News of job losses as well as Panasonic’s exit from the document scanner market are among the latest challenges facing the office equipment industry. While these developments align with a decreased demand for office document technology as many people continue to work from home, we do see continued opportunities for vendors in areas like A4 printers and cloud services as well as collaboration and conferencing.
Job Cuts and Restructuring
A recent Nikkei Asia article reported the loss of 16,000 positions at Japanese and US office equipment makers between January and September. Some of these losses were documented in the most recent quarterly financial disclosures—including 4,112 jobs at Canon from January 1-September 30, 1,730 jobs at Fujifilm from April 1-September 30, as well as 2,916 positions at Konica Minolta from October 1, 2019 to September 30 of this year.
|Excerpt from Canon's Q3 Financial Results|
The Nikkei Asia article also highlighted 6,400 job losses at Ricoh and 1,500 at Xerox, and indicated that many of the cuts were focused on sales and maintenance staff overseas (e.g., in Europe and the United States). Some of these cuts were also the result of consolidating operations in areas like maintenance and manufacturing.
These reductions come at a time that office equipment manufacturers are seeing continued declines in revenue. Keypoint Intelligence’s latest roundup of vendor financial information for the previous quarter shows that manufacturers like Canon (-21%), Konica Minolta (-16%), and Ricoh (-19%) saw double-digit declines in office-related revenue YOY driven by the impact of the pandemic, office closures, and lower revenue from print hardware (though Canon saw 21% growth in its inkjet printer revenue), supply, and maintenance sales.
That said, the declines have significantly improved compared to earlier this year; printer market leader HP did see just a 3% decline in printing revenue in Q4 (led by 21% growth in consumer hardware revenue), including only a 1% drop in supplies revenue.
At the same time, segment operating profit fell dramatically for certain vendors to the tune of 94% for Canon (in contrast, profit in the imaging system segment—which includes inkjet print—grew 167%), 70% for Ricoh, and 96% for Konica Minolta. This resulted in operating margins of 0.8%, 0.3%, and 3%, respectively.
It is worth noting that Ricoh’s office service operating margin was significantly higher (6%) than its office printing margin (0.8%), potentially reflecting a stronger demand for IT and business process services during the pandemic (e.g., office services grew 19% in EMEA in Q2). Also, Konica Minolta’s IT services revenue recovered to levels on par with last year, with revenue up in August and September (and Workplace Hub generated about $7.6 million in Q2).
While we don’t expect page volume losses to return to their pre-pandemic levels (due to continued levels of working from home as well as accelerated conversion to digital processes), we do see opportunities in technology and services for the “hybrid” workforce—spanning home office, traditional office, and a mix of both environments; offerings focused on collaboration and conferencing, security, the cloud, and e-commerce; and innovations that help companies reimagine and redesign offices.
Panasonic Leaves the Scanner Market
This week, we also heard about Panasonic’s planned exit from the document scanner (as well as unified communications) market. Panasonic announced the news to partners in an email and confirmed various reports of this news, indicating it will continue to supply hardware until January 2023 and provide support for its products until 2029.
While Panasonic’s US scanner business had been growing, a lack of traction in other geographies made it an unviable business overall. Panasonic’s decision was also reportedly influenced by competitive gaps related to manufacturing and R&D, economic stressors related to COVID-19, as well as the rise of cloud-based solutions.
In conclusion, while office equipment manufacturers continue to face challenges driven by the pandemic, remote working, and cloud services adoption, there are silver linings in areas like A4 print technology, inkjet, IT services, cloud-based software, collaboration and conferencing, as well as security solutions. If we know anything about our industry, it’s that it knows how to pivot when the going gets tough.
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