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IBM to hand printing division over to Ricoh
Ricoh to acquire IBM printing systems unit over three years
International
Business Machines Corp. is spinning off its printing division into a
new company that Japan’s Ricoh Co. will control, part of IBM’s ongoing
efforts to pare sideline businesses and focus on more profitable
segments of the technology industry.The deal, announced Thursday, will
see Ricoh pay IBM $725 million in cash up front and an unspecified
remainder later. Ricoh initially will own 51 percent of the new
company, InfoPrint Solutions Co., and will take full ownership within
three years.Ultimately IBM expects a pre-tax gain between $175 million
and $275 million. Between $100 million and $150 million of that should
come when the deal closes, in the second quarter.The spinoff had little
effect on IBM shares, which were up 34 cents to $97.74 in morning
trading Thursday on the New York Stock Exchange.Faced with middling
overall growth in corporate technology spending, IBM has sold off
several units in recent years in hopes of increasing its profit
margins. The biggest deals have included IBM’s $2.05 billion sale of
its disk-drive business to Hitachi Ltd. and the $1.75 billion sale of
its personal-computer business to China’s Lenovo Group Ltd.IBM’s
printing division has a long history but has diminished in the company
over time. In 1991, IBM sold off its typewriter and low-end printer
businesses, creating a company that became today’s Lexmark
International Inc.The remaining division now heading to Ricoh has
focused on high-quality production printing hardware and software for
large businesses. It is profitable, according to IBM Executive Vice
President Nick Donofrio.But according to IBM’s latest annual report,
filed nearly a year ago, the printing unit shrank from $1.34 billion in
revenue in 2003 to $1.14 billion in 2005. IBM said the unit’s sales
were about $1 billion last year.Given that slowdown, IBM decided it
would be better to let someone else invest in driving the division
forward.“It doesn’t mean it’s a bad business — far from that. It
simply means it needs a new direction,” Donofrio said. “It became
more and more obvious that we needed to do something here.”InfoPrint
Solutions will have about 1,200 employees and headquarters in Boulder,
Colo. Eventually, an additional 1,000 IBM printer-maintenance
specialists may join the company, depending on how the business
progresses.It will be headed by Tony Romero, who had been managing the
business for IBM.
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