IBM Agrees To Sell Printer Unit To Ricoh For $725 Million

Ricoh will initially take a 51% stake in the company and will acquire the remaining interest over the next three years.

Paul McDougall, Editor At Large, InformationWeek

January 25, 2007

3 Min Read

In its latest hardware divesture, IBM said Thursday that it's selling off its printer manufacturing unit to Japanese copier and imaging company Ricoh for $725 million in cash.

To facilitate the deal, IBM and Ricoh are forming a joint venture company to manage the operation, called Infoprint Solutions. Ricoh will initially take a 51% stake in the company and will acquire the remaining interest over the next three years, according to IBM.

The initial transaction is expected to be completed in the second quarter of the year, subject to regulatory approvals in the United States and Japan.

The sale is the latest move by IBM CEO Sam Palmisano to rid the company of low margin hardware products that are increasingly seen as commodities. In his boldest move, Palmisano spun off IBM's storied PC business in April 2005, selling it to China's Lenovo Group for $1.75 billion.

"The eventual transfer of the IBM Printing Systems Division to Ricoh enables IBM to continue to refine its focus on its strategic businesses and the clients of those businesses," Palmisano said Thursday in a statement.

IBM's Printing Systems Division booked $1 billion in revenue in 2006, but year-over-year sales were off 7% through the first nine months of that year.

At a press conference Thursday in New York, IBM officials said the unit's performance dictated that it was time for it to go. "There comes a time when we realize we can no longer move certain technologies in the direction of sustainable growth," said Nick Donofrio, IBM's executive VP for innovation and technology. "Sometimes we must learn to let go."

Indeed, the purchase price that Ricoh is paying for IBM's Printing Systems Division is actually less than the unit's annual revenues, implying that it may be operating in the red. By contrast, when IBM acquired Internet Security Systems in August 2006, IBM paid a multiple of almost four times ISS's annual revenue.

Still, Ricoh executives appear confident that they will have more success than IBM in growing the business, which focuses mostly on building large-format and high-speed digital printers for commercial printing environments. "For Ricoh, it's the beginning of a new stage in our strategy for global growth," said Ricoh president and CEO Masamitsu Sakurai, speaking through a translator at Thursday's press conference.

Sakurai said he's committed to keeping the business in Boulder, Colo., where IBM employs about 1,200 workers. IBM will continue to provide maintenance services to the company under a services agreement.

Editor's note: This story was updated Thursday afternoon with material from the press conference.

About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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