Epson Turns Page On Losses

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Epson Turns Page On Losses

 news 2015-03-17 at 10:51:55 am Views: 349
  • #42185

    Epson Turns Page On Losses
    By Kana Inagaki in Tokyo

    For Minoru Usui, chief executive of the world’s third-biggest printer maker Seiko Epson, executing a turnround plan is similar to managing a football team.

    Over the past few years, Mr Usui has transferred hundreds of employees from underperforming divisions to new growth areas in the same way — he suggests — that football players switch roles to improve teamwork.

    Seiko Epson, also a maker of smart glasses, is among dozens of Japanese companies such as Panasonic and Hitachi that have returned to profit by shifting to non-consumer businesses to combat price declines. But Mr Usui’s restructuring was done the classic Japanese way: with no loss of jobs.

    “We don’t do lay-offs,” Mr Usui says. “If we want to open up new fields with our strength in technology, we need people.”

    But his turnround strategy has cost time. From 2006 to 2013 the company swung between annual losses and profits, while its return on equity was negative just two years ago.

    However, investors are becoming bullish as the company heads toward a second consecutive year of record net profit, totalling Y111bn ($916m). The group expects its return on equity to reach 26 per cent for the fiscal year ending this month, and its shares rose 80 per cent last year, hitting a record high in December.

    At a period when the traditional printer market appeared inclined to shrink with the arrival of the paperless age, Mr Usui took a gamble by renewing the company’s focus on ink-jet printers after being appointed chief executive in 2008.

    Last year, he introduced Seiko Epson’s energy-saving ink-jet printers to offices in Japan and Europe, challenging rival laser printers. Until recently, ink-jet printers had mostly been confined to the consumer market, with laser printers viewed as faster, better in quality and lower in cost per printed page

    The shift was made possible by advances in its patented print head technology, called Micro Piezo, that Mr Usui helped to invent in the 1990s, which promises high print quality and accuracy in firing the ink droplets.

    http://pssmagazine.com/wp-content/uploads/2013/03/Mr.-Minoru-Usui-President-Seiko-Epson-Corporation-206x300.jpg
    Minoru Usui: 'If we want to open up new fields with our strength in technology, we need people'

    For Minoru Usui, chief executive of the world’s third-biggest printer maker Seiko Epson, executing a turnround plan is similar to managing a football team.

    Over the past few years, Mr Usui has transferred hundreds of employees from underperforming divisions to new growth areas in the same way — he suggests — that football players switch roles to improve teamwork.

    Seiko Epson, also a maker of smart glasses, is among dozens of Japanese companies such as Panasonic and Hitachi that have returned to profit by shifting to non-consumer businesses to combat price declines. But Mr Usui’s restructuring was done the classic Japanese way: with no loss of jobs.

    “We don’t do lay-offs,” Mr Usui says. “If we want to open up new fields with our strength in technology, we need people.”

    But his turnround strategy has cost time. From 2006 to 2013 the company swung between annual losses and profits, while its return on equity was negative just two years ago.

    However, investors are becoming bullish as the company heads toward a second consecutive year of record net profit, totalling Y111bn ($916m). The group expects its return on equity to reach 26 per cent for the fiscal year ending this month, and its shares rose 80 per cent last year, hitting a record high in December.

    At a period when the traditional printer market appeared inclined to shrink with the arrival of the paperless age, Mr Usui took a gamble by renewing the company’s focus on ink-jet printers after being appointed chief executive in 2008.

    Last year, he introduced Seiko Epson’s energy-saving ink-jet printers to offices in Japan and Europe, challenging rival laser printers. Until recently, ink-jet printers had mostly been confined to the consumer market, with laser printers viewed as faster, better in quality and lower in cost per printed page.

    The shift was made possible by advances in its patented print head technology, called Micro Piezo, that Mr Usui helped to invent in the 1990s, which promises high print quality and accuracy in firing the ink droplets.

    “We had leaned too heavily towards the consumer segment,” he says.

    Seiko Epson also reversed the marketing model in emerging markets, which had focused on selling printers at a low price and recovering profits with the sale of costly ink cartridges of its own brand.

    Its ink-jet printers are now about three times more expensive, but the tank can be refilled with cheaper inks from any other brand. The so-called big-tank printers became available in the UK and other parts of Europe last year.

    “Rivals are still watching to see if this model is going to work,” says Atsushi Arai, analyst at research group IDC.

    The consumer market now comprises about half of Seiko Epson’s ink-jet printer sales, with 20 per cent generated from businesses and the rest from the big-tank models sold in emerging markets. Previously about 80 per cent of printer sales were generated from the consumer segment.

    Seiko Epson’s share in the global market for ink-jet printers inched up 3 percentage points to 21 per cent in 2014 compared with 2011, according to IDC. That is still less than half of Hewlett-Packard’s 46 per cent share and behind Japanese rival Canon at 27 per cent.

    Mr Usui says his focus is not on pursuing market scale but on shifting product mix to make the company more profitable. Still, he adds: “If we don’t give up and continue pursuing our technology, I think we can be number one.”

    Analysts say, however, that the business-to-business shift still leaves Seiko Epson vulnerable to price declines. With a reduced consumer segment, its revenue is also about a third smaller than the Y1.5tn ($13bn) booked nearly a decade ago.

    “The competitive environment for business-use ink-jet printers is severe so the price risk remains,” says Toshiya Hari, analyst at Goldman Sachs.

    Mr Usui admits the company’s turnround is not complete. “We just launched the business printers so we’re actually only at the starting line.”

    Jobs may not have been lost in Seiko Epson’s restructuring efforts, but robots are increasingly taking over human labour at its plants.

    “Automation on assembly lines using robots manufactured in-house exceeded our expectations,” Goldman Sachs’ Mr Hari said after a recent visit to its assembly lines for print heads, noting that productivity is 13 times higher than manual assembly.

    These industrial robots are expected to play a bigger role in the company’s future as a new sales driver alongside printers.

    “Since we have always been using robots for our own manufacturing, we know the market needs very well,” says Mr Usui.

    The company has been selling in-house robots that were originally used to assemble watches from 1983. But the robotics business was tiny, generating less than 2 per cent of its entire sales.

    In each of the past two years, however, sales have increased more than 50 per cent as rising labour costs boosted demand for robots in China. Its industrial robots, now used to assemble smartphone and auto parts, are also sold in Europe and US.

    “In three years, we want to double sales to about Y30bn,” Mr Usui says. The company hopes to apply artificial intelligence so that its industrial robots can eventually detect parts and assemble them on their own.
    http://global.epson.com/company/message/img/usui_2014.jpg