Sunday, July 27, 2008

Excerpts From Espe


IKON has turned around, will it last?


These are some questions asked of Espe after the 3rd quarter conference call:


Amanda Seguin – Lehman Brothers

"...Okay. And then one more follow-up. On the Konica Minolta Danke deal, just wondering if that’s changed, if there’s any update on your relationship with Konica there and the machines in the IKON channel?

Matt Espe

Nope. Konica, we like the 350 and the 550, the equipment is terrific and the relationship is intact.

Shannon Cross – Cross Research

"Hi, good morning."

Matt Espe

"Hi, Shannon."

Shannon Cross – Cross Research

"Couple of questions. Just starting – can you talk a little bit about the competitive environment in the services business as you go out and do some of these bids, the sweep bids and that, you know, with the HP getting a bit more aggressive, Lexmark is probably desperate from a desperation standpoint I would say? And then they are also obviously playing their queue. I’m just curious at sort of what pricing, what it looks like in terms of how savvy customers are becoming in terms of getting all of you to price against each other and then what people are looking for and what sort of drives their decision-making?..."

Matt Espe

"Well, let me try to answer that. That’s a very good question. For many of our customers, this is now round two or three of outsource agreement, certainly round two.

So to your point, the customers are more savvy.

But what we are seeing is, we continue to see extremely high retention rates because the switching costs are high. And we’ve been able to leverage fairly strong product portfolios with very strong workflow solutions at our customer base. As a result, you just tend to get embedded into clerical workflow. So the switching costs are a little bit higher. So it makes it very difficult even for companies – strong companies like Canon – or I’m sorry, Xerox and HP to come in and knock us out.

When it’s a brand new "Greenfield", if you will, it’s a little tougher, but we have very strong references. So it’s – we think we are very well positioned because we’ve got a very broad and diverse product range and we’ve got great leverage with very strong workflow solutions, and we’ve got great process experience in a number of verticals.

Our product line – the equipment lineup is stronger for mid-market than a couple of manufacturers you mentioned. Our experience is broader and deeper, and our ability to sort of refresh the offering during the course of a managed service agreement is very good. And we’ve got a very, very good track record of delivering on precisely what we commit to. And that brings some sustainability as well."


My summary:

- IKON has moved from OMD to Oracle
- Color equipment revenue up 12%, placements up 7% and color equipment is no 38% of total units.
- B/W Office revenue down 11%
- IKON is losing low-end office market to "retail"; is of no concern
- Production up 3% B/W, 6% color
- 39 C7000's and 33 C6000's sold past quarter
- Analogue now at 7% of MIF (Machines In Field)
- Professional Serivices/Total Managed up 4% due to new programs to existing customers
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Source - Seeking Alpha, here.

Reactions:

2 comments:

  1. Is he kidding? Oracle is the worst decision Ikon has ever made, orders are not getting filled on a daily basis, no one is willing to make a decision, if it's not on their screen they won't take care of the customer and worry about the glitches later, OMD had its issues but at least it was reliable and somewhat forgiving. Color has increased across the board thanks to the launch of business color into the industry, and he is saying Ikon did that? Also the reason B&W has decreased is because business color is as cost effective. If things are on the rise why has 350 employees across the country been severenced? They have also created a customer retention team to see why they are losing customers, gee let me think, less employees, the ones that are left are spread thin and can't respond as fast, their pricing is the highest in the industry, and thanks to Oracle they can't get billing right or orders filled. They are blaming all the "setbacks" on the economy, in 2005 they came down hard on both Florida marketplaces for lack of sales and revenue, when they were given the explanation of the state being hit by 4 hurricanes it was dismissed as no excuse, that outside influences is not a good reason for lack of performance, seems to me that is the very excuse they are hanging their hat on.

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  2. Ok - well, these concerns you mention have been happening since 2004(when I started with IKON) and continue today.

    Now, I am not with IKON.

    And some of the reasons I left, you mention in your post -

    Regardless, IKON has not been as "customer centric" an organization for a while and the processes in place have driven a divide between the organization and the customer.

    So what?

    IKON is responsible to the share holders - not the customers. As is all companies that sell stock.

    Period.

    Being Customer Centric is only one tool used to increase sales, and thereby increase margins, thus establishing a positive return on investment for the stock holders.

    That is all.

    When a company buys back stock and reduces overhead(by reducing labor) the value of the stock will go up - less stock issued, and lower costs.

    Simple stuff.

    Cold? Yes, and?

    I do agree with your angst over the hurricanes' effecting business, but the horde of stockholders don't want to hear it either.

    Something is going to happen to IKON - the five to seven year old rumors are going to come to pass at some time.

    And when it does, guess who will benefit the most(other than executive management) - the stock holders.

    Not the customers.
    Not the general line employees, or middle management or all the sales people at COE.

    The stock holders.

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