Archive for November, 2008

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Has Ricoh bitten off more than it can chew?

November 16, 2008

It is common knowledge that Ricoh paid ~$1.6 Billion dollars for Ikon. That was said to be 30% above what it was valued at. And that was when the stock market was in much better shape than it is today. But we also now know that Ricoh picked up another $1.2 Billion in Ikon debt. It was that debt that kept most buyers away from the Ikon purchase.

What we didn’t know is (from what I am hearing) that Ricoh borrowed money to finance the Ikon debt. And then the economy took a down turn. The Ricoh top brass has said that their goal is to convert the Canon base to Ricoh. That sounds real good on paper, especially since Canon represented 60% of the Ikon market. The only problem is that not all of the Ikon-Canon customers think that Ricoh equipment is the same as Canon equipment.

What does the current landscape look like? Both CBS (Canon Business Systems) and the Independent Canon Dealers are aggressively pursuing Ikon’s Canon customers. The Canon letter, stating that Ikon is no longer authorized to sell or service Canon equipment has REALLY stirred the pot. Why, you ask? Because both Main Street and Wall Street hate uncertainty. You can’t plan for uncertainty. Because you don’t know what you don’t know. And the Canon letter left a lot of loyal Canon (Ikon) customers uncertain about service, and support, never mind upgrades to their Canon fleet. They are now taking action, talking to Authorized Canon Dealers to eliminate this uncertainty.

Now I know that the Ricoh top brass think that their (Ricoh) equipment is just as good as Canon equipment, but they are wrong. I have supported both and I will honestly say that the Canon equipment is simply better. As anecdotal evidence I offer the following example; It is not unusual to find Customers with Canon equipment still in operation that is 12 or 13 years old. You never see Ricoh equipment that old still in operation.  You may say who would want to hold onto equipment that long. No one! But that is not my point, my point is that the Canon equipment is built better so that you could if you wanted to.

So what happens with Ricoh if they not only over payed for Ikon, but then they don’t convert their Canon base to Ricoh. After all Ikon is only a distribution channel. That is their only value! It has been estimated that Ikon sold 60% Canon equipment and 30% Ricoh (It varied by location). So what if Ricoh only captures 30% or half of the Canon base, or less? Would that lessen the value of the purchase by half? How would that effect Ricoh’s ability to pay off on the debt that they financed? Stay tuned, and we’ll see. It is a good time to be an Independent Canon Dealer.

That’s my $0.02
Vince McHugh
vince.mchugh@Yahoo.com

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Canon terminates Ikon as an Authorized Canon Dealer

November 8, 2008

On October 31st 2008 Canon issued a public letter confirming what had been widely speculated, that Ikon (now a Ricoh Company) is no longer Authorized to sell OR SERVICE Canon equipment. This of course does not mean that they have to stop servicing Canon equipment, but they will not be authorized by Canon to do so. Canon does say in this letter that they will continue to sell Ikon “spare parts” for 3 years, and provide “certain technical support for at least one year”.

So what does this mean to you if your company has Canon equipment that you purchased from Ikon or is currently serviced by Ikon? The first thing I would do is see if your Ikon Service agreement is tied into your lease. This was a common Ikon practice because it makes it harder for you to get service elsewhere. If it is not wrapped into the lease it will make it easier to switch to an Authorized Canon Service provider. But you should speak to your legal counsel regarding this agreement. One significant aspect of your Ikon Canon service agreement that has changed is when you signed this agreement Ikon WAS an authorized Canon Service Provider, it can easily be argued that when they lost that status, it diminished the value of their service to your company. I think that you could even make the arguement that Ikon broke the service agreement.

If you are in a long term lease with Ikon for Canon equipment then it is very important that you make plans to obtain authorized Canon service. Let’s say you just signed a 5 year lease with Ikon for Canon equipment. Then the two time frames in the Canon letter to Ikon should really get your attention, because both of these terms are shorter then the terms of your lease. The first said that Canon would sell Ikon “spare parts” for three years. What will they do for the last two years of your lease for replacement parts? The second time frame mentioned is that Canon will provide Ikon “certain technical support” for “at least one year”.  Ikon does have it’s own tech support, but according to “the letter” there will clearly be some limitations on what tech support Ikon will get from Canon. This again seems to lessen the value of the service contract that you entered into with Ikon. I wold at least bring these issues to the attention to your legal counsel.

Now one thing that Ricoh said it would try its best to do in the next few years, “just to help you out” 🙂 is try to “upgrade” your Canon equipment to Ricoh equipment. You may like your Canon equipment and not feel like replacing your entire Canon fleet with Ricoh equipment. You also may feel (like I do) that this would not be an “Upgrade”! When I first left the Canon Dealer to go to work for Ricoh Business Systems (now Ricoh Business Solutions), I was able to help convert several Canon accounts to Ricoh accounts. I came back to work for the same Canon Dealer 2 & 1/2 years later, and a number of those customers who tried the Ricoh equipment also came back to Canon. I often heard from these customers that they felt the Ricoh equipment suffered by comparisson to its Canon counterparts. Having supported both lines I would have to agree.

So what do you do now? You can seek an Authorized Canon Dealer. You can allow Ikon to switch you from Canon to Ricoh, or you can stick your head in the sand and believe the “business as usaual” hype that even the Ikon reps can no longer say with a straight face. The choice is (as always) yours.

That’s my $0.02
Vince McHugh
vince.mchugh@Yahoo.com