IBM Gets $920 Million Outsourcing Windfall From Ricoh Deal - InformationWeek

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IBM Gets $920 Million Outsourcing Windfall From Ricoh Deal

InfoPrint Solutions will pay IBM $130 million per quarter during the first year of the deal, then $100 million per year for the remaining four years.

As part of the sale of its printing systems unit to Japanese imaging company Ricoh, IBM will provide technology and maintenance services to the joint venture company that will operate the unit under a contract that's worth $920 million over five years, according to a senior IBM official.

Under the contract, InfoPrint Solutions will pay IBM $130 million per quarter during the first year of the deal, then $100 million per year for the remaining four years, said Kos Nista, IBM's VP for mergers and acquisitions.

IBM announced the sale of its Printing Systems Division for $725 million in cash to Ricoh on Thursday. IBM will initially own 49% of the joint venture, with Ricoh planning to acquire that stake over the next three years.

With a services contract in place that actually exceeds the value of the sale price, IBM appears to have done a good job in maximizing revenue from a unit that saw sales decline by 9% through the first three months of last year and that sold for a price that's actually less than its $1 billion in annual revenues.

Of course, as temporary part owner of InfoPrint Solutions, IBM will be for a time footing part of the bill for the services -- in effect paying itself. But the company's share of InfoPrint's expenses will diminish over time, along with the size of its ownership stake.

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