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A Financial Wrap-Up Of This Month’s Document Technology Market

15 Apr, 2005 By: Mike Dudek imageSource

A Financial Wrap-Up Of This Month’s Document Technology Market

Each month we track changes in stock values of major public players in the
imaging industry. Here are the latest industry developments.

Danka: The company’s stock has declined by 51 percent in five months.

Opinion: Danka’s most recent earnings release was not well-received by
the market. During the prior year, from September 30, 2003 to September 30,
2004, Danka’s stock appreciated 57 percent from $2.42 per share to $3.80 per
share. Yet, in five short months the stock has dropped from $3.80 to $1.87.

Shareholders will insist that management explore strategic alternatives.
Decision-making tends to become reactive and short term in nature. Companies
under such pressure often become internally focused in an attempt to correct
perceived deficiencies, rather than focusing on the market opportunities.
Management and operational changes are often made, thereby increasing anxiety
among employees and creating uncertainty in the market.

When mega-dealers experience difficulty, opportunities are created for
independent dealers to grow and take away additional share. Quarterly reporting
deadlines seem to come at an accelerated pace for public companies experiencing

In other news: Danka announced that Lang Lowrey, chairman of the board and
former CEO, was retiring effective March 1. Lowrey was recently ordained into
the ministry. The company appointed Andy McKenna as its new chairman.

IKON: Announced 1,500 job cuts, which represents 5 percent of its
workforce, in an effort to cut costs and increase profitability. The company is
closing its business document services division, reducing the number of legal
document services locations from 82 to 65, and is selling portions of its
Mexican operations. The company intends to reorganize the field structure and
reduce the number of marketplaces in North America. IKON anticipates a total
pre-tax charge of $38 to $52 million.

As IKON rationalizes its work force, independent dealers in affected
marketplaces can reap the benefits if they aggressively pursue the opportunity.
The need to lay off these personnel is indicative of more fundamental issues and
challenges. IKON has struggled mightily for years in its attempt to change its
basic operating philosophy from autonomous to centralized operations. The
company has attempted to transform a primarily “up and down the street” company
that made high margins in many secondary markets to a major account company with
lower margins.

The sale of the leasing company was a major mistake that cannot be righted and
it will haunt IKON indefinitely. The company continues to over-focus on internal
operations rather than on the customer. The basic result has been that many
independent dealers have taken back market share.

In other news: Steel Partners revealed in an SEC filing that it has acquired a
5.4 percent interest in IKON.

Opinion: Steel Partners would make this investment believing that IKON is
under-valued and/or can be better managed. Steel Partners is likely going to
seek representation on the company’s board of directors, especially if it
acquires additional shares.

Global Imaging: Ray Schilling, Pete Shoemaker and Todd Johnson, already
on the corporate team, were promoted. Paul Schulman, former president of Barr
Business Systems was promoted to SVP-Business Development, and Dan Cooper,
former president of Virginia Beach companies was elevated to SVP-Sales,
effectively succeeding Mike Shea, who had been promoted to president of Global

Opinion: You are seeing many management moves within Global as it prepares
itself to better manage a business that has aggressively grown. You will
continue to see the company’s folks getting promoted up through the ranks.

Xerox: Reuters reported that Xerox announced a $55 million severance
program to cover a voluntary severance program for U.S. employees who work
primarily in technical service.

Opinion: Between Xerox and IKON, it sounds like there will be some talent
available on the street.

Ricoh: Announced that quarterly sales increased 5.4 percent and net
profit rose 13 percent. In North America, sales increased 8.6 percent, but
profits declined 23.5 percent.

HP: Announced quarterly revenue increase of 10 percent to $21.5 billion,
while EPS increased 7 percent from a year ago. Its imaging and printing group
grew 3 percent, supplies grew 8 percent, fueled by color printing, commercial
hardware grew 4 percent, but consumer hardware declined 13 percent. HP shipped
12 million printers in the quarter.

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