*NEWS*IBM-RICOH EXEC. REASSURE LEXMARK

[Anonymous]

IBM-Ricoh executives reassure Lexmark
NEW FIRM TO KEEP, EXPAND PARTNERSHIP
Executives
of a new printing company formed by IBM Corp. and Ricoh Co. told
analysts yesterday they plan not only to keep IBM’s partnership with
Lexmark but also to expand it.The remarks capped a day of theorizing on
how the joint venture could affect the relationship between IBM and
Lexmark, which manufactures some printers sold under the IBM brand and
was an IBM holding until it was spun off in 1991.Before a call with
analysts affirming Lexmark’s role in the new company, analysts had
cautioned that Lexmark-made printers could be phased out by Ricoh,
reducing Lexmark’s annual revenue by 2 percent to 5 percent.The
questions stemmed from a deal announced Thursday in which IBM said it
would spin off its Printing Systems Division into a new company, the
majority of which would be owned by Ricoh, a Japanese firm specializing
in printers, copiers and other equipment.Under the proposed deal, Ricoh
would hold a 51 percent stake of the newly named InfoPrint Solutions
Co., while IBM holds the remaining 49 percent. Over the next three
years, Ricoh will acquire the remainder of IBM’s stake.Ricoh will pay
IBM $725 million upfront and make another payment at the end of the
three-year period, according to the companies.InfoPrint Solutions Co.
will start with about 1,200 employees and be located in Boulder, Colo.
In another example of the companies’ ties, Lexmark leases space from
IBM in Boulder.After the deal was announced, analysts said it could
have meant the end of Lexmark’s printer production for IBM, which is
thought to consist of workgroup monolasers and some laser
multi-function printers, said Larry Jamieson of industry tracker Lyra
Research.But Ricoh spokesman Russell Marchetta confirmed yesterday that
IBM’s relationship with Lexmark “will continue.””We’re moving forward
with all of our partners,” he said.Lexmark declined to comment on the
joint venture, following its general view of not discussing customers,
including IBM and Dell, that buy printers from Lexmark and then sell
them under their own brands.
IBM and Ricoh executives told analysts
they had personally contacted executives at Lexmark and discussed the
new company, said Lyra Research Senior Analyst Steve Reynolds, who
listened to the call.”(They) said that at minimum, ‘We’ll continue as
we have.’ And I’m told their long-term goal is an even stronger
relationship with Lexmark than they have now,” Reynolds said.”I’m
somewhat surprised,” Reynolds continued. “I’m not sure how an expanded
relationship could really occur.”Reynolds explained that Ricoh uses a
number of suppliers, including Samsung and Panasonic, for its existing
printer business, while IBM relies quite strongly on Lexmark.”Maybe I
haven’t had a chance to think it through,” Reynolds said immediately
after the call. “But I cannot imagine how (an expanded relationship)
can be the case when Lexmark is going from being a primary vendor to
one among many.”Philip Grote, a printer industry analyst with Current
Analysis, said the move could be beneficial to Lexmark, though, because
the joint venture is exclusively focused on printing, whereas IBM has a
number of businesses.”Greater focus means more revenue, and Ricoh and
IBM and Lexmark will get a share of that,” Grote said.Before yesterday
afternoon’s analyst call, Jamieson, of Lyra Research, said he would not
have been surprised if Ricoh began using its own printers in place of
those made by Lexmark. But he emphasized that some IBM customers would
continue to need Lexmark-made printers because of legacy software
systems, so no phasing out would have been immediate.Regardless of what
happens, several analysts concurred it would not be a huge financial
blow to Lexmark had InfoPrint Solutions Co. stopped its orders.The
amount of sales to IBM, which are not disclosed by Lexmark, were
estimated by analysts to be as low as 2 percent of annual revenues and
no more than 5 percent — a range of about $104 million to $261 million
based on 2005 revenue of $5.22 billion.The IBM printing business,
meanwhile, generated about $1 billion in revenue in 2006, according to
IBM and Ricoh.

[Author]

January 30, 2007 at 10:18 AM