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


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