IBM and Ricoh's InfoPrint joint venture officially opened for business Monday.
Back in January, IBM announced plans to gradually offload its enterprise printing systems division to Ricoh and create InfoPrint Solutions Co. Ricoh initially acquired 51 percent of InfoPrint and is set to buy up the remaining 49 percent of the business over the next three years. At that point, InfoPrint will become a fully owned subsidiary of the Japanese print and imaging company, and IBM will be completely out of the printer business.
In 2006, IBM's printing business generated around US$1 billion in revenue. The division includes workgroup laser and multifunction printers, which feature scanning, copying and faxing capabilities, as well as thermal industrial printers and continuous-form production printers. The vendor also targets SMBs (small to midsize businesses) with its Infoprint Express printers.
Ricoh paid IBM US$725 million in cash both for the initial 51 percent of the joint venture and as an advance payment for the other 49 percent. The final pricetag for the transaction will be determined once the three-year period ends based on the profits and losses IBM and Ricoh sustain in running the joint venture.
IBM had been struggling to find ways to reinvigorate its printing business and to counteract a three-year slowdown in the unit's growth. The vendor eventually decided enterprise printers were no longer a core business. IBM previously spun off its lower-end printing business in 1991 with the founding of Lexmark, which became a separate publicly traded company, Lexmark International, in 1995.
At the same time, Ricoh was looking to expand its printing business and grow globally, with InfoPrint central to achieving those goals.
"It all boils down to a question of funding," said Bob Kilcullen, senior vice president and general manager, InfoPrint solutions management. With the wide range of technologies IBM has in servers, storage, software and services, the vendor's printing business wasn't front of the line when it came to receiving investment for research and development (R&D). "Now we drop right into Ricoh's strategic direction," he added. "We go from side stage to center stage."
InfoPrint will look to increase R&D across the board, filling in any gaps in its printer line-up, and integrating Ricoh's print engine technology into its range of printers. The hope is that InfoPrint with Ricoh's backing will be better positioned to compete against high-end printer competitors like Oce Technologies, Xerox and Eastman Kodak as well as rivals in the general office printer space, notably Hewlett-Packard.
The only potential area of overlap between IBM's and Ricoh's printing operations is in the low-end InfoPrint Express machines, Kilcullen said. IBM sourced those printers from Lexmark and InfoPrint plans to continue and expand that relationship. At the same time, Ricoh is an OEM supplier to Lexmark of print engines. "We'd like to form a three-way relationship to extend the relationships we have with Lexmark and with Ricoh to a higher degree," he added. Trying to establish such a relationship is a highly complex matter but Kilcullen said that discussions with Lexmark are ongoing.
InfoPrint currently employs around 1,200 staff worldwide. For the first year of its operations, the company will draw on IBM's printer maintenance experts to continue to provide maintenance services to customers. By June of next year, InfoPrint would look to take on most of those 1,000 experts. In practice, an IBM printer customer should be unaware of any change in maintenance support, with the same person servicing their printers this year and next year.
InfoPrint held a large party on Friday afternoon for employees at its Boulder, Colorado, headquarters to celebrate Monday's opening for business. Although being spun off from IBM was a traumatic move for some staff, everyone was congratulating each other on the formation of InfoPrint, according to Kilcullen. "I could feel energy in the air," he said. "This move is so positive for our business and it has been very well received."