Printer Producer Struggling Out of Slump : Printronix Gets Hard Lessons About Computer Market Shift
Aided by the accuracy that only hindsight offers, Robert Kleist, Printronix Inc.’s president and chief executive, quickly recites the problems that sent the successful computer printer maker tumbling last year for the first time in its 12-year history.
First, he explains, sales tailspinned throughout the entire computer industry. With fewer new computers generating information, the world needed fewer new printers to transfer the data to paper.
Then, the Irvine-based company was hit by the costly realization that its recent acquisition was unable to provide the hot, new personal computer printers it had been counting on.
Finally, an embarrassed Kleist admits, Printronix missed the target on laser printers--the only bright spot in the industry’s otherwise miserable year--by failing to develop a product for the personal computer user, the major customer for the latest breakthrough in printers.
“It’s not as simple as it was at one time,” says Kleist, a direct but soft-spoken 57-year-old engineer who was one of Printronix’ six founders. “Before, we grew on our unique technology, but now that’s not good enough.”
The problems at Printronix--the world’s 10th-largest printer maker which lost $11.7 million in its fiscal 1986 on sales of $131.8 million and laid off one-third of its employees since 1984--offer clear evidence that the turbulence in the rest of high-tech industry has finally hit the printer makers.
As with other high-tech products, when the age of specialization and miniaturization dawned on the printer market, many manufacturers were caught unaware and were unable to respond quickly.
“Printronix has always been strong in the old, mainstream printer market,” says Donna Wheatley, market analyst for Dataproducts Corp. in Woodland Hills, one of Printronix’ chief rivals. “But, now, the mainstream printer
market has been replaced by several markets, and each needs a specialized machine.”
Wheatley counts her own company among the victims of the changing market. Dataproducts lost a record $27 million in its 1986 fiscal year and also has laid off nearly one-third of its workers since 1984.
By the time companies were able to respond to the market shifts, analysts said, they ran into the deep high-tech sales slump of 1985.
“Everyone got caught off guard,” says Joel Housman, a market analyst with Robertson, Colman & Stephens, a San Francisco brokerage.
However, Printronix’ recent responses, including a push to diversify its limited product line and expand its international presence, appear to be following exactly the prescriptions offered by Housman and other analysts.
Kleist says that after posting an operating loss in the quarter that ended last month, the company should be profitable for the remainder of the year. Analysts are predicting sales of $150 million for the year, with profits of about $5 million.
Late last month, Printronix took what it believes is its most important step toward meeting the new market demands by unveiling eight new products, its largest-ever product introduction. Among the printers shown were new laser and serial printers designed to work with personal computers.
For a long time, all printer makers had to do was produce a reliable machine that could handle the high volumes of information being transferred from a computer to paper, either in a data processing department or on a factory floor. The machines, all fairly large and expensive, were basically noisy, cumbersome work horses that few office workers even saw.
Then came the personal computer.
Instead of durable printers to serve entire departments or, even, entire companies, this new marketplace needed models that could hook up to the single-user desktop computer.
Instead of big machines that would be sold to data processing professionals by a manufacturer’s trained sales force, the personal computer marketplace needed products that could be sold by retail clerks to everyday businessmen, housewives, and students.
And instead of machines that cost up to $200,000, this marketplace needed printers cheap enough to be considered a consumer electronics item.
For old mainstay printer companies such as Printronix, the change was revolutionary.
Printronix had built its considerable reputation and healthy market share with printers that used the dot matrix technology, a system of forming letters dot-by-dot over the entire width of a line. Working at rapid-fire speeds, these machines spew out data a line at a time, earning their name “dot matrix line printers.”
Almost from the time of their introduction in the mid-1970s, Printronix’ line printers were an immediate hit in data processing departments, where they churned out high volume reports for the bureaucracy, and on the factory floor, where they etched the bar codes and order routing slips used to track goods during the manufacturing process. The company says it is still one of the major suppliers of these machines.
Action Has Shifted
However, according to industry watchers, the line printer is no longer where the action is. According to the Dataquest research firm in San Jose, line printers accounted for less than 3% of all 5.4 million printers sold in North America in 1985. By contrast, in 1981, when far fewer personal computers were hooked up to printers, line printers accounted for nearly 11% of all the 1.3 million printers sold.
But because line printers are among the most expensive made--ranging from about $20,000 to more than $200,000--they accounted for about 26%, or $1.6 billion, of the $6.1 billion spent last year on printers. This year, line printer sales are expected to generate $1.6 billion, or 21% of the $7.4 billion total to be spent on printers.
Far and away the largest volume market for printers is the one for serial printers, the small, relatively inexpensive machines that typically hook up to personal computers. Dataquest estimates that these machines, which print a character at a time, just like a typewriter, will account for a whopping 93% of all units sold this year. Dollar volume for serial printers, a market dominated by such cost-cutting Japanese manufacturers as Epson and Okidata, is expected to reach $3.7 billion in 1986.
The fastest growing printer market these days belongs to the laser printer, a slick machine that operates similar to a photocopier and can turn out razor-sharp images and intricately detailed graphic reproductions. Dataquest estimates that sales this year will hit 284,000 units worth a total of $2.1 billion, about double the business levels of 1985.
However, much to Kleist’s chagrin, Printronix hasn’t built a strong presence in either the serial or the laser markets. But not because the company hasn’t tried.
In late 1984, Printronix paid $8 million in stock to acquire Anadex, a small Camarillo manufacturer of serial printers. Although Anadex was losing money, Printronix was willing to pay about four times the value of the company’s assets because it wanted Anadex’ technology and its access to the retail computer stores, where most of the serial printers are sold.
However, Kleist says that within a year of its purchase, Anadex’ sales dropped 70% to a mere $9 million. Although the plunge was largely due to the unforeseen slump in personal computer sales in 1985, Kleist acknowledges Anadex fared worse than most other serial printer makers.
Nine months ago, Printronix closed the Camarillo manufacturing plant. “The Anadex product line was less competitive than we originally thought,” Kleist admits. “They couldn’t keep up with the Japanese competition and the constant price cutting.”
More problems surfaced when Printronix attempted to exploit the hot laser printer market.
The company introduced a laser printer last year and directed it at its traditional line printer customers: major corporations and their high volume, large-sized computers. But, as Printronix learned the hard way, the biggest demand for laser printers is among personal computer users for reproducing graphic material, such as engineering drawings, and high-quality business reports and correspondence.
After returning to the drawing board, the company introduced two new laser printers two weeks ago, including one designed to hook up with a personal computer. Although product shipments haven’t started, the company thinks it has finally come up with a winner.
Dataquest analyst David Glidewell says the company has been suffering from customers’ perceptions that it only wanted to serve its original customer base, not the faster growing, newer markets. Furthermore, he says Printronix sorely needs to have its products sold in retail outlets, as well as by its traditional group of sales representatives.
“Our core business is not enough to be a long-term supplier in this business,” Kleist says. “We need to be a global supplier and we need to broaden our product line. . . . That’s where we are now.”
