Posts Tagged ‘Nexpress’

Why Nexpress deal makes sense

January 25, 2010

Heidelberg is getting a lot of stick over a reported volte-face regarding digital printing. According to Handelsblatt, a reliable German newspaper and subsequently repeated by a wide range of sources (including a Tweet from the home of this blog), Heidelberg is moving back into digital printing and is talking about some kind of alliance with Nexpress.

This proves, it seems, that Heidelberg was wrong to end its JV with Kodak in the first place, that digital printing is the future blah-blah, blah-blah and offset is about to disappear. Not so fast. It was only a year ago that Kodak was forced to defend its Nexpress business after a Wall Street Journal reporter picked up the wrong end of the stick in a press conference and suggested Kodak wanting to shed it. Kodak is trailing HP and Xerox in provision of digital presses, and third is not where it likes to be. Late last year it was reporting that sales in digital printing were 17% lower with customers favouring lower priced models.

Since then the proposed Canon-Océ merger has come along with a potential knock-on effect for Kodak’s cross-marketing arrangements with Canon, which might now change.

In Heidelberg that the last 12 months have been even more devastating than in Rochester has been well documented. But for all that Heidelberg is still selling more sheetfed presses (and Kodak obtains more revenue from sheetfed presses thanks to the plates business) than Kodak has sold electrophotographic digital presses.

Both companies have problems that the recession has brought to light. For Heidelberg the economic crisis has devastated its monopolistic business model. The largest litho press manufacturer cannot be the nimblest on its feet and its choice to move into large format presses looks ill-timed.

Yet digital printing has not really taken off in the way it was predicted to do. Look back at the sunny forecasts of yesteryear, not just Benny Landa’s prediction, but also Xerox’s that it would sell 1,000 iGens in the first year, and it is a litany of missed targets. The printing industry has preferred to cling to the technologies it knows rather than switch to the new and frankly digital developments have failed to deliver the knock out blow to litho. In addition litho press manufacturers have responded to the threat and come up with easier to use, faster and slicker machines.

Consequently, it would be no surprise to learn that the Nexpress project has not delivered the results that were expected of it. And the signals from Kodak are that it sees inkjet as the technology for the future and one where it owns the crucial advantage. While there have been incremental improvements in the Nexpress, most of the emphasis is going on Stream while piezo inkjet is providing the support technology (and revenue) while Stream matures.

In the Q3 results published at the end of 2009, Kodak states

The company has also made a decision to focus its investments at the core of its strategy which are consumer inkjet (including Stream technology) and enterprise workflow

then

It will reposition certain other business to generate maximum value

It’s hardly a ringing endorsement of the Nexpress product line and should the right proposal be made . . .

Likewise Heidelberg must have been some serious self-examination in the last year or so. It knows that the market for offset litho presses is shrinking among commercial printers, hence that push into large format and packaging. It can see sales of B3 presses plunge as digital wipes up the bottom end of the market. Its problem is managing the change and switching from a business model where everything seemed geared to producing printing machinery in volume as efficiently as possible to one where custom-built machines are the order of the day. This demands fewer resources in terms of people and space as orders for Speedmasters and going to be lower. It must surely be looking to see what other products it can turn its engineering skills towards producing. It is not averse to digital printing as the slow emergence of an inkjet division, aimed at printing on packaging, indicates. But this is a very long way from being able to operate as an alternative to litho in commercial printing.

Heidelberg also has a vast sales and distribution network, which has been deployed to shift the presses that the factory builds. Of late heavy metal sales have been waning and the natural response has been to offer consumables, support, training and consultancy in order to build a revenue stream to sit alongside press, prepress and finishing equipment sales. The problem is that few print company owners will recognize the value of consultancy advice and delivering it successfully will generally mean one customer flourishing at the expense of another.

Adding a digital press to the basket of products makes an awful lot of sense in terms of driving revenue through the Heidelberg nervous system. The problem last time was that the front line troops were too used to the techniques of selling litho presses and couldn’t really adapt to the different priorities of the digital world. That is the challenge Heidelberg faces, whether it chooses to work with Nexpress or any other digital press.