At Sharp’s National Dealer Meeting in Phoenix last week there were a couple of recurring themes. One, which will come as no surprise, was Foxconn, and its infusion of cash into the formerly troubled Sharp. The other was water. That, on the surface, is a little bit odder, but we’ll get into it shortly. The two-plus day event hosted more than 900 attendees including 605 dealer participants — a 5.2 percent increase over the previous event and just the beginning of some improved numbers we saw from Sharp.
President & CEO Doug Albregts kicks things off
Taiwanese contract manufacturer Foxconn’s initial $5.6 billion offer for shares of Sharp in early 2016 at first seemed to create more problems than solutions, shedding light on previously undisclosed liabilities and leading to a reduced price of about $3.5 billion. In our coverage of the deal, which asked “Has Sharp Dodged a Bullet?” we noted that “The $3.5B cash infusion, labeled by Sharp as a ‘capital alliance,’ gives Foxconn a 66 percent share of Sharp and prevents the company from certain bankruptcy.”
Nearly two years later, it would appear Sharp has done more than dodge a bullet – it is taking full advantage of that cash infusion and making no bones about it. And why should it? When you come into money, you thank your benefactors, promise to use it wisely, and then revel in your newfound wealth – which, to be honest, is sort of the feeling I got from Sharp. So, are they spending it wisely? Foxconn seems to be ensuring they are, or at least, spending it in Foxconn-approved ways – evidenced both in some of the new product announcements as well as in Sharp’s plans for the future.
Products, Pixels and Project One
There were a slew of new product announcements and I won’t go into them in detail here — you can read about them in Sharp’s press release. A quick rundown, however, shows 20 new document systems products (both A3 and A4, color and mono devices); 10 office display products (including 8K displays, which I will not share pictures of because a photo, no matter how good, of an 8K image is not really going to get the point across. What will is the fact that apparently 8K images capture such detail that they were used to locate Tom Brady’s stolen jersey); and products in new categories like network attached storage (NAS) and office water generation (I told you we were going to come back to water – but not quite yet).
When it comes to Foxconn, their influence was evident specifically in the A4 and NAS devices. The NAS devices are Thecus, a brand that is part of the Foxconn empire, and available to Sharp dealers through its distribution channel. More interesting was “Project One” – desktop monochrome A4 devices.
Albregts speaks to the press with Foxconn's Thecus NAS and 'Project One' device as a backdrop.
According to Shane Coffey, AVP, Product Management, the desire was to find a way for the Foxconn engineering team to work with the Sharp engineering team, taking into consideration the variety of products Foxconn makes and the variety of products Sharp makes — and they chose an MFP. “We were pretty happy about that,” said Coffey. Project One consists of variations on the devices both with and without touchscreens and with both 35 ppm and 45 ppm speeds. They have the same UI as the A3 products – uniformity among product lines being a big deal, and allow Sharp dealers to sell Sharp A4s, versus the Lexmark devices that have been Sharp’s primary A4 solution. The Lexmark devices still have a place, per Coffey, who notes that they offer higher speeds and additional vertical solutions.
Skywell, Smart Office and Survival
OK, let’s get to the water – I know you’ve been waiting for it. Sharp has a strategic alliance with Skywell and is offering “revolutionary drinking water dispensers that create clean water from the air.” It became a bit of a running gag throughout the event — “Man, that’s good water,” said every person on stage at some point — but in actuality, the dispensers are part of what Albregts said is a three-phased approach to helping dealers diversify, survive and thrive in the future.
Phase 1 is giving you what you need today. “We have 20 new product introductions” including 30-plus models in the document business alone, said Albregts. “We are actively chasing a top-three market share position by 2019. … either through acquisition or we’ll do it organically, but we’re going to get there by 2019.” (Huh. More on that shortly too.)
Phase 2 is adding new complementary products to help dealers expand their footprints. This is a strategy we’ve been espousing ourselves here at The Imaging Channel and have seen most companies doing in one form or another. For Sharp, this is where the Skywell water machines come into play, as well as Sharp’s display products like the Aquos boards, other third-party products like the NAS devices, and security robots … which lead into ...
Phase 3: The smart office. Offices are integrating AI in meaningful ways – and for Sharp, that includes a partnership with Amazon’s new Alexa for Business, also announced last week. Sharp says it is the first copier/printer OEM working with Amazon Web Services (AWS) on the venture and the only one to be featured on the slides at Amazon’s launch — which is kind of a big deal. Sharp will also introduce the Sharp-manufactured smart-assistant “bot” (real name to come), which looks a bit like an Amazon Echo and will allow users to use voice activation to do things like start meetings, communicate with remote employees, take notes and provide security.
Albregts greets the INTELLOS Automated Unmanned Ground Vehicle (A-UGV), while Marusic introduces the 'bot' — with the ubiquitous Skywell water machine on stage
Foxconn, Financials and the Future
So, let’s get back to what we all really want to know — how has Foxconn made a difference in the two years since the last meeting and what are the plans for the future? As usual, Sharp’s executives were pretty candid about all of it, and the team of Albregts, EVP and COO Mike Marusic and newly appointed VP of Channel Sales John Sheehan (who had big shoes to fill in the wake of recently departed Laura Blackmer) answered the tough questions at both general presentations and press briefings.
Sharp is really excited about Foxconn. At least that’s what they’re saying, and in spite of any difficulties that come along with working for new bosses (and let’s face it, there are some — we’ve all been there) it is probably true because, not to put too fine a point on it, Foxconn rescued them. While in the past, Albregts excelled at putting a good face on an otherwise dismal financial situation for Sharp (SIICA did remain fairly strong), it was probably nice for him to not need to this time. And actually, for the document business, the first half of the year (April-Sept.) was a bad half, per Albregts, with the document business about 4 percent down and operating profit flat, but he said that October-November is already well ahead of 2016 and 2015 numbers. A source of concern, however, was that in talking to dealers, a trend appeared to be that units are up but revenues were down — this indicates the need to diversify and takes us back to that three-phased approach mentioned earlier.
Foxconn offers greater potential, however, and now we revisit that comment from Albregts about becoming number three in the market by 2019. Sharp currently has about 300 dealers, and given the existing unit volumes and size of the market, getting from the point they’re at now to number three is virtually impossible by simply acquiring dealers (although Sharp did recently acquire multiline dealer Federalgraphics, which will add Sharp products). What will make it possible? “We should be able to acquire anyone we want,” said Albregts, noting conversations with Foxconn’s Terry Gou and referencing Gou’s (unsuccessful) multi-billion-dollar bid for Toshiba’s chip business. “[Gou said] ‘No one in your space is off limits to us.’ … he said to us, ‘you get to number three, you tell us how to do it and we’re going to support you in doing it.’ We’re looking at any opportunity for an acquisition,” said Albregts.
So while the Sharp event was filled with cool things like robots, bots and 8K video, it seems the key takeaway from the event is, keep your eye on Sharp. Things are afoot — if not immediately, then in the next year or so, and those things will be worth watching.