Océ’s Rokus van Iperen Survives Digital Era

Whatever happened to the paperless office? Wasn’t the advent of the digital age supposed to relegate printers and copiers to the Smithsonian Institution?

The very notion makes Rokus van Iperen smile. Assuredly, the Internet has had an impact on Océ, the Dutch printer maker, which the 56-year-old has worked for since 1978 and headed since 1999. The impact has been largely positive, though. Much of the data zipping around the globe as electrons still winds up as ink on paper. And Océ has added the lucrative business of managing digital documents to its mix of services. "This is a case where the trend is our friend,’’ notes van Iperen.

Although the Internet’s threat to the printer industry has been exaggerated, the recession’s has not. Océ’s results have suffered from the near-collapse of the financial services industry, a mainstay customer for its continuous-feed printers, and the construction business, a big user of wide-format printers for copying building plans.

For the nine months ended August 31, sales declined 6.8 percent from the same period a year earlier, to €2 billion ($2.9 billion). A steady stream of revenue from service and maintenance contracts has kept Océ’s business from plunging. It hasn’t saved profits, though. The company posted a loss of €25 million in the latest nine months, the first three quarters of its fiscal year, compared with earnings of €3 million for the comparable period a year earlier. Moreover, this year’s grim numbers are a far cry from those of pre-downturn days. Océ earned €43.1 million in the first nine months of fiscal 2007, on €2.3 billion in revenue. The big hit to profits this year? One-time charges for a restructuring and cost-cutting campaign that predates the downturn. Océ’s Euronext-listed stock, which peaked at more than €17 in July 2007, closed at €4.52 on October 15.

Océ may be bleeding a bit, but it is far from hemorrhaging. In 2005 the company, which is based in Venlo, on the German border in the southeastern part of the Netherlands, recognized that its key competitors were starting to offer low-price, high-quality machines. So the company began to outsource manufacturing, pare payroll and otherwise trim costs.

"We’ve reduced costs in every category, so we’ll come out of this crisis with new products, new partnerships and an even lower cost basis," contends van Iperen.

In a conversation with Institutional Investor Contributing Writer Claudia Deutsch, van Iperen elaborated on Océ’s prospects.

What proof do you have that the Internet is not pushing your industry toward obsolescence?

Van Iperen: Granted, some mainsbtay customer groups, including banks and construction companies, will never again print in the volume they once did. But there’s a huge future for high-speed graphic arts printers and for document management services. In recent months we’ve written some pretty big contracts for continuous-feed and very fast cut-sheet printers, the kind that compete with Xerox’s Docutech line.

Granted, some mainstay customer groups, including banks and construction companies, will never again print in the volume they once did. But there’s a huge future for high-speed graphic arts printers and for document management services. In recent months we’ve written some pretty big contracts for continuous-feed and very fast cut-sheet printers, the kind that compete with Xerox’s Docutech line.

But Xerox also makes medium-speed and color printers, and you don’t. Don’t you need a fuller product roster to compete with companies that offer one-stop shopping?

That’s where partnerships come in. Our homegrown black-and-white printers start at 80 pages per minute, and the only color printer we developed wasn’t competitive. So a few years ago, we began distributing Konica Minolta’s office and color printers. And last year we expanded that agreement into a strategic alliance. Together we decide which company will develop which products, but then both companies will sell the full line under their own brands. The software may be different, but the boxes are identical. And we’ve broadened our concept of partnerships. We have a product development agreement with Miyakoshi, a Japanese offset printing specialist. Together we’ve created a very fast printer that combines offset- and inkjet-printing technologies. Miyakoshi sells it exclusively in Japan; we sell it elsewhere. Fujifilm, meanwhile, now distributes our very-wide-format graphic arts printers under their brand in Japan.

Are your technologies applicable to products other than document printers?

We’ve been partnering with companies far outside our traditional field. For example, printed circuit boards are typically made by lithography, and solar cells by depositing materials on a rigid substrate. So we started a project called Print Valley, which consists of 23 companies in different fields that are working with us to apply inkjet technology to making their products.

Your R&D people apparently can collaborate with outsiders, but haven’t they traditionally had more trouble cooperating with one another?

We do have two main research labs, and until recently, they agreed on only one thing: Cooperation made no sense. Both had classic not-invented-here syndrome. Anton Schaaf, our chief technology officer, has made it his business to change that. He created a technology board with representatives from each lab, and insisted they agree on a common vision and a way to divide duties. And he forced many key people to do stints in the rival lab. So, slowly, the silos are coming down.

Why did you wait until long after most of your competitors to outsource manufacturing to Asia?

Remember, we always focused on the high end of the market, where customers cared most about the costs of usage — service contracts, paper, inks and such. Our usage costs were highly competitive, so customers didn’t care much about the price of the machine itself. But then our competitors started offering reliable, efficient machines too, and our advantage in cost-of-ownership was diminishing. So we signed contracts with third-party manufacturers, like Flextronics, to build Océ machines in Singapore, Malaysia and China and got our prices down by 30 percent.

Xerox, Pitney Bowes and other equipment manufacturers are putting more marketing muscle behind the services they sell. Is Océ too?

Absolutely. Xerox introduced the idea of facilities management in Europe, delivering not just high-speed printers but also operators to run them. Our European customers wanted that too, so our services business grew organically out of our manufacturing business. One of our biggest offerings in Europe is helping big companies manage fleets of thousands of copiers and printers. Our service offerings evolved differently in the United States, where our brand isn’t as well known and where competition is more intense. In 1999 we bought a small mailroom services business called Archer Management Services, and built on that. We’ve added records management, in which we help customers manage both digital and paper archives. We’ve developed software and services to help customers organize document flow. That may sound unimportant, but if you’re a law firm preparing for a trial and you have to organize 600,000 documents and maybe five years’ worth of e-mails, it’s a huge task.

How do you respond to people who say there’s no room for paper and printers in a "green" world?

We’ve always been a green company, and we will continue to be one. We encourage customers to use recycled paper, to use old prints for scratch paper, to preproof documents on screen before printing, even to buy paper and toner in bulk so as to save on transportation. And we promote duplex printing, which is using both sides of the paper. And since 1990 we’ve operated an asset-recovery facility at which we take back old machines and refurbish them for reuse in some cases, salvage parts from them in others.

Have you faced the same kind of anger over compensation as American CEOs have?

In Europe, as in the U.S., the government used tax money to bail out banks, so compensation is on people’s minds. But in 2007 our shareholders approved a remuneration plan that stipulates that executive pay packages must be competitive in the Dutch market. So my salary is €674,730, with the potential for another 90 percent of that in short-term incentives and some more in long-term incentives. Whether I cash in on all of that depends on how well we perform against a peer group of European tech companies — and against competitors like Xerox.