GOOD DEAL FOR EFI,BAD DEAL FOR FLINT INK

[Anonymous]

EFI & Jetrion: Good Deal for EFI, Bad Deal for Flint Ink
November 2006 — One of the major items of news in the past few weeks was the planned acquisition of Jetrion by EFI. Jetrion is a specialized inkjet printer company that was set up by Flint Ink in 2003. Previously Flint Ink had carried out inkjet developments within its Digital Division. This planned acquisition of Jetrion essentially raises two questions, the first being why is EFI buying Jetrion, and secondly why should Flint Ink be selling a company that operates in the fast growing market of inkjet printing? The first question is relatively easy to answer; the second may be more difficult.Before trying to answer those questions I will first look at Jetrion and the products it offers to the market. Jetrion is an inkjet product company and an inkjet ink company.Up to the past month Jetrion was predominantly a supplier of add on inkjet printing subsystems for conventional label and packaging presses and mailing systems. These products, the Jetrion 3000 series are small systems using Spectra piezo drop-on-demand printheads up to 2.4 to 14.4 inches wide that run at press speeds, imprinting single color data onto a label, package or mail item using solvent or UV curable inks. However I believe that the main reason for the EFI acquisition is the new Jetrion product. A description of this is below and this is taken from the Jetrion website.At the recent Labelexpo event Jetrion launched a new digital UV inkjet press. The new Jetrion 4000 Series Inkjet System delivers full-color labels in production volumes with quality comparable to flexography, and production costs significantly lower than current digital color presses. Developed for short- and medium-length narrow web production runs, as well as variable data imaging, the Jetrion 4000 series of digital inkjet color presses are stated to give label converters all the advantages of UV inks coupled with the immediate and low-cost changeover of digital printing. Because the only consumable required is the UV ink developed and manufactured by Jetrion, usage costs of the Jetrion 4000 are claimed to be significantly lower than those of other types of digital color printing.The press utilizes advanced UV inkjet hardware and Jetrion’s new UV4000 set of CMYK inks to print full-color labels at fast digital speeds on an ever-increasing range of papers, films, foils and small caliper tag stocks. Offered in widths of 4-, 6- and 8-inches, the Jetrion 4000 fits a range of applications for short- and medium-run batch and variable printing, including industrial, electronic, automotive, shelf and shipping labels, as well as a range of tags, tickets and forms. Jetrion has incorporated Xaar-based Leopard grayscale printheads and high-performance UV-curing technology into the turnkey printer.EFI already has a major commitment to the inkjet printing market with its ownership of VUTEk, one of the leaders in the wide and super-wide format display graphics market. One of the reasons EFI acquired this company, apart from it being a profitable organization, was to open up a new area of business which could link up with its Fiery digital front end and PrintCafe MIS businesses. Recently EFI has started to offer a Fiery front end with some of its VUTEk presses. Linking VUTEk with Jetrion will build a very powerful inkjet division. I believe that the move by Jetrion into making a digital label press was perhaps the key development that made the acquisition attractive. At present the only main players in the digital label business are HP Indigo and Xeikon, both with xerographic presses. The potential of an inkjet press in this market with its speed and running costs appears very attractive.The following is part of the statement from Guy Gecht, EFI’s CEO “Jetrion’s advanced technology and very talented team are great additions to our inkjet business and are a key element in fulfilling our strategy to expand our presence in the industrial inkjet market. We are especially impressed with Jetrion’s packaging and label printing expertise, and we see this as an emerging market opportunity for digital printing given the increasing demand for short-runs, variable content and fast turn-around in these segments.  In addition, the Jetrion and VUTEk development capabilities complement each other quite nicely.  Combining EFI’s leadership in precision color and intelligent, high speed Raster Image Processing (RIP) technology with the market-leading innovation of the VUTEk and Jetrion product lines will give us multiple opportunities to share expertise, benefiting all of our products.”There is however I believe considerably more potential for this technology than just labels. We are now starting to see the start of the arrival in the market of high and medium quality inkjet color presses for a range of markets. The capabilities of the combined R&D groups of Jetrion and VUTEk for developing products for this market are high. For EFI this would generate significant potential for sales of its latest high-performance Fiery DFEs. At the recent GraphExpo exhibition in Chicago I met with Fred Rosenzweig, EFI’s President and he indicated that EFI saw huge potential in the industrial printing business. He believed that bringing together the expertise of both VUTEk and Jetrion staff in both the engineering and ink chemistry areas would generate major opportunities for EFI to be a key player in this area of the market.The reasons why Flint Ink is selling the business are less clear. The following comment was made by Rita Conrad, Director of Corporate Communications for the Flint Group in the coverage of this potential acquisition in WhatTheyThink last week. “The timing was good for us, and it is a very good match for Jetrion. For the Flint Group, it strengthens our financial position at this particular time and allows us some additional capital for investment. And it is in keeping with the strategy for the Flint Group going forward. We are currently one of the largest suppliers of inks and printing supplies in the conventional printing marketplace, and that is where our focus lies. Both the printing industry and the ink industry are consolidating. The industry is changing—but we certainly don’t think it is going away. We intend to be very strong in that arena.”For me this does not add up or perhaps we are not hearing the full story. As the market is growing much faster in digital and we are seeing a reducing demand for conventional printing, why jump on the ship that is going slowly rather than the one that is accelerating? It sounds like the bean counters are in charge and they see short-term capital gain to be a better bet than long term business growth. What are they going to invest this money in? Making more low-margin litho ink? However since private equity company CVC Capital Partners recently acquired Flint Ink, the company selling Jetrion, one can perhaps understand the situation where such companies will prefer a quick profit in offloading an area of the business that is not in the mainstream and considered more of a future prospect than a current profit earner.

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November 15, 2006 at 12:50 PM