Printronix Hopes to Rebound With a Diversified Line
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, 57, a direct but soft-spoken engineer who was one of Printronix’s six founders. “Before, we grew on our unique technology, but now that’s not good enough.”
Turbulence in Industry
The problems at Printronix--the problems that caused the world’s 10th largest printer maker to lose $11.7 million in its fiscal 1986 on sales of $131.8 million and to lay off one-third of its employees since 1984--offer clear evidence that the turbulence that has run rampant through the rest of the 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’s 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 “But, now, the mainstream printer market has been replaced by several markets, and each needs a specialized machine.”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 has laid off nearly one-third of its workers since 1984.
By the time companies were able to respond to the market shifts, analysts say, 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.
Path Touted by Analysts
However, Printronix’s 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.
“To make money in the printer business, it’s not enough to own one printer technology,” explains David Glidewell, an analyst with Dataquest Inc., a high-tech industry research firm in San Jose. “A company has to adapt to the total electronic environment, and that means offering a wide range of products that meet more sophisticated needs.”
Late last month, Printronix took what it believes is its most important step towards 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.
“We’ve achieved our objective,” Kleist said just two days after the products were shown at an industry trade show in Las Vegas. “But it was very costly and took longer that we ever thought.”
Business wasn’t always that difficult.
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 workhorses 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 desk-top 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 to everyday businessmen, housewives and students by retail clerks.
Need for Cheap Printers
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 like 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’s 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.
However, according to industry watchers, the line printer is no longer where the action is in the printer business. According to Dataquest, the San Jose market research company, line printers accounted for less than 3% of all 5.4 million printers sold in North America in 1985.
And the future does not seem to hold much prospect of change. Dataquest estimates that 133,000 line printers will be sold this year, about 2% of the 6.2 million total units. 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.
$1.6 Billion in Sales Expected
But because line printers are among the most expensive printers 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 about 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 it’s not because the company hasn’t tried.
Anadex Acquisition
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 more than the value of the company’s assets because it wanted Anadex’s 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, the sales of Anadex 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 that 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.” As a result of its Anadex troubles, Printronix was unable to unveil a new line of serial printers until last month.
Yet more problems surfaced when Printronix attempted to exploit the hot laser-printer market.
According to Kleist, the company introduced a laser printer last year and directed it at its traditional line-printer customers: major corporations and their high volume, large-size 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’s finally come up with a winner.
‘We Can Lose’
“We can’t afford not to be in the laser-printer business,” Kleist says. “Even if our customers don’t want to buy a laser printer, they want to talk about one with us. And if we don’t have one to even talk about, we can lose.”
It’s no coincidence that the company’s largest-ever new product launching two weeks ago came on the heels of its largest-ever loss. The new machines are part of Printronix’s strategy of diversifying a product line that many in the industry, including Kleist, consider stagnant.
Dataquest’s Glidewell says Printronix 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.
“In the computer industry, you either grow or die,” Kleist said. “We need this broadened product line.”
Kleist said the company also needs to generate more international sales to take advantage of its foreign manufacturing operations as well as the growing need among foreign-based businesses for computer printers. International sales in the 1986 fiscal year accounted for 19% of the company’s sales of $131.8 million. This year the company is aiming for 35%, a goal Kleist says the company has a good chance of achieving because it has already recruited a direct sales force to call on European customers.
“Our core business is not enough to be a long-term supplier in this business,” Kleist said. “We need to be a global supplier, and we need to broaden our product line. . . . That’s where we are now.”
