While vigilance and concern over COVID-19 and its variants remain in many parts of the world, vaccine availability and the resulting vaccinations are allowing enterprises in many areas to reopen offices. Businesses are also becoming more knowledgeable about what is needed to sustain and grow business as they adapt to the hybrid office concept. So while last year delivered some dark financial quarters for the imaging channel, results reported by the major OEMs for the first quarter of 2021 so far indicate there may be a break in the clouds.
Why do we say this? When reviewing information from the quarterly reports for those OEMs that have clearly defined printing-related business unit financial data — Brother, Canon, Epson, Konica Minolta, Kyocera, Ricoh, and Xerox (HP does as well, but has yet to report Q1) — their combined revenue is up about 1.4%. That doesn’t mean each OEM experienced that kind of growth – but that is in line with the likely scenario for 2021 industry growth we projected back in January. Let’s look at some of the highlights and lowlights that comprised these quarterly results.
Converting the financial data to USD, we saw some OEMs experience revenue growth during the first quarter of 2021 compared to the same period of 2020.[i] Canon and Kyocera reported declines in printing revenues for the quarter; however, when converted to USD, those numbers are either flat or slight increases. Epson and Brother were the big “winners” with growth of 18% and 7%, respectively. These two OEMs, like Canon and HP, continue to benefit from the work-from-home and remote learning dynamics that COVID-19 introduced. Konica Minolta experienced a decline of just over 1% and Ricoh had a decline of just under 1% in total printing revenues when compared to the first quarter of 2020. Xerox’s first quarter 2021 results were 8% below those from the same period of 2020.
Almost all OEMs reported increased hardware unit sales for the quarter. Although consumable sales continued to be depressed and impacted the final revenue results, the increased hardware unit sales should bode well for better consumables revenue as the year progresses. This should point to all periods in 2021 showing much-anticipated improvements over 2020.
However, challenges remain. First, it may be more accurate to compare 2021 numbers to the pre-COVID-19 time frame. In that sense, the first quarter of 2021 will most like be around 3% to 4% lower than the same period of 2019, and that will most likely be in line with the 10-year CAGR of the industry. So, while 2021 results will be better than 2020, no one should be lulled into a sense that the overall trajectory of the print hardware and consumable industry has changed. Second, most OEMs seem to be taking a pragmatic approach in setting future expectations around recurring consumable revenue, explaining that office page volumes will continue to decline in the office. (Canon offered a different viewpoint in its Corporate Strategy Conference in March stating that “paper media is superior in terms of readability … when people use processed information, and we believe that demand for printing will not decrease significantly in the future.”) Finally, OEMs who benefitted from the work-from-home and remote learning dynamics that energized the at-home printer/MFP demand also seem pragmatic in communicating that that demand will most likely subside to a much lower level by the second half of the year (with Canon again being the exception, saying they expect continued strong home demand for inkjet and laser printers). All of this is leading industry OEMs to make changes in focus and strategies.
Examples of this are:
- Konica Minolta has stated it is focused on developing “… the next main business that could succeed the office unit,” switching from product-centered selling to value-added digital transformation (DX) as a service.
- Ricoh has stated it is working to transform itself into a digital services company, projecting that Office Services will be its revenue leader by 2023 and profit leader by 2025.
- Canon’s CEO outlined four business groups that will lead sales in the future: monitoring cameras, medical equipment, machines to manufacture organic electroluminescent panels, and commercial and industrial printing, with the latter leveraging Océ technology.
To be clear, no OEM (that we know of) is exiting the printing business. Virtually all of them introduced new printer and MFP products during the first quarter of 2021. However, there were also announcements about expansions in IT services, software portfolios and partners, cloud solutions, and integrated security solutions. The move to create more services-based revenue streams to replace diminishing consumable streams is well underway, and printer/MFP products will play support roles in the broadening of these services. In 2021 we’ll continue to see more breaks in the clouds that hovered over the industry during 2020 and we are excited to watch imaging channel OEMs as they execute strategies that blend printers and MFPs with DX services.
[i] Financials reported in yen (¥) are converted to USD ($) using the average of the daily ¥ to $ exchange rate for the quarter. For that reason, some of the percentage increases or decreases mentioned may or may not align with what is reported by individual OEMs.