by CIO Staff

IBM to Form Joint Venture with Ricoh

Jan 25, 20073 mins

IBM and Japanese printer and copier vendor Ricoh announced Thursday that they’re forming a joint-venture company based on the IBM enterprise printing systems division, which will gradually become a fully owned Ricoh subsidiary.

Ricoh will acquire 51 percent of the joint venture to start, and it will be known as the InfoPrint Solutions Co. Over the next three years, the Japanese company will gradually acquire the other 49 percent of the printing business. The first part of the deal, forming the joint venture, is due to be completed in the second quarter of this year, subject to regulatory conditions.

At that time, Ricoh will pay IBM US$725 million in cash both for the initial 51 percent of the joint venture and as a prepayment for the other 49 percent. The final consideration for the transaction will be determined once the three-year period ends based on the profits and losses IBM and Ricoh sustain in running the joint venture.

The joint venture should start with a staff of about 1,200 employees, and more than 1,000 additional IBM printer maintenance experts may also come on board in the future. IBM has committed to providing maintenance services to customers of the joint venture for the first year of operation and to supplying IT services to the new company for a maximum of five years.

In 2006, IBM’s printing business generated about $1 billion in revenue, according to the vendor.

The transfer of the IBM printing systems division to Ricoh will allow IBM to focus on its core businesses and clients, IBM Chairman Sam Palmisano said in a statement. He stressed the move is an extension of an existing 20-year relationship between IBM and Ricoh. The Japanese vendor has the necessary investment to develop the printing operation, according to Palmisano.

For its part, Ricoh is looking to expand its printing business and make the InfoPrint Solutions Co. into a core business.

The InfoPrint Solutions Co. will occupy the same headquarters as IBM’s printing systems division in Boulder, Colo. Tony Romero, the former general manager of the IBM unit, will head the new venture. The new company can use IBM’s InfoPrint brand and the IBM logo for at least five years and will become a global IBM partner for printers.

As IBM has been busy buying companies, acquiring more than 60 organizations since 2002 for about $16 billion, the vendor has also offloaded noncore businesses including its hard-disk drive and display operations and the $1.75 billion sale of its PC business to Chinese vendor Lenovo Group in 2005.

IBM spun off its lower-end printing business in 1991 with the founding of Lexmark, which went on to become a separate publicly traded company in 1995.

—China Martens, IDG News Service, Boston

Related Link:

How Lenovo Is Leveraging the Brand from East to West