XEROX STAKES FUTURE ON COLOR DOCUMENTS

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Xerox stakes its future on the growth of color documents
(March  2006) – At one time, Xerox Corp.’s success helped slow down the growth of color documents in the workplace. Now, the company is banking on color reproduction to drive its growth.
Typewriters had been produced with a red underlining ribbon, for highlighting purposes. But Xerox’s machines in the 1960s printed only in black and white, and their popularity soon convinced typewriter manufacturers that only black ribbons were necessary.
The company is now in the middle of a color blitz that it hopes will change the way businesses use color documents and drive Xerox’s profits.
Xerox announced its “Color Everywhere” campaign in 2001 but took the idea to a new level in 2005. It rolled out dozens of color products, most notably the Workcentre C2424, a desktop copier/printer/scanner based on the company’s proprietary solid ink technology, and the DocuColor 240/250 color machines designed as workhorses in larger offices. A multimillion dollar ad campaign featuring color continues in print, online and on TV.
“Our investments in color continue to pay off,” Chairman and Chief Executive Anne M. Mulcahy told analysts during a conference call in January.The company is furthering its commitment to color by building a $59 million plant in Webster that will produce a new generation of high-tech toner.Revenue from color has been growing between 15 percent and 20 percent a quarter for the last three years, say company figures.Last year, color products and services made up $4.6 billion, or 30 percent, of Xerox’s $15.7 billion in revenue. They represented 32 percent of Xerox’s revenue last quarter, up 16 percentage points from 2001.
Why? The simple answer is money. Color copies and prints are five times as profitable as black-and-white counterparts, Xerox says. That’s largely because there’s more to the process of color printing and copying. A color copier or printer is essentially four single color machines working together in one unit – with black, cyan, magenta and yellow toners.
That means there are four sets of supplies to replace. While the cost of color printing may likely come down some, current technology can’t make those four sets of toner go away, experts say.
“Color is clearly the most vibrant part of the marketplace, and it’s color everywhere, from the low-end to the high end,” Jim Firestone, president of Xerox North America, told an investors conference this week.
Installations of all machines are growing, but color units are leading the charge, he said.
In the fourth quarter of 2003, 4 percent of the pages printed by Xerox machines were color pages. That doubled to 8 percent in the fourth quarter of 2005.And the market should continue to grow. Roughly 3 percent of all pages printed are color pages. By 2008, that number could grow to 10 percent, Xerox said.
Lyra Research says sales of color multifunction devices should increase from 100,000 in 2005 to 600,000 by 2009.
Competition
But competition is fierce as rivals such as HP, Canon, Ricoh and Konica Minolta fight for space. While Xerox’s iGen3 dominates the market for digital production color presses, competitors such as Eastman Kodak Co.’s NexPress division and HP’s Indigo line are looking to catch up, said Steve Reynolds, an analyst for Lyra.
And in the office market, competitors are slugging it out, especially in the midrange machines that might typically produce color pages 30 percent of the time.
“Everybody and his dog is rushing product to market as quickly as they can,” Reynolds said.
That’s leading to price cuts, with some low-end products now starting at much less than $1,000.
Firestone acknowledges the battles calling the market “fiercely competitive.”
But Xerox’s aggressive product introductions have given the company solid footing, he said.
“That helps us,” he said.
Changing perceptions
However, Xerox is reaching for more, and looking to educate customers on how color can help their businesses.
Mike Spinelli, a principal with Xerox Global Services, said his organization tries to show customers how they can save money in other areas by using color.
“Color has a direct relationship to customer loyalty,” Spinelli said. “Most people are using color for aesthetics and they need to consider it to drive behavior.”
For example, credit card companies or insurance companies can use color in bills or policies to highlight important information for customers. Studies have shown that well-designed documents can cut down on calls to support centers, saving businesses money, Spinelli said.
Color can do that by acting as “visual Velcro,” he said.
“How can I get your eyes to land on the parts of the documents of what you want them to read?” he said.
Xerox also wants customers to use color smartly, said Peter Crean, a senior fellow at Xerox’s color research lab in Webster.
“When color first came out people used it just to use color,” he said. “It was the office equivalent of reading a ransom note. If you look at the professionals, they’re using color strategically to make an impact.”
Jill Morton, who runs a Hawaii-based color consulting company, said businesses are paying more attention to how color impacts their customers. Pharmaceutical companies spend more time studying the color of pills, she said.
“I really see an explosion of awareness about color,” said Morton, who has done consulting for Xerox and famously noted that Mulcahy was wearing a shade known as “drunk-tank pink” at an event last year.
That awareness is moving into the office because laser printing technologies are finally more affordable, she said.
“You really need to look professional now. It’s a really competitive marketplace,” she said.
But color adoption has been notoriously slow especially in the office. Xerox introduced its first color copier in 1965, and 40 years later, still produces only 8 percent of its pages in color.
“In a lot of office applications, where you just need to get me a piece of paper with some information on it, just doesn’t add that much and isn’t worth the cost,” Reynolds said.
Xerox’s Crean acknowledges that, but sees a future coming quickly when users will switch to color.
“Televisions switched to color when it was 2.5 to 3.5 times the cost of black and white. Photography was similar. Color printing is still 5 times the cost of black and white,” he said.
But with color televisions, personal computers and even cell phone screens everywhere, color is changing old habits, Crean said.
“If you’re just writing minutes, (black and white) is fine,” he said. “But if you’re presenting data, you might want color. Today, people don’t think twice about going to the Web and grabbing an image or two for a document.”
And in an overall market estimated in the hundreds of billions of dollars, even small gains can mean big money. 

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March 14, 2006 at 10:19 AM