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Imaging Index: A Financial Wrap-Up of this Month’s Document Technology Market

9 May, 2005 By: Mike Dudek imageSource

Imaging Index: 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. The following chart depicts the change in value from September
30, 2004 to March 31, 2005.

Adobe, HP,Global Imaging, Canon, and EFI have all
experienced double digit appreciation in the last six months. Danka, and IKON,
on the other hand, continue to decline, sinking 58 percent and 18 percent
respectively. Keep in mind that last year Danka appreciated 57 percent when its
stock climbed from $2.42 to $3.80 from September
30, 2003 to September 30,
2004. IKON experienced similar results by growing 64 percent from $7.31 to $12.02 during the same period.

Latest Industry Developments

Danka: Americas Group has undergone an “organizational
re-alignment” to streamline its management structure. Todd Mavis, the company’s
president and CEO, assumed responsibility for all U.S.
sales channels. Mike Popielic, who was responsible for running non-European
operations, is leaving the company.

Opinion: Danka’s stock has dropped from $3.80 to $1.60 in six months. Expect to see additional
changes at Danka caused by key factors, including recent changes in top management—a new chairman of the board—and declining
stock value.

IKON: Jeffrey Hickling has been appointed as senior vice
president of operations.  Hickling, who
will report to CEO Matthew Espe, had various leadership positions at GE. In addition, Mark Hershey was
promoted to senior vice president, general counsel and secretary with
the departure of Don Liu.

Opinion: The GE connection continues at IKON. It seems ages ago when IKON was an autonomously entrepreneurially-driven company that
competitors were wary of. Expect more internal changes at the company as new
management brings new ideas.

On the legal front, it will be interesting to assess whether
its new general counsel takes a different legal posture than his predecessor.
IKON’s former corporate parent Alco Standard Corporation had always prided
itself on being non-litigious. However, in more recent years, it seems that
IKON has aggressively instigated legal action on many fronts, and it has been a
defendant on others.

HP: Mark Hurd, formerly of NCR, was appointed as its new
president and CEO. Hurd received some heat in the media on reports that he made
$2.3 million on sales of NCR stock prior to his appointment to HP as NCR’s
stock declined 17 percent after news of his departure. Supposedly, Hurd sold
the stock before being contacted about the HP opening.

In addition to this pre-employment stock gain, Hurd also
apparently is being protected in his employment agreement by HP against a
decline in his NCR stock for as much as 20 percent for the 90 days after his
departure as he exercises NCR stock options for 850,184 shares and actual stock
of 100,665 shares.

Canon: Yorohu Adachi is its new president and CEO, replacing
Kinya Uchida who is returning to Tokyo.

Opinion: Under Uchida’a leadership, Canon U.S.A.’s
revenue grew 16 percent from 1999-2004. This growth over the last five to six
years, in my opinion, was not acceptable to Tokyo.
Adachi was most recently president and CEO of Canon China
and Hong Kong and chairman of Canon Singapore.
Under his leadership, Canon Asia grew 61 percent from 2001-2004, and China
grew 75 percent.

Oce: The company announced flat revenues in its first
quarter compared to the prior period, but indicated that non-recurring revenues
increased by 25 percent as a result of increased sales of new printing systems.
Net profit declined by 22 percent.

Adobe: The company had record revenue of $473 million in the
first quarter compared to $423 million in the prior year.

Counterfeiting Criminals: Xerox revealed that it initiated a multi-country investigation into counterfeiting that
resulted in the seizure of 7,200 phony Xerox color laser toner cartridges with
an estimated value of $1.3 million. Lexmark announced that more than 13,000
counterfeit Lexmark toner cartridges were marketed. Two individuals were
arrested and artwork and printing plates used to make counterfeit
cartons were seized. The counterfeit toner market is estimated at $1
billion per year.

Opinion: The toner manufacturers consistently state that
they are aggressively pursuing these counterfeiters to protect
consumers. They also encourage consumers to purchase only genuine supplies from
authorized channels. Please raise your hand if you think these
manufacturers are being altruistic. Can they please tell us “the rest of the

Color Solutions: Don’t miss the color boat! The independent
research firm IT Strategies predicts that annual worldwide spending on digital
color output devices will hit almost $50 billion by 2007. Xerox announced that
it is investing two-thirds of its $1.4 billion annual R&D budget on color
strategy. Xerox’s color business reportedly did $3.9 billion or 27 percent of
total annual sales. Xerox is betting that the percentage of color copies/prints
will move from about 3 percent to 10 percent in ensuing years.

Opinion: Everything is better with color—growth, revenue,
margins and profitability.  After market
pricing is often 10 times black and white pricing.

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