THE NEW GLOBAL LEADER IN IMAGING?

After losing key distributers over the last few years to competitors such as IKON Office Solutions to Ricoh ($1.62 billion), Global Imaging Solutions to Xerox ($1.5 billion) and Danka to Konica Minolta ($240 million), an enormous part of Canon USA’s distribution seemingly vanished. As some analysts estimated the IKON loss for Canon was as much as 40% of their distribution, it seemed Canon might be in trouble. Many analysts felt Canon’s strategy to replace this revenue, apparently through growth of their subsidiary branch system, would lack the impact necessary to replace these losses, at least for the near-term.

With that, Canon surprised us all earlier this year by announcing an alliance with long-time hardware partner Hewlett-Packard. In effect, HP’s managed print services group is now selling Canon A3 MFP equipment, effectively filling a major hole in HP’s product line and giving Canon a sorely needed distribution channel. Time will tell whether this alliance will prove fruitful but we feel it has excellent potential for both HP and Canon.

Now Canon has made another bold move, announcing their long-anticipated acquisition of Océ N.V., the Dutch production equipment manufacturer, which itself acquired Imagistics in 2005 in an attempt to better penetrate the office equipment market. According to recent press information, Océ employs 22,000 people worldwide (10,000 in the US), operates in approximately 100 countries, and had 2008 revenues of $4.3 billion. About half of Océ’s worldwide business in 2008 came from the North American market.

                                               Canon imagePRESS 7000VP

The Canon-Océ deal is a major boon to both companies. It gives Océ research and development considerably deeper pockets. It also gives Océ products an enormous number of feet in the street. Canon high volume sales representatives will now be able to offer an upstream migration plan from their hugely successful VP products, either through selling Océ equipment themselves or by bringing the Océ sales person into the deal, depending on how Canon sets this up down the road. In the past, the Canon rep couldn’t participate in opportunities that required “iron” that was capable of more volume than the imagePRESS 7000 VP could handle.

Now they’ll be able to offer some of the world’s fastest cut-sheet and continuous feed products such as the JetStream 2800 – the industry’s fastest inkjet web printer, capable of up to 2,792 letter-sized pages per minute and 60 million pages per month, among a slew of other very high-end production imaging products.

Océ Jet Stream 2800

Imagistics was acquired by Océ to help them penetrate Fortune 1000 companies at the office level – which is Imagistics’ strength. The acquisition added significant distribution for Océ in North America, Canada and the UK. To support the former Imagistics (now Océ’s) sales force, Océ relabeled MFPs and printers, primarily acquired from Konica Minolta in recent years. Now, Océ will offer products that are manufactured by their new parent company and in theory, these products should make Océ more cost advantaged than they were as they no longer need to go outside the company for the equipment and supplies.

If and when this acquisition occurs, here is what is in store for Canon and Océ:

• Canon will now offer the broadest imaging portfolio in the world, with products ranging from $69 consumer products such as the PIXMA MP250 inkjet all-in-one printer to sophisticated web presses that can cost millions of dollars. Assuming this acquisition moves ahead, no other company in the world can offer a product portfolio anywhere near this large and complete – not Xerox, not HP, not Heidelberg, not anyone.

• Canon obtains sorely needed office equipment distribution in North America, Canada and the UK. After the staggering distribution losses experienced by Canon USA over the last several years, the new Canon will now have significant representation in nearly every major and minor market.

• Canon obtains a global organization giving them coordinated support in approximately 100 countries. While Canon already had subsidiaries that supported most, if not all, of these markets, Océ may have better direct service and support capability due to the fact that they often operate out of Océ branches rather than relying on resellers and partners. This should be helpful when selling to global companies as well as in the development of a global MPS program, if Canon decides to develop one.

• Océ high volume printing sales reps obtain the Canon imagePRESS solutions, allowing them to reach lower into production accounts where they may have been a bit weak against vendors such as Xerox.

• Océ (formerly the Imagistics portion of the organization) obtains product from their parent company rather than having to obtain it from another manufacturer, which we would expect to improve Océ’s hardware and supply margins in the office equipment market.

• Océ R&D will have access to more resources, especially with respect to technology, patents and capital.

• Canon R&D will also benefit, as they will be able to leverage Océ’s technology and patents.

• By offering such a large hardware portfolio, Canon gives software partners more opportunities than other brands, which may in turn make these partners more likely to develop and push solutions tied to Canon products.

• If Canon and HP’s office equipment MPS relationship proves successful, how excited would HP’s Indigo salespeople be to be able to offer imagePRESS, VarioPrint, VarioStream, Océ vertical market solutions, etc.?

The bottom line:

Canon’s acquisition of Océ will potentially vault Canon into the position of the number one company in the imaging industry. Leveraging both sales forces will drive more hardware sales for both companies. Canon will now be able to compete toe-to-toe with archrival Xerox at a much higher level as they can now offer products that compete directly with Nuvera and iGen as well as products in markets in which Xerox doesn’t compete at all. There is so much upside to this acquisition; the only thing that can stand in Canon’s way at this point is Canon. If they can execute the integration, Canon will become the global leader in the imaging industry.


Andy Slawetsky, President of Industry Analysts, Inc. Industry Analysts, Inc., is a marketing and management consulting firm for the office automation industry. Much of the company’s research and testing results can be viewed on their web site – www.industryanalysts.com.