Gradco Systems Tightens Links With Japanese Firm

In a move that it says could nearly double annual revenues, Gradco Systems Inc. has strengthened the license under which C. Itoh Co. Ltd. has been making and selling Gradco’s paper-sorting and collating equipment to makers of copier machines in Japan.

According to Santa Ana-based Gradco, Itoh, one of the world’s largest trading companies, now will be the exclusive manufacturer and supplier of Gradco equipment for the Japanese market.

Exact terms of the deal, which call for Gradco to establish a Japanese subsidiary, were not announced. However, Gradco said it expects that the arrangement will generate sales of $30 million for the current fiscal year. For the entire 1987 fiscal year, which will end next March 31, the company is forecasting sales of $75 million.

Financial analysts said the new arrangement allows Gradco to claim the sales made by C. Itoh as revenue to its Japanese subsidiary. Under the old arrangement, Gradco collected only a royalty payment from each sale Itoh made of a Gradco product.

William Ganelin, a securities analyst with McKewon & Timmins in San Diego, said that Itoh was forced to accept the licensing-arrangement change in order to protect its sales relationship with Gradco. Under the old contract, Ganelin explained, Gradco could have licensed its product line to Japanese copier makers at their plants located outside of Japan, bypassing Itoh entirely.

The new license gives Gradco a larger share of the revenues from each sale in exchange for Itoh’s exclusive marketing rights in Japan, where most of the world’s copier machines are made.