IKON: DIM PRINTER/COPIER IND GROWTH

[Anonymous]

Ikon CEO: Printer/Copier Industry Growth
Prospects Dim

 May 05

PHILADELPHIA
–The office printer and copier industry continues to face “very tough growth
prospects,” according to Ikon Office Solutions Inc. ( IKN) Chief Executive
Matthew Espe.

But Espe believes Ikon, which distributes such machines, can return to
earnings growth by cutting expenses, exiting unprofitable businesses and posting
moderate revenue growth.

“We’re confident we’ll be able to drive earnings growth that’ll make
investors happy, (and) revenue growth that will show we’re winning in the
marketplace,” Espe told Dow Jones Newswires in an interview at a
document-management industry conference here.

Ikon, of Malvern, Pa., sells equipment made by companies such as Canon Inc. (
CAJ) and Ricoh Co. . It competes with Xerox Corp. , among others, in machine
sales as well as providing document services.

Ikon has gone through a transformation in the past few years, selling off
assets, exiting product lines and cutting employees. Revenue and earnings lost
from the asset sales, combined with difficult industry conditions, have caused
sales and earnings declines in recent quarters, and the company has predicted a
full-year decline in earnings excluding one-time items for fiscal 2005, which
ends Sept. 30.

Although some analysts have predicted Ikon will return to earnings and sales
growth for fiscal 2006, such growth “will be challenged by highly competitive
industry conditions and cost-reduction execution issues,” Standard & Poor’s
wrote in a recent report about Ikon.

“The industry we’re in still has very tough growth prospects,” Espe said. ”
Equipment segments are down a couple of points in the industry, and we’ll
continue to see that for the next two to three years.” While sales volumes have
risen, product prices have fallen, he said.

To counter these trends, Ikon has shifted its focus to higher-growth segments
– such as document-management services and color copiers – with higher profit
margins.

Also, Ikon in March announced a restructuring in which it cut 1,500 North
American jobs, exited the business-document services unit and sold its Mexican
unit. The company is in the process of selling its French division, Espe said.
He called these divisions “bleeders” because they were losing money.

One thing Ikon is unlikely to do in the near future is make a big
acquisition, Espe said. While Ikon is open to modest acquisitions, “we don’t
want to distract ourselves” with a large deal, he said.

Ikon shares rose 2 cents to $9.43 late Thursday morning.

[Author]

May 23, 2005 at 12:33 PM