I-A Inc : Print Volumes are Shrinking, Are We in Trouble?

[Anonymous]

Print Volumes are Shrinking – Are We in Trouble?

Ever since Johannes Gutenberg developed movable type around 1439, making machines for putting ink on paper has been a growth industry. But that trend is likely to end soon.

Companies that make office printers and copiers have had a tough time recently. Xerox Corp. (XRX), Lexmark Inc. (LXK), Canon AG (CAJ) and Hewlett-Packard Co. (HPQ) have all been reporting weak financial results. They blame the global economic slowdown for reducing the amount of pages that get printed each month.

But investors have reason to worry that the cyclical problems may be reinforcing a secular decline. If businesses and individuals are printing less because they don’t need printed pages, the companies that supply office printers could face even bigger long-term problems. Now Microsoft Corp. has joined Apple and Google in making electronic tablets that can replace printed paper. That increases the opportunity for government, education and corporate customers to abandon binders full of printouts and shift their workers to screens.

Making office and consumer printers and copiers used to be a wonderful business. Once a device was installed, the manufacturer reaped the rewards for years as customers kept buying pricy ink and toner. At the high end, there were lucrative service contracts as well. But when volume flattens out, it’s a brutal market with many well-established competitors competing fiercely for every point of market share.

Printer and copier companies have produced increasingly capable devices. Sales of color-laser printers and multi-function devices that copy, print, scan and fax, have provided growth spurts, even as traditional black-and-white printing and copying shrinks. But fundamentally the industry depends on the number of pages printed to drive revenue, and if pages don’t increase, the business is in trouble.

All the stocks of printer makers have been hammered over the past two years.

 

XRX data by YCharts

Their chances of rebounding with a cyclical pick up in printing seem dubious. The record industry and the newspaper industry both initially blamed sharp downturns on recessions. But investors who awaited a rebound watched their stocks continue to plummet.

To be sure, futurists who forecast a paperless office as far back as the 1980’s have been burned repeatedly. Market researcher IDC says that last year, worldwide page volume from digital printers fell just 1% to 3.09 trillion pages from 3.12 trillion. It predicts small gains in page volume through 2015, even in the U.S. market where tablet alternatives are having the most impact.

A number of factors point to lower volume, however. Companies are encouraging employees to be “green” by avoiding unnecessary printing. Growing use of cloud services like Google docs lets people share documents electronically without ever printing them out. The printer companies themselves have set up businesses managing print services for their customers and promising to slash print budgets.

Signs of decline are everywhere. U.S. postal service mail volume, fell to 168 billion pieces in 2011 from the record 213 billion in 2006.

And these companies have seen significant two-year revenue declines:

[Author]

November 6, 2012 at 8:49 AM