On May 24, I left a comfortable 65 Rochester NY degrees for a sweltering 95 degrees Orlando, FL temperature with about a billion percent humidity thrown in.  This, for a combination analyst and dealer meeting hosted by Ricoh US.  The meeting format was a departure from the norm, not only for Ricoh, but for virtually all other vendors in the imaging market. 

Traditionally, the analyst community is invited to attend the general session, followed by the product expo, and dealer workshops.  Expos are fine as far as they go.  But the workshops allow analysts like me to gauge how the strategies delivered at the general session will be implemented. 

At other vendor meetings, analysts are given a chance to meet with senior management after the general sessions and workshops to ask specific questions as well as to provide feedback to that management on how dealers are responding to the message.  This was not to be at this meeting, since the analyst community was “invited” not to attend beyond the first day.  We lost the chance to clear any misconceptions.  Ricoh lost our feedback.

Ricoh’s effort was either a step forward or a step backward, depending on whether you are looking from the bottom up, or the top down.  First, I should say that executives shared considerably more information than had been the case in the last few meetings.  In one previous meeting, for example, the company’s performance was generally disappointing, as was the performance of virtually every other vendor in our industry.  When asked if we were going to hear their analysis of their own performance, we were told, “No.”  Short and to the point, I guess.

From that perspective, this year’s communications effort represented a significant improvement. 

Mike Dane, VP of Marketing for Ricoh US kicked off the analyst meeting by stating that this was the “beginning of a regular cadence of communication.”  He stressed the fact that this session was not a dealer briefing, despite the fact that it was held in conjunction with Convergence – Ricoh’s national dealer meeting.

We heard from Kevin Togashi, Chairman and CEO of Ricoh Americas, Corp.  After an overview of Ricoh’s worldwide presence (180 countries, 109,000 employees, 234 subsidiaries/affiliates and $23.4 in sales revenue he focused on Ricoh Americas.  This group accounted for ¥521.9 – a decline of 6.4% including the impact of the exchange rate.  Note that this decline was calculated for FY 2010 (ending March 31 2011).  The impact of shortages stemming from the Japan disasters had not yet been felt.

I was surprised at this performance, given that comparisons to the previous year were made on the basis of one of the worst years in recent memory for office equipment sales.  One would think that, with the economy beginning to turn around, Ricoh would have turned in better numbers.  Most other vendors report increased US revenues in the range of 5% - 9%.  Given the presumed contribution of IKON coupled with increased emphasis on the company’s direct channels, we were disappointed.

When discussing sales by category, Mr. Togashi revealed that Imaging Solutions (copiers, printers, MFPs, fax, duplicators) account for 73.6% of WW revenue, while the newly emphasized Network System Solutions account for 14.6% for a total office technology contribution of 88.2%.

Jeff Hickling, President and CEO of Ricoh U.S. (formerly with IKON) was next.  He discussed performance for Ricoh US, stating that revenue was up slightly.  This seemed to conflict with statements made by Mr. Togashi (see previous), but the basis for comparison was not clear.  Revenue from Managed Services (MDS and Network Solutions) was up some 8%.  We caution the reader, however, that services revenue represent a smaller statistical base.  As such, even a minor improvement would result in a disproportionately large percentage increase. 

In January of this year, Ricoh announced their Managed Document Services initiative, with same-day meetings worldwide.  The program was backed by a $300MM investment spread over the next two years, although details were sparse on what that investment was expected to produce.  Moreover, the program was clearly targeted at Ricoh’s direct distribution network (RBS), with little said regarding implementation through their once strong dealer network.

Almost six months later, Ricoh announced that they would be migrating significant parts of their MDS program to their independent dealer network.  The program was reviewed by Terrie Campbell, VP of MDS at Ricoh US (formerly VP Managed Services, IKON).  Campbell presented at both the analyst briefing and dealer general session.  In both cases she exhibited the most passion for her role and program, although much of the content was based on her experience with IKON’s legal document services and Ricoh’s MDS efforts through RBS.  Still, she launched Ricoh’s reach to dealers with a program called chaMPS (Get it?).

The program is comprised of three components – Proven Methodology, Best-in-Class Resources and Ricoh’s Industry Leading Services – which will be offered cafeteria-style. This new program makes it easier for Ricoh, Savin and Lanier dealers to leverage what they need, when they need it, while lowering their document-related capital investment and helping accelerate profit generation opportunities.

Ricoh will outsource its portfolio of services (available to RBS branches since January) to its dealers. This includes the ability for dealers to outsource premier off-site monitoring services, access to on-site professional services, including output, security, capture and organizational change management consulting and project management services. And, Ricoh will outsource its commercial imaging services and litigation support services as well as IT services, including remote monitoring services for servers and workstations and a 24/7 customer-facing help desk.

Steve Burger spoke during the dealer general session to preview new model introductions scheduled for 2011.  These were to include 25 new models based upon 15 new engines.  Unfortunately, most were not scheduled for release until late summer, with even that estimate seen as a bit optimistic based on the unknown impact of the earthquake/tsunami.  So dealers who are concerned over Ricoh’s “late to the dance” A4 efforts will have to continue to wait.

The company previewed three monochrome MFP products – the 2352, 2852 and 3352 (23, 28, 33 PPM) scheduled for summer launch.  These will follow Ricoh’s color MFP strategy – higher hardware cost to support dealer margin requirements and richer feature set, coupled with a lower operating cost.  It remains to be seen if dealers will be able to incorporate this strategy into their MPS efforts.  Release is currently scheduled for October 2011.

Also announced were three additional A4 monochrome products ranging in speed from 47 – 52 PPM.  These also followed Ricoh’s “Hybrid” strategy – A3 features in an A4 frame, but at a higher price than competing A4 products.  A lower page cost was said to make up for the higher acquisition cost. Release is not slated until September 2011.

Placed even farther into the future (read this as no release date) is a revamp of Ricoh’s UI on all equipment.  To be frank, we were never fans of their current interfaces, feeling that in an effort to present as many features as possible on the home screen, the UI tended to intimidate users.  The new effort was cleaner and simpler, and, in a bow to Sharp’s launch of their new interface, Ricoh stated that their new panels were “really sharp.”

The company jumped onto the cloud bandwagon by repositioning three existing offers as cloud efforts.  These include HotSpot printing, Document Mall and @Remote.

Finally, in an effort to add “today” products to the portfolios of dealers hungry for incremental revenue, Ricoh announced projectors, communication systems (camera, computer and Internet connectivity) and ePaper solutions that allow for input into a tablet like preloaded form.

But, perhaps the most significant, and strangest in terms of its timing, release was the announcement of Ricoh’s new Pro C651EX/C751EX offering light production color print capability at 65 or 75 PPM. We say “strange” because the announcement was embargoed.  Yet some 900 attendees saw it operate at the product expo with no requirement for a signed NDA.  What’s more, when we returned from the meeting, we found the finished launch video posted on You Tube. For a few days the world had the opportunity to see the product for themselves before the video was taken down.  This being a small family-like community, it certainly didn’t take long for word to spread.  Still, analysts continued to be asked not to publish already public information.  We didn’t.  But, with the formal announcement scheduled for June 6, we delayed this meeting review so that we could include the product.

The new systems offer 1200 x 4800 dpi resolution, an expanded media library, a wide range of finishing options including book making, a built-in cooling system to prevent developer from overheating (causing color drift), “load while run” consumables and customer replaceable service components.  The system requires a dedicated 220 volt power source and is targeted at monthly volumes of 110K – 130K pages per month.

We were unable to obtain specific hardware or TCO prices.  Launch is scheduled for later this summer, pending production constraints.

The significance of this product for dealers is that it allows them to reach into the color production space with a product that we presume to have a lower price point than the current C901 series. Still, we would expect to see most of the sales activity to be through RBS/IKON.

Overall, Ricoh is attempting to engage their dealers with A4 products, a program designed to support managed services and new production color systems.  For the most part, dealers remained concerned over product delivery (existing and new products) as well as their place in RFG where, based on interviews with Ricoh staff, they account for less that 20% of Ricoh revenue.  It wasn’t long ago that dealers represented the vast majority of Ricoh’s business, causing them to question their future.  I’m not saying that a shift to direct business is a bad thing.  But, when in the midst of such an obvious strategy, dealers repeatedly hear how much they’re valued and how much they should trust Ricoh, I can recall the quote from Hamlet, “The lady protests too much, methinks.”

Was I surprised?

Upon returning from Ricoh’s dealer meeting, I found a press release (not from Ricoh) announcing that the company would be reducing their worldwide workforce by 10,000 people, roughly 10%.  I thought, in light of their avowed desire to have open and honest communications with both analysts and dealers, that they might have mentioned that during the meeting.  Was I surprised? 

During the first day of the meeting Ricoh announced an alliance with NewField IT, a UK based provider of software to speed the implementation of managed services in large and medium sized companies.  This alliance represented a major plank in Ricoh’s MDS strategy.  Almost at the same time, Xerox announced that they had purchased NewField IT.  Not a word from Ricoh.  Was I surprised?

Shortly after my return from Convergence, a federal judge approved a settlement of $4.9 million for some users who had leased copiers from IKON (and, through them through GE Capital).  While most of these transactions occurred prior to Ricoh’s acquisition of IKON, I’m certain that the fiscal responsibility for this settlement falls to Ricoh.  I know that, in the broadest context, $4.9 million off the bottom line might not be important enough to mention.  But, in the paraphrased words of the late (great) Everett Dirksen, "A million (sic) here, a million (sic) there and pretty soon you're talking real money." The settlement was never mentioned during any of our meetings.  Was I surprised?

As mentioned, Ricoh staff repeatedly stressed the importance of the dealer network to the company’s overall distribution strategy.  Yet, in the midst of the first day’s meeting several dealers observed a senior Ricoh executive returning from the fitness center - mid day, while the dealers were all in the product fair trying to decide what gear they should buy.  The dealers that brought this up with us didn’t feel like much of a priority when company leaders choose to get in a needed workout rather than spend time with them after they flew thousands of miles for these meetings, especially when they were on the verge of spending hundreds of thousands of dollars.  Was I surprised?

Hey, Ricoh!  The channel is watching.  We, in the analyst community root for your success.  We saw many positive indicators of excellent strategies.  True, there are some occurrences beyond your control.  Yet, many are judged, not by what happens to them, but by how they respond to those events. 

Lou Slawetsky
CEO, Industry Analysts, Inc.