The world’s biggest supplier of digital printing equipment, Xerox, is in talks to acquire the world’s biggest printer, RR Donnelly, in a move which may have significant ramifications for the entire print industry.
If the deal (leaked to Bloomberg) goes ahead it will heighten what has started to become an uncomfortable relationship between some digital press suppliers and some printers, as the suppliers set up and grow businesses in direct competition with some of their print business customers.
In this country Fuji Xerox Document Management Services (FXDMS) competes in the open market against many print businesses that use digital printers supplied by Fuji Xerox, among others. Similarly Ergo is now owned by Konica Minolta, and competes in the open market against printers that use Konica Minolta kit.
The suppliers can operate in this way because the market is highly fragmented, however taking on the big US web printers is a major step, and will be indicative of Xerox taking what is known as business process outsourcing to a new level.
The parties say there is a Chinese wall scenario where the kit supplier and the print services supplier do not talk to each other and operate completely independently, but many printers are sceptical of the claims that there is no communication between the two, especially at a senior level, with both the supplier business and the print management business being part of the same overall company.
Some printers in Australia are among those becoming unsettled by the twin approaches, where their supplier is part of the same business that owns a major competitor against whom they are losing jobs. And in the inplant world Fuji Xerox has long been banned from Nippa (inplant professionals association) events, as it offers institutions a complete document management service which enables the institution to close down its own inplant.
Four years ago Fuji Xerox paid $375m to buy Australian business Salmat’s BPO operation. At the time Fuji Xerox majority owner Fujifilm said, "Fuji Xerox is strongly promoting the business shift from the hardware-centric business offering multifunction devices and printers to the solutions and services business.”
In regard to the RR Donnelly deal Xerox is now selling high volume inkjet web presses under both the Xerox brand (Trivor – not yet released but shown at drupa) and the Impika brand, and will want to sell them to competitors of RR Donnelly. It also sells inkjet web systems under the FX1400 and FX2800 brands.
Analysts believe the deal and a stronger presence in the commercial print market will give Xerox the growth it has been unable to achieve organically – it is already the biggest player in digital print technology so there is little room for growth.
However the risk is that with the RR Donnelly deal is that it will be competing with some of its biggest print provider customers and potential customers and so will put them offside as far as buying their kit goes. Clearly Xerox does not believe this is too much of a risk against the benefits of vertical integration.
RR Donnelly had sales of $US11.6bn last year. Its shares jumped 12 per cent on news of the potential sale to Xerox. Before the Xerox approach RR Donnelly was planning on splitting its business into three separate parts, with an October timeline. Xerox has sales of US$18bn, of which US$11bn is from its technology business and US$7bn from its business processing outsourcing service.
Neither Xerox nor RR Donnelly is commenting on the talks nor even confirming they are taking place.
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