This Week in Imaging: How IKON, Lanier, Savin Acquisitions Have Made a Tough Road for Ricoh
The big news this week – actually last Friday – was Ricoh Company’s announcement that it would take a net loss of 170 billion yen ($1.6 billion) for its fiscal year ending on March 31st due to a write-down in the value of its North American business. Ricoh had previously expected to break even for the year.
Ricoh’s U.S. sales subsidiary, Ricoh USA is expected to take a $1.72 billion impairment charge for its fourth-quarter for the under-performing Ricoh USA and “mega-dealer” IKON Office Solutions, the latter of which Ricoh acquired in 2008. Ricoh may book up to $929 million (100 billion yen) in impairment losses for its North American operations for its fiscal year.
A lot of this woe can probably be traced back to Ricoh’s acquisition of IKON and others. The timing of Ricoh’s acquisition of “super-dealer” IKON Office Solutions couldn’t have been worse – with Ricoh completing its acquisition of IKON for $1.62 billion in November 2018 – right after the global economic crash, the beginning of the Great Recession, and with the gradual decline in office printing beginning in earnest, as North American and Western European companies began shifting to digital document communication and storage. At the same time, companies also began focusing on the cost of office printing, and some OEMs and managed print service providers began taking the strategy of helping companies reduce their print volumes. Nor were matters improved by a clumsy integration of IKON with Ricoh USA (then Ricoh Americas), with many seemingly unhappy rank-and-filers, as well as many unhappy Ricoh dealers that said they were being forced to compete with IKON.
On the plus side, Ricoh’s acquisition was expected to be a blow to rival Canon, with Canon’s distribution deal with IKON ending (IKON also sold HP, Konica Minolta, and Ricoh office equipment before the acquisition).
At first it seemed the acquisition of IKON would only be a boon for Ricoh. After all, IKON was said to be the world’s largest independent provider of copier/MFPs, printers, and related services, with over 400 offices in North America and Western Europe, regional sales and service training facilities, a roster of Fortune 500 customers, and revenues of $4,167 million for its fiscal year before it was purchased by Ricoh.
As an analysis at Gartner in 2008 put it, the deal was expected to: “Augment Ricoh’s distribution of its Ricoh, Savin, NRG and Lanier brands throughout its current market” and “Provide a major channel to complement Ricoh’s previous deals, enabling the company to benefit in managed print services (MPS) and its light and heavy production equipment.” The Gartner analysis also stated that Canon “has held the top market share position every year since the early 1990s in the North American A3 copier/MFP segment.” With the acquisition of IKON, Ricoh “would control a company (IKON) that sells more than $1 billion of Canon’s copiers and MFPs in North America (representing 60 percent of IKON’s 2007 revenue).”
For its part, Ricoh said the IKON acquisition would strengthen its sales and support channels, and would enable transitioning of almost a million non-Ricoh devices placed in the field by IKON with Ricoh-brand devices.
Now, about 10 years later, Ricoh finds itself facing losses for its North American operations. Ricoh Company’s new president and CEO, Yoshinori Yamashita, who was appointed in April 2017, is laying much of the blame at the transition away from paper, harsh competition, and “a striking decline in unit prices” in North America. Since his appointment, Ricoh has taken various emergency measures, eliminating some 5,000 jobs in North America, ending financial support to its Indian sales subsidiary, and even selling its stake in Coca-Cola in Japan.
Overall – and through the benefit of hindsight – it also appears that Ricoh is suffering from the after-effects of acquiring two firms that were primarily direct-sales operations–Savin and Lanier. While the Savin and Lanier acquisitions appeared like good deals back in the day, Savin and Lanier, coupled with the acquisition of the huge quasi-direct “super-dealer” IKON, proved in the long-run to be detrimental to Ricoh, as the decline of office printing and the high expense of direct sales and service (over the more nimble dealerships) proved counter-intuitive, especially with the onslaught of the 2008 recession.
Where previously, many vendors were criticized by investors (not their dealers) for their insufficient unwillingness to dive into direct sales, service and distribution, with the exception of the diverse HP, vendors such as Xerox, Ricoh, and others with large direct operations have felt economic pain.
We can clearly remember the days when most of the vendors went through the motions of direct support and distribution – and the resulting tension between dealers and vendor marketing and direct employees often on display at sales meetings. It wasn’t a pleasant experience. and we feel gratified that the resilience of independent dealers has apparently proven its worth.
Finally, last year, Ricoh USA announced various organizational changes, including an announcement that Ricoh USA is transferring many of its direct-sales customers to Ricoh dealers: “As we further utilize our RFG (Ricoh Family Group) dealer network and transfer SMB customers to dealers in specific markets, every RFG dealer in every market will become Ricoh’s mid-market player for generating new business.” Will it be enough? A great deal of damage appears to have been done at this point, and Ricoh, which will likely face even stiffer competition from the likes of the combined HP Inc.-Samsung Printing Solutions, as well as the likely merger between Xerox and Fuji Xerox, and continued competition from Canon, Sharp, and Konica Minolta, will have a tough road back.
This Week in Imaging