Tuesday, June 9, 2009

Imaging Industry Operating Income - How Soft Really?

The newest update of the Imaging Industry Margin Index Report from the Woodford Group spotlights a once unflappable industry finally experiencing the full impact of a turbulent economy. Although the results of the imaging industry trends are dramatically lower this quarter, the downturn is not surprising given the overall state of the economy.   

Industry revenues took a major dive, but were surprisingly not the lowest on record. However, industry margins, taken together, were definitely the lowest ever, and yet some companies still managed to perform well. It’s a challenge to interpret these results, particularly on a macro level, as there are several overlapping factors and influences to take into consideration.

The first and most obvious of these is the belt-tightening that most companies experience in the face of a serious economic downturn. Both at channel and end user levels, restriction on purchasing is strictly enforced, as is tighter inventory control. Secondly, many imaging industry firms are opportunistically restructuring, which affects their bottom lines. The final and perhaps most significant influence on the imaging industry is the shift in usage patterns, specifically a reduction in overall print volumes. This is difficult to quantify because it is overshadowed by the other gating influences. Although all three radically affect revenue and margin, the third influence will likely have the most lasting impact on the industry as a whole.

On an individual company level, the IIMI report identifies some interesting developments, most notably with Ricoh who, for the first time, came in second on the revenue scale. By sustaining only a minimal sequential drop in a volatile economy, Ricoh was able to overtake competitors who traditionally have been strong industry performers, but who have suffered more drastic reductions in revenue. Ricoh has worked to build a broader business which addresses more attractive customer segments, a strategy which is clearly successful and profitable for them.

Other key players experienced shifts in both directions as well, illustrating just how diverse and dynamic the imaging industry remains. Despite ongoing internal costs for restructuring and external market pressures, the ever-resilient imaging industry continues to offer attractive and stable returns, especially as the economy begins to improve and new business opportunities emerge.

The twenty-first consecutive report in the quarterly series, the latest IIMI report provides the most recent data and analysis, highlighting key trends within the imaging industry as a whole, as well as individual strengths and weaknesses of 12 key industry players. Since 2004, the Woodford Group together with their partner, the Photizo Group, has tracked key revenue and profitability metrics of these companies, which represent more than 90 percent of the distributed imaging industry. The Imaging Industry Margin Index Report is available immediately. To purchase a copy as an individual report or as part of a quarterly subscription package, please contact the Woodford Group at www.woodford-group.com or call 1-845-987-6201.

2 comments:

Greg_Walters said...

Rob- great stuff.

Is there any way for you to talk in more detail regarding the "shift in usage"?

Rob Sethre, CEO, Woodford Group said...

Greg, we can go into a lot more detail regarding the shift, but that is beyond the specific scope of this report. But we do know from both recent data and even anecdotal evidence that usage patterns are now moving. The difficulty right now is that these developments, although at least partially caused by the economic situation, are also masked by it. So in the public domain we will probably only see the "clean" effect after the economy stabilizes. Obviously the advantage is to anybody who can anticipate such developments, so if somebody needs this trend quantified they should contact us to discuss a specific data package.