IBM said on Thursday it would fold its printing systems division into a joint venture with Japan’s Ricoh as part of a plan to exits its digital commercial printer business.
The Japanese group would then acquire the remaining 49 per cent of the venture – branded InfoPrint Solutions – over the next three years.
IBM will receive $725m in cash when the deal closes – expected to take place in the second quarter. The payment will cover the initial 51 per cent stake in the joint venture that Toyko-based Ricoh will acquire together with a prepayment on the remaining stake.
The final price tag will be decided at the end of the three-year period though IBM said it expected to recognise a total of between $175m and $275m on the deal.
The deal marks the latest step by Samuel Palmisano, IBM’s chief executive, to refine the group’s focus to concentrate on what he sees as IBM’s core strategic businesses. It also represents the biggest divestiture since IBM completed the sale of its PC operations to China’s Lenovo for $1.75bn in May 2005.
Nicholas Donofrio, IBM’s executive vice president in charge of innovation and technology, said IBM had been considering the future of the printing systems business, which has annual revenues of about $1bn, over the last three years and said that as growth slowed it had become “more and more obvious that we needed to do something here.”
IBM revealed last week that sales in the printing systems division declined 7 per cent last quarter, and its profitability shrank.
On Thursday Mr Donofrio emphasised that the digital printing business remained a solid business opportunity but added, “you have to be able to realise when it is time to let old things go”.
For Rioch, which has extensive printer operations targeting small- and medium-sized businesses, the deal represents an opportunity to expand into a new area and broaden its range of office equipment products to compete with Xerox and Canon.
Sales in the global digital printer market are expected to grow by about 32 per cent to $33bn in 2009, according to InfoTrends, a US research company.