IBM Selling Printing Business To Ricoh

The Armonk, N.Y., IT giant on Thursday said it's selling its printing systems division to Ricoh, through a joint venture, for a $725 million up-front payment and another unspecified amount over three years.

Plans call for IBM and Ricoh to create the joint venture, called Infoprint Solutions, of which Ricoh will own 51 percent. Over the next three years, IBM will sell the remaining 49 percent to Ricoh in stages. Tony Romero, who has run IBM's printing group, will become president and CEO of the unit. Once Ricoh acquires the entire entity, Infoprint will become a wholly owned subsidiary of Ricoh.

IBM's entry into the printer business ended in 1991, when it spun off its printing unit into what is now Lexmark. In 1995, IBM began building its Printing Systems Division, which focused on high-end, production-level printing solutions. Of late, IBM executives decided the industry and technology were moving in a direction that wasn't in step with its core strengths, said Nick Donofrio, IBM's executive vice president of innovation and technology.

"There comes a point in time -- and trust me IBM has been there before -- when you realize you no longer have the capability to move certain technologies in the direction of sustainable, profitable growth," Donofrio said. "At IBM, we constantly look at how fast we are changing, the rate we are changing. ... Sometimes we must learn to let go."

He added, "Over the last three years, it became more and more obvious that we needed to do something here."

For Ricoh, the deal will mean an almost-immediate jump into the high-end, commercial and industrial printing space, in addition to its core business in office document hardware solutions.

"The office world has been our domain," Ricoh President and CEO Masamitsu Sakurai said at a New York press conference with IBM. "We have aggressively set our sights on penetrating the production printing market."

"I am confident we are poised to take a sizable share of this market," Sakurai added.

The deal is expected to close in the second quarter. At that point, 1,200 IBM employees will move to Infoprint Solutions, which will be based in Boulder, Colo., where IBM's Printing Systems Division is now located. An additional 1,000 IBM services employees will be migrated to the unit over time, the companies said. IBM will receive about $150 million per year in contracts to provide services to the Infoprint organization, under a five-year deal.

Neither company spelled out plans for migrating IBM channel partners to the new joint venture and, ultimately, Ricoh.

Anne Anderson, president of Rainbow Computer Technology, an Eagan, Minn.-based solution provider and channel partner of both companies, said the move appears positive. "Ricoh makes all those [printer] engines for IBM anyway," she said.

IBM's printing business was failing, Anderson added. "So this isn't a bad move for them. This is something that everyone saw coming," she said.

The high-end production printing space is showing momentum, and the IBM-to-Ricoh transfer could position the business well to tap into that, according to Anderson. "This is Ricoh's forte," she said.