Let’s Get Ready To Rumble; US economy is showing strong signs of coming back…

Here we are 04/13/2010, exactly 3 months since I had a slight employment diversion. During the 3 months I had an opportunity to take a good look around me and realize that things were not as I remembered them. I had been so busy focused on the insanity that was around me at our office that I had forgotten to look outside or really listen to my clients talk about their experiences with the economy.

What is sad is how easy it is to get caught up in the forecasting, closing and the implementing of what we do and forget that there is a real war outside. Our economy has taken some major hits which has severely impacted all of us in one way or another. I had my head buried so deep in the sand that I didn't realize how vulnerable we are really were, until I ended up on the unemployment line. No one is irreplaceable and I guess that is the lesson that I had to learn. I do think it is a lack of leadership not to be able to make corrections without throwing the baby with the bathwater but that was not my call.

In the end I ended up in a culture where I was already a known entity and had a strong track record of success; so the hope is that after 3 months of soul searching I too will be part of the solution to our National economic issues. The good news is that the US economy is optimistically coming out of its funk slowly but surely. There are many strong signs of recovery in our favor and a few that were not.

Printing shipments were down month to month and year over year. In January 2010 commercial printing shipments were $6.7 billion, down -7.2% compared to 2009. This data is a bit obscure but can be found at the Manufacturers' Shipments, Inventories, and Orders also known as the M3 survey has monthly statistical data on economic conditions in the domestic manufacturing sector. The survey measures current industrial activity and provides an indication of future business trends. The preview for February's report will come out March 24^th. There are a lot of organizations and individuals that take this raw data and manipulate it to formulate their own opinions on the state of our economy. Of interest to those that sell the big iron or are purchasers of the big iron a report that is nicely put together with analysis and commentary is the one produced by WhatTheyThink.com.

Dr. Joe Webb, director of WhatTheyThink's Economics and Research Center, they have just released a current report titled, "North American Monthly Printing Shipments, Issue #52." This report is available for purchase at: https://store.whattheythink.com/monthly-u-s-printing-shipments. I had never really spent much time looking at economics or the reports as they came out till I became unemployed. The old days I would have made a phone call to the company of my choice and would have found myself picking a desk the same day. In this new world I did have a lot of job opportunities but getting the decision makers to pull the trigger on an addition to their payroll budget was not as easy as it used to be. While unemployed I started to pay attention to the financial reports release dates and following what was going on much closer than I had ever done before.

But there are a lot of people looking forward to the "Spring" back of our economy. In an audio report by Jerry Webman, Ph.D. a Senior Investment Officer & Chief Economist for the Oppenheimer Funds I found this report to be very "level headed" and was characterized by cautious optimism. His sentiments can be found all over the economic strata. Many do share Mr. Webman's thoughts and they are easily found. His commentary can be found here: U.S. Economic Recovery in Full Swing--Weekly Market Commentary.

Founded in 1915, the Institute for Supply Management™ (ISM) is the largest supply management association in the world as well as one of the most respected. ISM's membership base includes more than 40,000 supply management professionals with a network of domestic and international affiliated associations. ISM is a not-for-profit association that provides opportunities for the promotion of the profession and the expansion of professional skills and knowledge.The ISM releases 2 reports a month, the Manufacturing ISM Report On Business^® and the March 2010 Non-Manufacturing ISM Report On Business^® The ISM used to be known as the Purchasing Managers Index or PMI.

The manufacturing sector has been coming back now for 8 months. WE are now seeing new job creation begin and will continue as the economy recovers. Jobs finally returned in March, however, as nonfarm payrolls increased by 162,000 (48,000 were census workers). Manufacturing payrolls rose by 15,000 and construction payrolls by 17,000 which were 2 of the hardest hit and are now showing some reprieve. Temporary employment improved in March by 40,000 which could be a indicator for future job growth as companies retain those employees fulltime when merited. There are all good signs for our industry and the recovery of our economy in the near future.

Here are a few key pieces of the ISM report.

MANUFACTURING AT A GLANCE
Mar-10
Index	Series	Series	Percentage	Direction	Rate
	Index	Index	Point		of	Trend*
	March	February	Change		Change	(Months)
PMI	59.6	56.5	3.1	Growing	Faster	8
New Orders	61.5	59.5	2	Growing	Faster	9
Production	61.1	58.4	2.7	Growing	Faster	10
Employment	55.1	56.1	-1	Growing	Slower	4
Supplier Deliveries	64.9	61.1	3.8	Slowing	Faster	10
Inventories	55.3	47.3	8	Growing	From Contracting	1
Customers' Inventories	39	37	2	Too Low	Slower	12
Prices	75	67	8	Increasing	Faster	9
Backlog of Orders	58	61	-3	Growing	Slower	3
Exports	61.5	56.5	5	Growing	Faster	9
Imports	57	56	1	Growing	Faster	7
OVERALL ECONOMY				Growing	Faster	11
Manufacturing Sector				Growing	Faster	8

There are a lot of reports and raw data out there for those that have the time to acquire and distill it. One government site that keeps a nice calendar of all of the key government reports can be found here: http://www.economicindicators.gov/ the National Bureau of Economic Research also keeps a nice list of economic reports and their releases on their New Economic Releases Page.

Pirate Mike

Winds of Change; Konica Minolta repositioning the troops for the next wave of the offensive...

The Morning with Michael:

I have been going to comment about this release since the day it came out but had a few other posts that were a priority. Now that the articles have served their purpose I will make my comments.

Konica Minolta positioning Jun Haraguchi Takes on Global Leadership Role for Konica Minolta Business Technologies in Japan; Nobuo (Ned) Umehara Takes Over as President and CEO of Konica Minolta Business Solutions U.S.A. on April 1

Ramsey, N.J. - March 25, 2010 - Konica Minolta Business Solutions U.S.A., Inc. (Konica Minolta), a leading provider of advanced imaging and networking technologies for the desktop to the print shop, today announced senior management changes.

Jun Haraguchi, President and Chief Executive Officer will return to Japan to become General Manager, Worldwide Sales and Marketing for Konica Minolta Business Technologies, Inc. In his new position he will be responsible for global sales operations and marketing strategy. Mr. Haraguchi has spent the last 13 years in positions of increasing responsibility within Konica Minolta, the last five years as President and CEO of Konica Minolta Business Solutions U.S.A. During his tenure he led the successful integration of Konica and Minolta, the integration of several acquisitions, most recently Danka Office Imaging, while improving market share and the overall operating performance of the company. He will remain on the board of directors of Konica Minolta Business Solutions U.S.A.

Nobuo (Ned) Umehara has been named President and Chief Executive Officer of Konica Minolta Business Solutions U.S.A. effective April 1, 2010. Mr. Umehara, who until recently served as General Manager of OEM Sales for Konica Minolta Business Technologies, has been with Konica Minolta for 33 years. He has considerable experience in the U.S. market having worked here on two separate assignments in the past, once in the printer division and once within the MFP sales operation. Mr. Umehara will be leading an organization with strong brand awareness, award-winning product lines, and a solid infrastructure in place.

"It has been a privilege leading a dynamic organization such as Konica Minolta Business Solutions U.S.A.," said Haraguchi. "Despite the tough economy over the past two years, our corporation has been able to grow market share and improve operating performance. Ned will be assuming responsibility for a company that is led by a strong senior management team and is well positioned for future success. I want to thank the entire Konica Minolta family for their unwavering support and dedication during my time here, and I look forward to their future success - both individually and as a group."

"I am honored to take on this important role at this time in our company's history," said Umehara. "Leveraging the strength of the operation, I envision continuing our strategies to expand our presence in commercial print, managed print services, and the solutions business while gaining share in the core MFP business. One thing is certain, and that is our business partners and end users will not be affected during this transition. My number one goal is to ensure them they can continue to count on Konica Minolta for industry-leading technologies and superior service."

There are lots of changes going on inside of the office equipment sector and more to come as everyone reposition themselves for the 2010 fiscal year. New product introduction are being prepared, new compensation plans are being presented and explained to the troops.

Some organizations had the setup that if you were at 60% of plan you were still making money, the new trend is to set those gates so that anyone under 80% is unhappy and people that over achieve are very happy. Oddly enough in the midst of the storm there has come upon the industry a "calm peace."

Now that Ricoh/IKON have made their first moves to consolidating the new world reps from RiKON seem to be ok with the changes. Their compensation plan has adopted the above strategy which is the kind that you would expect in a sales organization. No one should be happy at 60-80% of their budget.

Konica Minolta was not in such a place of upevil but more in a transition that will be marked by the normal marching orders. Repositioning the troops, working on the distribution model, fine tuning supply chain and cheering on the troops. They have a lot to be proud of coming out of a markedly tough 2009 with the loss of one of their lead distributors of production products and the loss of a key strategic partnership with Oce.

They are poised to make a remarkable comeback as the introduction of their new FLAGSHIP product the 8000! This new tool of destruction will be of the likes of the Canon imagePRESS, Xerox 8002, Ricoh Pro C900 ETC. That paired with their own "heavy iron" black and white offereing the 1200. They are ready to do battle with the likes of Xerox, HP and Kodak!

Being prominently displayed at the 2010 On Demand show it almost makes you want to buy a plane ticket just to see it. As Konica Minolta repositions itself within the Print Production as an "End to End" provider not just of hardware but also in the lines of solutions we will see a Gartner "Challenger" move toward Jun's original battle cry "We are on the road to Tier 1." This battle cry was introduced in Jun's road tour of the branches in North America.

I have met Jun personally several times and was always enamored with his charisma and ability to reach down to everyone and pull them up. It is a sad day to see him leave but I am sure that they have great plans for a warrior of his caliber. All in all the seas are calming down only to meet the currents that are bringing the next wave of economic changes to us.

That's it for Pirate Mike's observations of the day, I hope that your day is full of prospects and that your afternoon is absent of any excessive service call reports! The winds have been strong the last few days so I am about to head off and "go catch the wind."

Good Sale'ing...

Scary Times – Ricoh the one world leader succumbs to bad economy and is vulnerable like everyone else…

Now this is just hearsay, but I was just told that Ricoh is making employees take a week furlough without pay and has started lying off employees. This is a very similar situation that I am seeing across the boat I mean board with companies in our industry. From Konica Minolta's huge layoffs right after Xerox and Kodak cut roughly 20% of their global workforce. I'm sure it is not a shock to see HP step back and act cautious in new hires and expansion. Now with Canon in complete desperation to see them partner up with HP is almost funny. These types of partnerships are not uncommon in our industry, good bedfellows they make as they both struggle to assert their once top tier status. With Oce bleeding profusely to now even Ricoh showing their humanity we see salary's decreasing, employee benefits being cut or disappearing all together to sheer headcount reductions in almost every company.

IKON has even make changes and cutbacks in our company 401K matching program. The one thing I will say is that we are still expanding headcount and retooling our demo facilities and go to market strategy. We have not given up that we can be successful in such trying economic times. "Be Bullish In Production" our RVP says religiously. IKON is very bullish in times when even the greats are cowering. In fact we seem to have put on the war paint and run into the streets to meet our enemy head on. We continue the fight regardless of the naysayers.

I am getting nervous to see our "big brother" have such 'noise' coming from their employees. I knew many that went from Konica Minolta and others to over to RBS when they were the best looking for longevity; now what were long term stable employees they too are making the great pilgrimage to look for "gainful employment."

With everyone having such a knee jerk reaction it makes me wonder what is coming next. From everything I am seeing it appears that IKON is coming out on top and in a strong position to negotiate with the Ricoh first born. It would not surprise me to find that IKON becomes the "chosen one" and the pony picked to win this next horse race. I look forward to hearing the stories from my readers as I'm sure that many will find even uttering such a thing blasphemous.

If you have a Ricoh layoff story or more "inside information" I would love to hear. As for Pirate Mike I think we will see the true colors of Ricoh's intentions by April 1^st 2010! Maybe I'm wrong but hide and watch as Ricoh retools their organization to come out fighting strong in the next fiscal.

Also be looking for the new Ricoh Pro C901 ( or whatever they will call it ) This new machine of destruction will be a great advancement of the C900 of today with no fuser oil, basing its strengths on a newly formulated polymerized toner? that will bring digital quality to new heights. If I had to guess with the speed at which they are developing products I would guess mid spring or early summer. With all of the great advancements of the Aegis product you can be sure that Ricoh is looking to show the world that "Ricoh knows production." Or at least the new horse they ride IKON>

What Ricoh knows is how to buy the best technology and engineers and then follow that up with a great distribution model which they did too buy. The IKON acquisition will show that their multibillion dollar purchase was not in vain but truly put them on the map in a way that they never could have done before the acquisition.

Ricoh is slowly learning the power of the weapon that she bought. But being able to wield this new weapon of destruction is yet another story. IKON is not an easy horse to ride, and this ride is surely to get very edgy in the short term as things build and the economy continues to falter. This is an "E" Ticket for sure!

As we get into 2010 I'm sure there are more cuts, layoffs, and changes to come. All we can ask is in the end that we are paid to the champions of the day. I for one cannot complain too bad as I have had record months and a record year! I am sitting somewhere around 120% of my budget with almost 400% of my yearly units. The Ricoh Pro 550EX, 700EX and the infamous C900 have taken me to the Promised Land!

Even in bad times the pirate of Lewisville Lake is showing that it can be done with no food or water and just on new business acquisition alone!

Happy Hunting,

(Xerox, Konica Minolta, Danka, Ricoh, IKON, Oce, Imagistics, Lanier, Global) How good companies alienate great people – A story of bloodletting and corporate ignorance.

I have wondered how companies let such great talent walk out the door and end up at the competition to do nothing short of shut them down in a particular marketplace. I have watched so many people change hands over the last 4-5 years that it is truly amazing how fast the strength of a company can change. I have noticed that companies lose employees in 5 distinct ways.

1.Through lack of leadership.
2.Through lack of promotional opportunities, and poor positioning of their resources.
3.Through changing of the compensation plan or not insuring that the employees get paid as they should.
4.Through the changing of an established employees territory or constant switching of roles.
5.Through the lack of respect, recognition or pure disregard for the employees goals and dreams/desires.

I have survived now 2 distinctly different combining's, the merger between Konica and Minolta and the acquisition of IKON by Ricoh. Both were very different but had many of the same elements in them. I have witnessed several other acquisitions and mergers from the acquisitions of the Ricoh family companies like Lanier to the acquisition of Global by Xerox and Danka by Konica Minolta and Imagistics by Oce. One thing that they all have in common there was always a mass exodus of many great people during these troubling times. And in which affects the company's strength and positions the company for greater failures.

During Konica and Minolta's merger I witnessed many events that I wish would have ended up differently. One thing that Minolta and the later Konica Minolta were very good about is making sure that their employees got paid what was due to them and identifying what the employees dreams were and addressing their work to accomplish that dream/desire. Managers took special care to see that the sale reps got paid and that their livelihood was preserved at all costs. Although it seemed as if the sales people were spared the initial cuts, pay plans took dramatic cuts. Leadership was there to manage focus and readdress employee concerns. Konica and Minolta had their failures with processes and support structures. The companies were brought together without a good supply chain methodology. There were very few things that actually happened that made business any easier. In fact many of the processes that were solid become more flimsy as the companies came together. Research and new product lines were coming out quickly giving their people some great products to sell but there was no internal support structure to get them to where they wanted to be. The frustration had always been tolerated as salesmen knew that they were "paid the big bucks" to deal with it themselves. Now that the financial incentive had left the big hitters left also for a more fertile hunting ground.

There was very little emphasis that anyone was very important. In fact the exact opposite was quite true, we like you but we can replace you tomorrow with someone that wasn't here when we paid them properly was definitely the attitude. Promotional opportunities were available but limited to the local leadership's ability to keep you pinned down to what they needed you to do (sell if that was what you were good at). The branch I was at had probably 8-10 of the companies top 20 reps nationally and they all were gone within eighteen months of the formal merge. Territories didn't change for the Minolta employees but that isn't true of most of the Konica employees that ended up in menial jobs and eventually quit to find somewhere else to graze. Minolta had a strong culture of respect and that was only broken by raping the compensation plan to the point that one could see the writing on the wall (you are not getting paid the way you used to so just get over it). It was obvious that Konica Minolta didn't want a huge changeover but really did want to slowly change out all of their employees to new ones that would only remember Konica Minolta and not one or the other. The legacy employees were not good for morale and only brought strife and improper expectations. The original expectation was that if you don't make a six figure income we will fire you. The new expectation was be lucky to have a job and hope you make 65-80k.

IKON and Ricoh's situation was quite different. Ricoh tried to preserve the unique identity of IKONITES. They were very keen on putting value on their individuality and importance. Great steps were taken to try to keep key employees put until the changeover was complete. Leadership was lacking though as IKON had become weak and instable. How can the largest independent distributor of office products in the world get taken over? Who would let this happen? Hedge fund operators that were looking to plunder gold at any cost, that effectively were nothing but corporate pirates. These raiders and marauders slowly and methodically purchased stock and held it for ransom till they were able to manipulate the books till IKON looked like an attractive buy. Leadership had lost the desire to fight and had become fat, slow and lost the entrepreneurial spirit. IKON's growth pattern was like a dwarfed child with no way to grow into the fulfillment of the promise that it had once offered. As a result she became a victim of greatness. Her size and distribution model soon became the desire of others that didn't want to create their own but saw IKON as a cheap alternative since she had become so weak and unprofitable.

IKON was built on the conquering spirit and had become a fierce competitor to do battle with. Over time their success had created greed and sloth. (See the 7 deadly sins of a copier salesmen to fully understand this dynamic) IKON became vain and without potency. Something like 21 companies bid for IKON; Canon, HP, Samsung are some of the ones that I heard of. (If you know where I can find documentation on whom bid for IKON and how that went down please let me know) Now after the acquisition there is much restructuring being done to become the new Ricoh; the new one world leader.

One would have thought that promotional opportunities would have been wide spread as many of IKON's people did leave to places far off. But as the people left the leadership found it more attractive to place "new" talent in place that did not know of the IKON way. The compensation plan was very slowly adapted to a new way of thinking. This new "manufacturers" view of box placement and aftermarket preservation took a while to settle in and is still being implemented now as we speak. Territories have not changed that much as they really have tried to preserve IKON's identity and run it as a "wholly owned" subsidiary for the mean time. People were viewed as an asset and respect was placed on maintaining the integrity of the local branch and employees. But IKON really expects you to take care of yourself, they do not see the value in "getting you paid." If you cannot figure it out for yourself you are surely out of luck. They still believe in the "only the strong survive," and do expect that everyone that comes aboard has a sharp sword and is ready to use it. (Even if it means cutting a few throats in the initial onboarding) I almost find it funny sometimes as I have almost become accustomed to it.

Other employers love to hire IKON employees as they bring the "blood lust" to their people. We revitalize their troops in a way that we will never fully understand, but it is why we get so many phone calls. If you survive you are a "keeper." Leadership at IKON is much more methodical than Konica Minolta but the leadership at Konica Minolta was much more visionary. I can still remember seeing the President of Konica Minolta come to the local branch and taking time to meet and inspire the local people. IKON is the exact opposite they do not have time to be bothered. I have seen people I didn't know walk to the corner office and leave within an hour to only find out that it was the National VP of Sales or some other high powered title to watch them gather their things and leave as quickly as they came. They would rather do a "focus" group then actually meet the people and refocus the troops. This is the mistake that Konica Minolta did in the acquisition of Danka; they did not reach down and pull everyone up this time as they did in the merger.

But I have decided that "acquisitions" are much different that "mergers." In a merger everyone is more hey we are a team that is now stronger to take on bigger foes, in an acquisition you are more the conquered one and must be subservient. People look down but they do not reach down to pull you up. They look at their new purchase in a fish bowl and see how neat their new pet is. In a merger you look over at your new comrade in arms and hope he is carrying a big stick and extra ammunition as you go to slay goliath. Konica Minolta was a 'small' company that had 'big' dreams. Their dream was to become a tier 1 player in the game of office equipment and imaging/document services. Ricoh's dream is to be the 'one world leader.'

So in this I have seen many different approaches and cadences. I have seen good management and poor management, good leadership and poor leadership. I cannot tell you exactly what good leadership is but I know it when I see it. I can 'feel' it. It is the love – hate relationship that you have with overcoming your fears and taking new ground. It is the fear of taking the hill then rejoicing as the hill falls to your power. Good leaders empower their people to conquer and do not hold them back but send them out as berserkers. For those of you that do not understand the reference and its importance; "Berserkers (or Berserks) were Norse warriors who wore coats of wolf or bear skin and were commonly understood to have fought in an uncontrollable rage or trance of fury, hence the modern word berserk."

We now more than ever must come to grips with our fears, overcome our call reluctance and go forth with frenzy. We must take our market share by force and win friends and influence people with the sharp edge of the sword and the tactical advantage of a calculator and well worked spreadsheet. Some days I love the challenge and other days I wish I was dead. Today I was up for the challenge. I will probably reword this blog many times over so you can read it every day and it will change as the season and circumstances change. One thing that you will find out about Pirate Mike is that I am not stubborn in my knowledge. I fully bend and flow as my understanding changes. I hope to evolve my understanding of my circumstances and the events around me and hope to be a survivor and a thriver in this harsh economy and time in our industry.

So WHAT DO YOU THINK?

Pirate Mike

Here is to good hunting… May you kill everything that falls into your sights…

Konica Minolta Imaging the end of the Danka Legacy

After receiving about 15 calls from fellow Konica Minolta-ians and Danka-ites it became evident that a mass slaughter had occurred just a few weeks ago on a Friday at 4pm about 500 people from sales and service were walked to the door and said "don't let the door hit you …" Konica Minolta service managers with 15-20 years of tenure and all of the Konica Minolta National Account Sales Managers, "You job has been eliminated." Thank you for your service but we don't need you anymore. You will get a severance package "if I fill out the paperwork properly" have a nice day!

This is part of the bloodletting that I referred to in a blog or two ago. We are at the beginning of a new age. Konica Minolta has shown that due to the inflation of the Yen that they are 50% or worse off from last year. Yasuo Matsumoto the Chief Executive Officer reported in the 3 Quarter Earnings report that their net income was done over the last nine months by -51%. That is a substantial amount for a company that had a very aggressive go to market strategy. But even Konica Minolta was not unscathed by the Ricoh acquisition of IKON. The new RiKON accounted for 100 million dollars of high end Konica Minolta production gear per year. That was more than all their other channels together including their Konica Minolta Business Solutions. Now that IKON has a full on Rioch and Kodak strategy Konica Minolta will have to rely on their direct and dealer channels to push the gear.

Now the new group minus the chaff that they separated from the wheat just a short time ago is now the go forward group that still has very little direction. Local reps are not 100% of their roles and even where to show up for work. What is in store for the band of merry men? They seem to have divided the responsibility of the high end production to Danka folk and have let the down the street business to the Minolta folk sorry Konica Minolta folk. Does that give my heritage away? Well what I can say is that a lot of really very dedicated and very talented service professionals were sacrificed the other day and to what end? What can be gained by separating the worker bees from the hive?

I am always curious to watch and see what Konica Minolta does. Rumors had it that they were buying Oce. But that now doesn't seem to be much of a reality. What does seem to be happening is that they have taken all that was left of Konica and put them on the front lines as "down the street" salesman even if they were major account or national account reps. Equalizing everyone to the same task, "transactional business." Konica Minolta, both sides and the new company was never good at project management and large deals, and always reverted to transactional business as they cannot see past a 30 day or better yet a weekly forecast. They have little or no analyst support, no presales support and very little if any understanding of the "solution sale."

This has to be hurting them in a world that is very "solutions oriented." In a world that is looking for "turn key" solutions, and printer fleet management, and managed print services. The days of walking in and asking if they needed a fax machine or a copier are over and they have not quite adjusted to that yet.

Watch for some interesting turn abouts if they ever get their patented inkjet technology to work in mainstream production environments. After introducing a new textile inkjet printer look to see them get in with the craze of manufacturers that are working on high speed inkjet printers that had Drupa filled with new vendors and exhibits.

To all of you that were sacrificed I am sorry that you paid the ultimate price to help them make up for the appreciation of the Yen over the dollar and Euro which accounted for -31.8 Billion yen. We know that you are the reason that they were successful and hope that you find yourself a home in the companies that are expanding and increasing their market share like the new Rikon.

Pirate Mike

RiKON The Next Generation

It sounds a bit like an old Star Trek episode but really this is my life. With all of the instability in the world what could happen that would bring all the stars into alignment, fix the global economy and solve world hunger? How about Ricoh making a play for the largest independent distributor of office products and solutions maybe? Ok maybe not… So you think that you had it all figured out huh, Konica Minolta buys Danka, Xerox buys Global. And maybe since IKON was almost a billion dollars of Canon's yearly equipment revenue that they would forsake the path that they followed with Global Imaging and Danka; well you were wrong! I can remember it like it was yesterday, "No Canon will never cut IKON off, that is ludicrous." Much to IKON's and Ricoh's dismay, Canon did pull the plug and sent Ricoh (the father of a brand new baby) reeling looking for a new horse to ride for the high end color and black and white portion of IKON's production portfolio (a 25% share of IKON's revenue). Watching this unravel (from the inside) was enough to send you to the doctor looking for a well deserved prescription of Xanex. Well thank goodness for Ricoh's Kodak relationship now we can all rest easy right?


In a playing field that is less than well defined it is funny where new bed partners come from. Just picking up Kodak sounds good but is not that easy to implement especially over night. Kodak is a very high end and expensive digital press not just in up front acquisition costs but also in day to day operating costs not to mention that it requires a much more skilled operator to run and make repairs. IKON with all of its production experience isn't going to jump in and start doing service on the NexPRESS and service is where it is at in the business model of the office equipment world. So now what? Hmm, well maybe the new Hitachi technology that they have buried into their new flagship product the Ricoh Pro C900 (Digital Press, Production Copier – What do I call it?) will be enough to stave off the bitter reveling of Canon. Either way just putting the Kodak label on portfolio brochures is not going to stop the bleeding. Especially when you have cut a main artery like in the case of IKON and Canon. IKON sold about 60% Canon products in a very well defined market place where over the last years IKON went around buying up successful dealerships that were primarily Canon in nature.


So now the acquisition is over and we approach the first milestone. What is that you say? Well since you asked it is the beginning of Ricoh's new fiscal year of course. Here comes 2009 fast and furious. So what is in store for IKON in this broad new world of opportunity? Will they remain ran as an independent subsidiary? Will they get quickly absorbed into the belly of the beast? With the changing of the guard from a political standpoint and the evolution of our economy it is anyone's guess. As companies draw lines in the sand and build alliances with other competitors either by acquisition or by contract we start to see the battle grounds becoming more defined. Now that the great expansion is over and we see the number of competitors collapse into a 3 or 4 player race; we now are starting to see the mystery unfold.


The new mission of RiKON is to explore strange new worlds, seek out new life and new civilizations. In my humble opinion this new world of RiKON is very well positioned for the midterm play. Why midterm you ask? Because RiKON is a large organization and they really cannot move and adapt that quick. I watched the launch of the Canon imagePRESS both from the outside (small Canon dealer that was first to market with the imagePRESS in the country's 7^th largest print market and from the inside as a newly head hunted acquisition of IKON to their newly formed commercial print initiative (which was 6 months late to market) and watched IKON take quite a bit of time ramping the program up to the monster that it became. Between defining the goals of the organization and the tools to hand out along with push back from local operations and management it was amazing that the program lifted off at all. IKON has a way of taking strong salespeople and administrating them to death. I wonder daily how I ever find time for sales activities in the midst of my spreadsheets and conference calls. But they do have the momentum of figuring out how they want to position their "go to market strategy" though which still makes them very dangerous; much like a wounded water buffalo one must be ready to pull the trigger or get out of the way.


The imagePRESS's successor the Pro C900 is a Hitachi engine (obtained from the Ricoh purchase of Hitachi Printing Systems) with a Ricoh wrapper (fast plastic B2C look and feel). It has obvious Ricoh influences though, odd finishing configurations and odd substrate limitations that are very familiar with typical B2C products. Without time to finish the development Ricoh opted not to use a polymer toner but to use the old fashioned fuser oil process and the slow down the engines speed capability to build it to a price point. This fusing process is the one that we have over the years come to know and love. For the old timers this should bring back fond memories, as many have come to love the glossy, greasy get out your shammy cloth and buff the proof look. Outside of that, the engine has a very good color gamut (very similar to the imagePRESS) and has 8 bit color depth at the 600X600 dpi setting. (Unlike Canon's "multi bit" technology) The engine has remarkable front to back registration and clearly shows that Ricoh is "on to something." A very strong competitor to the Xerox Docucolor series it will challenge and even beat the imagePRESS where its few obvious weaknesses are not the main consideration. Upon a more detailed look the Hitachi influence is pretty obvious. The registration system is something that closer resembles something off of an offset press not a copier, and the systems that monitor quality are obvious improvements "not Ricoh." From beefed up rollers and mechanisims inside the outer wrapper is purely cosmetic. With expanded controller options in the near future and the ability to incorporate all of Ricoh's finishing options this will be a horse to ride in an economy where people want more for less and sellable is good enough.


With Ricoh moving into the production arena full steam, backing this movement not just with the acquisition but in a total refresh of IKON demo floors, infrastructure, finances and personnel. With strong incentives to stay and see the changes through RiKON is positioned themselves to make strong moves on Canon and Xerox as the new product takes hold in the market place. Also for those elite customers that need NexPRESS or Digimaster they will have that to choose from as well as the IBM infoprint roll to roll systems that at the moment is a joint venture soon to be another wholly owned subsidiary of Ricoh are also on the menu. Now with their PPBG (Ricoh production print business group) and IKON (a real production print equipment and solutions distribution system) Ricoh for the first time has some products to sell and a way to market and support them on a global basis.


How long will this take? My guess after watching the launch of the imagePRESS and seeing the state of the C900 today I am thinking that things will be in place to move forward for a strong play by Q3 or Q4 of Ricoh's 2009 fiscal. Also watch for a faster and a slower C900 along with firmware coming shortly to integrate all options on their mid volume line to fit the C900. This will give the C900 a dominant opportunity in the in plant and crd space given its specs and price point.


Where will it all fit in commercial print? We will have to see how everyone perceives the C900. With open houses going on around the country, and very critical trials being pursued as we speak; some of the country's largest buyers of digital printing equipment are trying this new Hitachi technology out. Once they make their decision we will have a clear idea of how well we are going to fare this round. Ricoh with enough stamina and finances to get through several boxing rounds gives me the impression that they will get to see the fulfillment of their new objective. "Become a player in the print for pay and high volume market." With Konica Minolta running tight on Ricoh's heels and niche players poised to be gobbled up by someone for example like Oce it is still anyone's race. And what if Xerox decides to drop this AP platform that is just an extension of worn out technology the race could renew yet again. Although pay close attention though as IKON restructures it may take the focus off of those that understand the production world (those that sold and serviced the Canon's) and replace them with new inexperienced followers of the Ricoh line (mfp, fax and b2c color devices) as part of a realignment that might make sense to someone that has been staring at spreadsheets too long.


It is hard to say how long Ricoh will allow the rogue IKON to continue selling multi brands and non focus products but it clear that nothing drastic is going to change in the short term. Everyone is still trying to convince themselves that it is "business as usual." And in an economic and political time like this makes this whole discussion even more interesting. Canon is still dizzy from trying to figure out how they are going to replace 400 locations and how much they are willing to drain out of their large cash reserves to "buy back" customers that chose Canon products and specifically picked IKON as their service provider; they have a tough row to hoe. If one looks at other mergers to glimmer a bit of history one remembers that Global did not lose the farm but instead grew their market share and did quite well after the Xerox acquisition. RiKON could very well come out stronger than ever. Unlike the Danka purchase by Konica Minolta. (I would guess that the danka.konicaminolta.us will quickly change to kmbs.konicaminolta.us as they have no need for the extra dead weight and reputation that Danka has earned over the years.)


I was there for the Minolta and Konica merger and survived it (2 President's Club Trips and 1 Circle of Excellence Trip) so I know how step children are treated. They are managed to success or simply managed out. With mostly the "Minolta Management Style" left they are a very shrewd and focused group led by a Konica visionary (Jun H.) they will drive hard till they reach their business objective which is to become a "Tier 1 Player." Konica Minolta will press on till they move over one of the Gartner's "4 leaders" or knock one out of the game completely. That was their new mantra as I left to chase the Canon imagePRESS product which now has done a vanishing act from my portfolio.


Gartner has Konica Minolta as a challenger and that they truly are. With a very different "to market approach" they are not part of the "leaders" group of thinking (Canon/Xerox/Ricoh/HP). They are very much out of the box and are non traditionalists that could become a wild card in this program; they are not to be taken lightly. With their 90 ppm engine to be out soon the playing ground will level once again and they will be competing from a position of strength stepping up from their current production platform which has done very well in office, in plant and print for pay markets (both commercial print and franchise print).


As I look at my options which are still considerable (enough to keep me with a headache all the time) I am not sure that I see a clear leader to "jump" to. I suspect that as I look at the different organizations that no one has a truly superior program to the one that IKON has put together and the one that RiKON has adopted. What I have seen is a clear indication from Japan that they intend to move into this brave new world that their direct group was unable to accomplish. Now with IKON in hand they can boldly go where they have never gone before.


So what does the future look like?


Muddy and troubled for everyone in this industry. But for those that are brave enough to stick out this new world of RiKON they will be quick to learn the new vision; we are on a 5 year mission to travel out to distant zip codes, and to seek out new customers, and to boldly sell what no one has sold before. We tip our hats to you Mr. C900 may your silicone oil flow through our veins and your "green" pulverized toner sustain us, and your plethora of finishing options take us to the promised land.


Amen


Just another personal opinion from Pirate "Big Iron" Mike…


(May the rate factor be with you and your credit analyst be "on vacation")