Xerox goes vertical
Xerox, the US copier and printer company, announced that it will buy US-based Global Imaging Services, a company that specialized in sales of office equipment to small and mid-size businesses. The price annoucne3d was $1.5 billion.
The purchase is an attempt to buy into the growing small business market and also is part of Xerox's new strategy to expand direct sales. Xerox, like other copier companies, has held back from direct sales to small and medium businesses, in order to keep its dealers and resellers happy. The GIS acquisition will put an end to that.
GIS, founded in 1994, has over one billion in sales. It has grown through a steady stream of acquisitions of other small regional dealers, over 80 in the last decade and two already this year. The company now has wide national coverage. Curiously, though the company now sells a variety of products form Xerox rivals like Ricoh, Canon, Konica Minolta, Sharp, and Hewlett-Packard, it does not at present sell Xerox products. Xerox may get a double effect by growing its own reach and, eventually, switching customers away from its competitors.
For Xerox, it is its biggest acquisition ever, and follows two other, smaller acquisitions in recent weeks. The thinking is that Xerox, having pulled itself out of near-bankruptcy over the last few years, has decided that its future growth will involve vertical integration of the middlemen. The corporate copier market is mature, and the big technical advances (analog to digital, monochrome to color, single-function to multifunction) are pretty well played out. Pricing is competitive and, thanks to improved design, copiers last longer. Ironically, desktop and small workgroup printers are growing in profitability thanks to toner prices far higher than those for larger copiers.
This is another example of the problem that companies, even dominant ones, in mature industries face. Getting market share for Xerox is not easy matter, given other equally adept vendors with similar products like Canon and Ricoh. Expansion outside the core industry is not easy (Xerox has tried and failed a few times over the years). The only possible move left is vertical integration, though that has its risks as well.
9:20:43 PM 
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