes, "You only get one chance to make a first impression."
So stop screwing it up!
March 2017: “Are These
the Good Old Days?”
I’m not one who recalls lots of famous lines from TV shows or movies and sprinkles them in my conversation. However,
there’s a line from the 2013 finale of The Office — the US version — that’s particularly apropos to
one segment of the MFP business today. It’s when Andy Bernard laments, "I wish there was a way to know you're
in the good old days before you've actually left them."
No, I haven’t gone all sappy. Hardcopy today is far from “rainbows and unicorns,”
but it’s dawned on me that we’re on the cusp of what can legitimately be looked at as “the golden age of
desktop MFPs.” To clarify, I’m talking about economical A4 laser or LED color and monochrome MFPs sold in open
channels. And it’s more about what users get from these “low-end” MFPs than any claim these products are
creating the best of times financially for those who make them.
To see what I mean, look no further than some of the products noted in this issue, particularly
the color devices: Canon’s new imageCLASS models; Brother’s latest MFC series; and Xerox’s first VersaLink
MFPs. HP is no slouch in this category either, but these latest products are now a step ahead. Lexmark also remains a contender,
but one with some issues. You might put OKI in this category, too, although less so when it comes to scale and viability.
And with the imminent departure of Samsung-designed MFPs in this segment, that’s pretty much it. Six vendors in a market
that can probably support three or four with a reasonable degree of success.
Certainly in relative terms, the A4 side of the MFP business is where the unit
volume and sales growth are to be found these days, especially for color devices. Meanwhile, we’re seeing most traditional
A3 vendors pretty much give up on true A4 innovation and promotion. They’ve concluded — probably correctly —
there’s no way to be an A4 evangelist without exacerbating already tenuous sales trends in the more lucrative A3 side
of the business. Is it any wonder just two vendors (Lexmark and Kyocera) offer today’s only fully credible A3 replacement-type
But forget about
the vendor side of the equation for a moment. Instead, look at what customers get from the latest crop of mostly sub-$1,000
A4 laser MFPs ... which they can buy instantly at dozens of places online, have UPS or FedEx deliver to their door, and be
As much as
the industry has come to denigrate ”speeds and feeds,” who doesn’t like faster better than slower? Today’s
latest desktop MFPs offer color speeds in the range of 30-55 ppm and some monochrome models are up to 65 ppm. Nor is it just
output speed. New single-pass duplex document feeders are enabling image capture at 20 ipm on up to 60 ipm on most models.
And vendors are at last getting serious
about paper-handling. Not only is duplex a given for both input and output, a paper supply north of 1,000 sheets is hardly
unusual. Even though most engines are still front-facing printer designs, today’s new machines are compact and require
modest space. They’re easy to fit almost anywhere and relocate as needed.
Arguably the greatest progress has been in usability. No longer are big
touchscreens limited to pricey A3 devices and consumer AIOs. Color touchscreens on new laser MFPs measure up to 7”,
and vendors are enabling tablet-style gestures and features. These enhanced UI’s are providing the basis for more powerful
customization and personalization, user-defined workflows, downloadable apps, and simple but powerful solutions. Likewise,
vendors are providing more and better tools for device management and MPS.
Finally, vendors aren’t yet getting enough credit for how they’re
quietly but significantly bringing down page costs, albeit from levels that used to be downright embarrassing. There’s
still more room for improvement on color pages, but monochrome costs are now pretty attractive. Across the board, vendors
are offering more toner choices, and many of the new cartridges have unprecedented high yields. And keep in mind, these savings
come without restricted access to supplies and without any need for a service contract ... unless that’s what one wants.
So what are the missing pieces? A few things
come to mind, but I’d categorize them as making a good thing even better. On the product side, simple finishers would
be a nice plus. That would be facilitated by the addition of more sideways print engines. And I’m still holding out
hope for more A3-capable A4 products like Ricoh’s easy-to-overlook (apparently even for them) monochrome MP305 Plus.
And we’re still lacking a toner program like HP’s Instant Ink. HP piloted a “professional” version
of its inkjet supplies replenishment program in 2014, but nothing came of it. And while other vendors offer automated toner
shipment programs, none yet has the simplicity or economy of Instant Ink.
Nonetheless, as these final improvements begin to hit the market —
as they undoubtedly will — they’ll quell some of the last blanket arguments in favor of A3 models for lots of
SMB customers and for many enterprise workgroups. But even without additional improvements, you still won’t find a more
robust and innovative MFP segment today than the A4 desktop business. So enjoy it
February 2017: “Runts of the Litter”
t’s one of those cold, hard facts of animal life. There’s
often a runt or two in a litter of newborn dogs or cats. They can be cute and they may yet thrive, but the odds are stacked
against runts from the get-go, and their early disadvantageous circumstances are hard to ever fully overcome.
Sadly, the same holds true for hardcopy
vendors. Back in the beautiful, bountiful days of yore — when there was plenty of business to go around — runts
could manage to hang on, perhaps exploit a particular niche, and work assiduously to stay out of the way of their bigger brethren.
But those kinds of lives are increasingly difficult to maintain in a printing business that has peaked and now faces an unknown
rate of decline.
the fittest dictates one of two possible outcomes for hardcopy runts. Either they’re sufficiently attractive to be bought,
although perhaps at less-than-ideal prices, or they’ll simply exit. The latter process will be abrupt for some; others
may linger on a few years, slashing expenses and milking the supplies and service annuity. But we’re beyond the point
where spunk, grit or wishful thinking will save the day.
So who are these printing runts? Sadly, it’s a growing list that includes practically every vendor
that falls below a certain hardcopy revenue bar. And I’d argue that bar keeps moving higher.
There are common threads among those on the list. None
is highly diversified in print. Each has a fundamental technological limitation, whether that’s laser vs. inkjet, color
vs. mono, A4 vs. A3. Most are focused narrowly on a particular sales channel. Some rely heavily on OEM suppliers or are themselves
focused on OEM sales. Others have surprisingly narrow geographic coverage. While it may be counterintuitive, the majority
have been doing what they’re doing in print for a very long time. And more often than not, they’re small pieces
of larger entities.
start with the two most recent guests at the printer party, Pantum and Funai. Neither offers anything distinctive in terms
of products or technology. They’ve made no real headway in a particular channel, category or geography. And they’re
abysmal marketers. Plugging away a few more years won’t change any of that. Buh-bye.
And you can put Avision in almost the same category. It’s
halfheartedly tried to leverage a background in scanners and offshore manufacturing to create a couple of midrange A3 and
A4 mono laser MFPs that no other vendor or customer has shown an inkling to OEM or buy.
Casio is unique, but not in a good way. It’s made a few
OK-ish A3 color LED print engines, but its OEM business has dried up. It’s also the only printer vendor anywhere with
no MFPs, and it sells its Speedia line of printers only in Japan.
Then there’s NEC. The one-time would-be contender has scaled back its printing presence
again and again such that today it OEM’s just a few models from Fuji Xerox and sells them only in Japan. It’s
time to say goodbye for good.
is a big company and a dominant PC player, but the collection of rebadged mostly mono A4 models it sells only in China have
nothing to recommend them. And a development project with Ricoh has been a disappointment. This company has much bigger fish
Dell is in the same
sort of leaky PC boat. Its big printing dreams of a decade ago have dwindled down to me-too OEM’d models in the US and
Canada. It’s past the time to admit defeat and move on.
Also due for a dose of reality is Panasonic. Just when you think they finally get it, the
company launches a half-dozen more A4 monochrome laser MFPs that get a few sales in a smattering of markets, but not in the
US. Printing and Panasonic haven’t been a match for over a decade.
OKI is somewhat better off, but this vendor too needs to accept it will be perpetually in
the third tier. However, it’s among the few on my list that could extract at least some kind of modest price in a sale
to the right A3-centric MFP vendor.
The slow-motion demise of Muratec in printing is getting harder to watch. Clearly, being a nice company with nice people
that treat others nicely isn’t enough. Fortunately, the company is involved in a half-dozen much better businesses.
Olivetti is the last of the full-line MFP
relabellers. It offers no differentiation and few solutions, selling through tiny dealers in a handful of mostly European
countries. And it generates about 1% of Telecom Italia’s revenue. Arrivederci!
Rounding out my list are two wanna-be production inkjet vendors. RISO
is gradually shifting from outdated duplicators to mediocre presses, but the future looks far from rosy. Then there’s
Memjet, which has spent an obscene amount of other people’s money, with very little to show for it. It’s time
to give up and sell off.
while Sharp and Toshiba aren’t officially on my watch list, it’s hard not to worry about their futures. At least
these MFP operations should command OK prices from buyers someday.
January 2017: “2017? It's Gonna be Yuge!”
It looks like Washington isn’t the only place this year where braggadocio
and bombast are back with a vengeance. For separate but similar reasons, HP and Xerox want to make 2017 yuge for the MFP industry
and for themselves. Each is seeking to foment its own “MAGA” moment in a declining global office printing business
dominated by not-so-American makers. Time will tell if these latest hardcopy histrionics will pan out.
There was blood in the water as each vendor nervously sought
to convince itself, its customers and its investors the other guy was wrong and destined to fail. But HP and Xerox were so
obsessed with their own challenges, they underestimated Japanese vendors, and both companies ended up suffering as a result.
Last September, HP set the stage for 2017
when it announced plans to disrupt the “copier” market — a term every other vendor stopped using in the
last millennium — by reinventing and replacing service-intensive boxes with superior multifunction printers based largely
on failed Samsung devices. That crusade will commence this spring with the launch of sixteen A3-size laser and inkjet MFPs
that will available in 54 specific configurations that differ mostly in terms of their bundled paper-handling accessories.
Not to be outdone, Xerox at its Wall Street
investor conference in early December stated it would launch 29 new MFPs in mid-2017, which is more models than HP but fewer
SKUs. Xerox said it will be “the largest new product launch in its history.” We’ll bide our time to see
how really new these A3 and A4 MFPs actually are. Xerox has been milking the same old B&W A3 platform for 15 years, and
its last “new” MFPs were differentiated only by a tiny firmware tweak and the addition of an “i” after
the old model numbers.
the numbers of new devices are real and the launches happen as planned, HP and Xerox this year will add more models than any
other MFP vendor launched last year, in some cases 50% to over 100% more new products.
Of course, one mustn’t overlook the fact HP and Xerox are
facing some pretty tough headwinds that have been far from kind to their respective hardcopy operations of late, albeit in
somewhat different ways. Also not a coincidence is that this latest last-man-standing battle over office MFPs is being waged
after both companies have shed major parts of their respective business empires that until very recently each vendor had portrayed
as being the epitome of synergy.
the ultimate attraction — but also the Achilles heel — for the upcoming MFP salvos at HP and Xerox has more to
do with channel than product or technology. By my count, this latest A3 push at HP will be that company’s seventh concerted
effort to ignore, obsolete, or co-opt office equipment dealers. And Xerox’s newest pitch to those same dealers caps
20 years of yearning, learning, burning and churning that have yielded precious few gains. But Xerox calls it a “greenfield
all these new models are to be so beautiful and really great. HP and Xerox this time promise to succeed bigly where every
previous push has faltered. Just ask them. But don’t ask for lots of details. That would spoil the surprise. Anyway,
details are for losers. Winners are happy with vision.
According to Xerox, channel partners “have always wanted our A3 products,” which somehow
ignores the fact its MFPs have been there for the taking for years. And Xerox also says dealers have great confidence it will
be here for the long haul. OK, if you say so. And HP is sticking with its “performance of copiers with the reliability
and ease-of-use of printers” bloviating. Good thing we’ve never heard that one before.
Still, if I were a betting man — and I have to say
I’m not — it would appear the odds are not in favor of either HP or Xerox succeeding, or succeeding as fully and
fantastically as they need to in order to satisfy their impatient investors. So sad. Dealers are sticky, risk averse, and
rightly focused on other priorities these days. Even if those new MFPs do all HP and Xerox are trying to convince the world
they can do, it’s far from clear these vendors won’t just end up running faster to stay in the same place, while
they hunt for an elusive future less dependant on print.
One of the biggest unintended consequences could easily be that Xerox and HP once again sharpen their
foci obsessively and narrowly on themselves, leaving Ricoh, Canon, Konica Minolta, Sharp and Toshiba to keep on doing what
they’ve been doing, which is to dominate selling and servicing of office MFPs, and then use that as a springboard for
their cautiously gradual expansion into adjacent opportunities.
Believe me ... that’s what people are saying.
December 2016: “The 'N' Word”
At the risk of overstating the obvious, the whole point
of a newsletter is to report on and examine that which is ... NEW! So after publishing The MFP Report for over 21 years, I
consider myself to be something of an expert on how newness is handled in the hardcopy industry. And what I’m here to
say is that the often cavalier and occasionally craven way this industry handles what’s new is getting pretty darn old.
As I frequently lament when talking to MFP vendors, if what they do perturbs or misleads me, just think what it probably does
to a customer or a prospect.
no better way to appreciate how vendors go astray with the concept of “new” than how they announce stuff. What
I encounter more often than not any more is a classic “day late and a dollar short” double whammy.
The hardcopy industry no longer believes
“timing is everything.” More and more, I stumble onto new products that pop up on a vendor’s web site or
appear at online stores; these products never get properly (or even improperly) announced. Hear ye! Hear ye! If a product
is worth being called “new,” it’s worth being announced. Of course, this isn’t to say all announcements
have to be equal in breadth, depth or import.
The two alternatives to the non-announcement are only slightly better. One is the early, vague pre-announcement that
is never followed up by a proper announcement. And the other is the long-after-the-fact announcement. As I write this, Ricoh
has finally announced some pretty newsworthy A4 MFPs ... that shipped six months ago, and Funai has just announced a mundane
AIO it’s been selling now for three months. Go figure.
Once a product is announced — or not announced, or pre-announced too early, or announced
too late, as the case may be — I often encounter a litany of other issues and frustrations. And so does everyone else
who devotes less interest and effort to your products than I.
Typically, I find vendors these days do one of three things, and increasingly they go for
the full trifecta. First, vendors are extremely imprecise in how they choose to define what’s new. They fail to put
any brackets around their bold claims. However, there are crucial differences between saying something is new to mankind,
to the hardcopy industry, to a particular sales channel, to a specific product segment, or to just that vendor at that moment.
All of these can be valid, but such qualifiers can’t be treated as optional.
Second, vendors often subscribe to the “more is better”
school of marketing, so they cite a litany of “new” things in the “new” product that by any rationale
definition are not new at all. Repeating in your announcement nice features carried over from the predecessor model, or things
that are shared with your other current products, doesn’t magically make them new all over again. It’s like virginity;
you get one shot and then you lose it.
Third, vendors who are busy tallying up so many new things that aren’t new, invariably overlook important things
that are new ... or at least newsworthy. I’m struck by how often I end up using adjectives like first, best, only, fastest,
cheapest, etcetera solely because of my own due diligence, rather than because a vendor has actually pointed out that stuff.
Incidentally, vendors also should take credit when eliminating a shortcoming that was in the previous product. It shows you
The flip side to all
this is that once you’ve launched something, the “new” clock begins ticking. And by definition, nothing
can be new forever or for a protracted period of time. Yet I’m continually flabbergasted how elastic the measure of
newness has become. It’s routine for some companies to keep that “new” starburst next to products on their
web sites six months or longer after the launch. That’s old!
And while we’re on the subject of web sites, I’ve yet to see a vendor whose “compare”
button actually reveals any substantive differences between the old and new versions of two products. This is becoming especially
troublesome among vendors who insist on keeping two or even three generations of products on their web sites until the very
last old box in the channel is gone.
So far, I’ve been talking strictly about hardware, but the same issues are increasingly common when it comes
to solutions, services, programs and more general business or strategic announcements. However, the dysfunction in each of
these areas has its own particular gnarly twist.
When it comes to solutions and services, it’s apparently impolite to talk about anything tangible
or detailed because it’s all so high-falutin’. Every solution and service is inherently new and a thing of value.
Specificity would sully the innate beauty. And because programs are works in progress that continually grow and morph, they’re
simultaneously always new yet timeless in the way they’re presented and described.
But by far the biggest problems arise
when vendors pronounce new strategies that are not really new at all. This results in a vendor — Xerox is the prima
facie case this month — providing no evidence for why its new pronouncements of old strategies should reasonably be
expected to produce different results. New is getting so old.