IBM-RICOH EXECUTIVES REASSURE LEXMARK
IBM-RICOH EXECUTIVES REASSURE LEXMARK
2007-01-30 at 10:15:00 am #17086
IBM-Ricoh executives reassure Lexmark
NEW FIRM TO KEEP, EXPAND PARTNERSHIP
Executives of a new printing company formed by IBM Corp. and Ricoh Co. told analysts yesterday they plan not only to keep IBM’s partnership with Lexmark but also to expand it.The remarks capped a day of theorizing on how the joint venture could affect the relationship between IBM and Lexmark, which manufactures some printers sold under the IBM brand and was an IBM holding until it was spun off in 1991.Before a call with analysts affirming Lexmark’s role in the new company, analysts had cautioned that Lexmark-made printers could be phased out by Ricoh, reducing Lexmark’s annual revenue by 2 percent to 5 percent.The questions stemmed from a deal announced Thursday in which IBM said it would spin off its Printing Systems Division into a new company, the majority of which would be owned by Ricoh, a Japanese firm specializing in printers, copiers and other equipment.Under the proposed deal, Ricoh would hold a 51 percent stake of the newly named InfoPrint Solutions Co., while IBM holds the remaining 49 percent. Over the next three years, Ricoh will acquire the remainder of IBM’s stake.Ricoh will pay IBM $725 million upfront and make another payment at the end of the three-year period, according to the companies.InfoPrint Solutions Co. will start with about 1,200 employees and be located in Boulder, Colo. In another example of the companies’ ties, Lexmark leases space from IBM in Boulder.After the deal was announced, analysts said it could have meant the end of Lexmark’s printer production for IBM, which is thought to consist of workgroup monolasers and some laser multi-function printers, said Larry Jamieson of industry tracker Lyra Research.But Ricoh spokesman Russell Marchetta confirmed yesterday that IBM’s relationship with Lexmark “will continue.”"We’re moving forward with all of our partners,” he said.Lexmark declined to comment on the joint venture, following its general view of not discussing customers, including IBM and Dell, that buy printers from Lexmark and then sell them under their own brands.
IBM and Ricoh executives told analysts they had personally contacted executives at Lexmark and discussed the new company, said Lyra Research Senior Analyst Steve Reynolds, who listened to the call.”(They) said that at minimum, ‘We’ll continue as we have.’ And I’m told their long-term goal is an even stronger relationship with Lexmark than they have now,” Reynolds said.”I’m somewhat surprised,” Reynolds continued. “I’m not sure how an expanded relationship could really occur.”Reynolds explained that Ricoh uses a number of suppliers, including Samsung and Panasonic, for its existing printer business, while IBM relies quite strongly on Lexmark.”Maybe I haven’t had a chance to think it through,” Reynolds said immediately after the call. “But I cannot imagine how (an expanded relationship) can be the case when Lexmark is going from being a primary vendor to one among many.”Philip Grote, a printer industry analyst with Current Analysis, said the move could be beneficial to Lexmark, though, because the joint venture is exclusively focused on printing, whereas IBM has a number of businesses.”Greater focus means more revenue, and Ricoh and IBM and Lexmark will get a share of that,” Grote said.Before yesterday afternoon’s analyst call, Jamieson, of Lyra Research, said he would not have been surprised if Ricoh began using its own printers in place of those made by Lexmark. But he emphasized that some IBM customers would continue to need Lexmark-made printers because of legacy software systems, so no phasing out would have been immediate.Regardless of what happens, several analysts concurred it would not be a huge financial blow to Lexmark had InfoPrint Solutions Co. stopped its orders.The amount of sales to IBM, which are not disclosed by Lexmark, were estimated by analysts to be as low as 2 percent of annual revenues and no more than 5 percent — a range of about $104 million to $261 million based on 2005 revenue of $5.22 billion.The IBM printing business, meanwhile, generated about $1 billion in revenue in 2006, according to IBM and Ricoh.