Xerox rebounds slower than expected; shuts down wide format and enters another era of layoffs…

2011 may be known as the “Year of the Rabbit” for some but not the great Xerox. Goliath is falling and I’m not sure who can catch his fall. The first 6 months of 2011 may be part of the rebuilding of American economics but for Xerox it has been nothing but a nightmare.

6 Month Stock History for Xerox (courtesy of Yahoo Finance)

Going into a new age Xerox’s CEO Ursula Burns moves full steam ahead having to announce some very difficult decisions at the end of the 4th quarter of 2010 that they would be moving ahead with a plan to lay off 2500 employees. Then early on in 2011 Xerox announced or rather whispered quietly that they were going to discontinue their wide format business in North America.

In an article named, “How Will Xerox’s Decision to Discontinue “Wide-Format” Impact Reprographers, Xerox Wide-Format Dealers, and Other Wide-Format Manufacturers? “ The writer gives an interesting view about the effects industry wide on this decision. None the less it was a difficult decision to arrive at and an even more difficult one to announce to their employees that have heard nothing but bad news for a long time. In an article written by Anthony Bianco and Pamela L. Moore back in 2001 for Business Week named, “Xerox; the downfall” the writers talk about the many rough decisions made over the years by Xerox executives and the timeline associated with those decisions.

So what’s next? How will Xerox reorganize knowing that they will be 2500 people light in the coming months? Who will they lean on? Where will the work load go? Well for months I have been hearing rumors on a big announcement coming from Global – Xerox’s rogue warrior.

I have talked about this subject on many occasions only to get my hand slapped by my presumptions. Although many of my predictions did in fact come true, some were slightly off the mark. But as anyone vested in my industry knows I have opinions based on what I see and hear on a local and national level and we are all subject to rumors.

Well the rumor on the street is that as Xerox makes good on its promise to lay off workers it is also going to restructure how they distribute the workload. What does this mean do you ask? Well I think in the short term Xerox customers are going to get a visit from their first cousins at Global saying, “Hi my name is Bob from Global Imaging Systems, a Xerox company I am just stopping by to introduce myself as your new rep.”

My assumption is that very shortly Xerox will be unloading assets sold by Xerox sales reps themselves only to find out that they are no longer with a job and that their assets have been given to a Global rep to manage as Xerox tries to cut the fat from their organization. This “live long enough to see a better day” strategy will have some interesting implications for their customers that signed up for “an elite manufacturer direct experience,” not a close imitation.

The other assumption is that many of these assets will be production print devices and not just workgroup systems. This also creates some interesting situations as not all Global offices have dedicated or specialty trained production teams. This puts a lot pressure on a workforce that is less disciplined as Xerox’s own. Global has been allowed to run a bit unrefined and now it will be dealing with an even greater share of Xerox’s business; business that Xerox itself sold.

So how will customers react to this news? Well it will depend on how they hear it and really it is a people business so it largely will depend on the rep that shows up to the door and the resources that he or she has at their disposal which will depend on the local branches culture and strength. Many of Global’s offices have or were very strong dealerships prior to the acquisition.

Does this leave opportunity for everyone else? Why of course with another great competitor in transition and weak it means that thousands of customers, potentially a 100 million dollars of assets will be up for grabs to those who are willing to bring to light the new risks associated with being a Xerox customer.

What used to be said, “No one ever got fired for buying a Xerox,” could now change to “No one wants to be the one to pull the trigger on Xerox as it could get them fired.” Only time will tell if any of this comes to fruition but one thing is certain. It is a dangerous time to choose the wrong vendor for your infrastructure as it is getting harder to choose a company that is solid.

With the holocaust in Japan leaving many manufacturers crippled both in their own capacity but also hindered in that their supply chain partners had suffered as well. This has left many deals wide open as “he who has the goods gets the deal.” As we have seen here in Houston Texas some decisions have been made to buy from people that “have inventory” without regard to who had the best price or gear.

This leaves one that is watching thinking that they have been watching day time soaps like “Days of our lives,” when in fact they were watching “As the copier turns.” It will be interesting to listen carefully to both Xerox and Global and see what they do in the near-term. It appears that big changes are coming and it is not good news for customers that invested in “Xerox dominance.”

Happy Selling…

Pirate Mike

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,

Credit in a wayward world; what you need to get a loan…

Yes my name is Michael and I work for IKON; I wanted to stop by and introduce myself. Can I get a fully completed credit application, your personal guarantee and social security card and a copy of your driver's license and maybe 1 or 2 years of your most currently audited financials?

Does this sound like you initial cold call in the frozen tundra of your business landscape? Well it will soon, or should. How do you expect to get any business done talking to decision makers of well intentioned companies that have plenty of needs but no cash or credit? Everyone I talk to tells the same story, ya I had to walk away from 3 deals this month as I couldn't get them approved. I have had deals take weeks when the company and principal had great credit with no negative information.

When the daily news looks like this: Xerox forecast down 80%, Kodak alying off 18% of their global workforce, Konica Minolta laying off 600, Cenveo shuts down plant, Vertis Communications consolidating, Consolidated Graphics Reports Loss on Quarter, RR Donnelley Q1 Net Down 92% On Changes, Southwest Color Graphics closes doors, United Graphic Equipment no longer, U.S. Postal Service posts $1.9 billion loss, Quad/Graphics to lay off another 140 employees, Domtar Reports Loss of $45 million, Kodak First-Quarter Sales Decline 29%, Additional Cuts. It is not hard to understand why no one with money wants to hand it out to our capital equipment investments.

In this day and age you had better have perfect credit, audited financials and a very strong personal guarantee (750+) if you really think someone is going to loan you anything especially if you sic code is something like 2752! Although commercial printers are not the only ones being picked on, it seems like no one is immune to the credit FREEZE. It is like the ice age after a nuclear holocaust. Everyone has put all their supplies together and are waiting it out. Each hoping that the other will go out and see if the radiation is gone, just to look at the window and see another drop from poisoning.

We are not out of the woods yet, in fact it looks like 12-18 months if we are lucky to see some light at the end of the tunnel, and that may even be too optimistic. Companies are slashing employees, cutting benefits/pay/travel, outsourcing everything, and looking for a sign that everything they are doing is working. The atmosphere at the office has become uber competitive, where anyone even the secretary could be plotting against you just to lengthen her job by a week.

I hope for all of our sakes that I am wrong. I hope that the headlines start to read, "Companies expanding, spending money and handing out pay raises to beat inflation and the cost of living!" But I fear that we are not there yet,,,

Any comments?

Pirate Mike..