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By Kevin Keane, IAPHC CEO On Why We Write TMN "Thanks very much for getting back to me with that contact information and for that great newsletter. It was excellent, very entertaining and informative...." From a 23 February 1999 e-mail from Vincent Hempsall, Associate Editor, Canadian Printer Magazine. The Power of The Knowledge Network "Enclosed you will find a $500 check from Nahan Printing, Inc., to be added to the Platinum Reserve Fund. Because of Tuesday Morning News, we made a contact and sold our press. This check is in appreciation of having this great tool (TMN) that allows us to make such contacts. It is my hope more and more of our membership will recognize the value of this tool. You can count on me to continue to spread the word. Keep up the great job!!." A 22 February 1999 letter from 14th District Governor Dan Sand, of Nahan Printing in St. Cloud, Minnesota. Industry News We're on K P duty There is much news since we last visited. And a goodly amount is centered around Eastman Kodak (K) and friends; and the slightly toothy, long grained, deckle edged, clay coated Paper business (P). We had reported to you in the last issue of TMN (2-16-99), the unusual pre- release on that date, of news that Dainippon Ink and Chemical, Japan's largest ink manufacturer was entering into a joint venture with the Japanese unit of Eastman Kodak to 'process photographs into printing templates.' Previously the two firms had spun off Kodak Polychrome Graphics (KPG) as a joint venture between Sun Chemical, a Dainippon subsidiary and Eastman Kodak. KPG came into being on 1 January 1998 as the world's largest graphic arts consumables supply company with projected sales in 1999 of $2 billion. On 23 February, the actual news clarified the pre-release: Basically the new joint venture creates a Japan Region for KPG, to begin operations on 1 April 1999 and to be known as Kodak Polychrome Graphics Japan Ltd. Two days later, NexPress Solutions LLC, a joint venture between Eastman Kodak Company and Heidelberger Druckmaschinen AG announced that 400 employees who had formerly been employed by the two giants, were now officially NexPress employees. NexPress, which was announced last year and was reported to you in TMN at the time, is charged with developing a new Digital Color Printing System with a targeted introduction date at drupa 2000, the global trade show and exposition. Therefore, it was intriguing to read in Bloomberg News reports of 22 February, that the German publication Manager Magazine, had confirmed with a Heidelberg spokesman that Heidelberg is in talks to acquire the office imaging business of Eastman Kodak Company. This is the same division which was developing a digital printing/copying engine for Danka Business Systems, Plc., pursuant to an R & D arrangement which required Danka to pay Eastman Kodak for the development of the digital engine. Danka has blamed at least some of its current financial woes on the R & D payments to Kodak. A week earlier, Danka had announced that it was laying off 7 per cent of its work force and the firm continues to retain Wasserstein Perella & Co., to evaluate its options which could range from bankruptcy protection to the sale of part of Danka. As if to close the circle, some rumours have suggested that Heidelberg could be a logical buyer for a part of Danka in light of Heidelberg's drive to become a single source supplier of hardware and software solutions. Consumable sales could be part of the marketing mix as well, and of course we have already reported the soon to be completed acquistion by Heidelberg of Canadian supplier Louson Desonite. Reportedly, Heidelberg also considering a new nameplate for the Quickmaster line of presses (and perhaps even the GTO line in some parts of the world) The new brand name is Printmaster. Given that the former association for quick printers changed its name to erase any down and dirty connotations, this move would make some sense for Heidelberg. An exclamation point as to the rapidly shifting nature of the graphic arts vendor/supplier business came Friday when the Poloroid Corporation announced it was selling four of its businesses including graphic arts and holography. Meanwhile its a RIPPING Good Time in the Paper Business! On 26 February, Bloomberg reported that the $50 a ton price increase for office papers, which we had reported to you in TMN in January, appeared to be holding for firms ranging from Boise Cascade to Champion to Georgia Pacific, finally offsetting prices hovering at six year lows due to the glut of cheaper Asian paper imports. Which is not to suggest things are rosy in all segments of the paper business. Bowater, Inc., based in Greenville, South Carolina said last week that it was cutting newsprint production at its Gatineau, Quebec mill. The mill makes about 450,000 tons per year and Bowater is going to scale that back by some 35,000 tons. The Associated Press carried a feature yesterday about a unique effort by a group of employees at the 100 year old Great Northern Paper Mill (owned by Bowater) in Millinocket, Maine in what is thought to be the first ever attempted employee takeover of an American paper mill. Great Northern itself is unusual in that it is a rare combination of paper making and power generation. The carbonless paper business is also feeling some Asian flu. The British- French consortium, Arjo Wiggins Appleton, Plc., had some disappointments in the second half of 1998 mostly because of slowing sales in its carbonless division. To make things more difficult for that segment, a new carbonless paper making machine owned by Asia Paper and Pulp is coming on line in Singapore. As Ken Minton, Chairman of Arjo Wiggins Appleton said on 25 February , his firm "... does not expect any significant improvement in the level of buoyancy of the markets we serve." And no wonder, today in Jakarta, Asia Paper and Pulp said that its subsidiary paper making firms Indah Kiat and Tjiwi Kimia expect to have a more profitable year because of higher overseas demand. In this case overseas means North America. On 22 February DuPont Company sued International Paper and its xpedx division in Chancery Court in Delaware. The complaint alleges that DuPont had an exclusive distribution agreement with xpedx requiring that xpedx could only sell DuPont's polyolefin shrink wrap film called Clysar, and not any other manufacturer's film product. In the aftermath of the merger of Zellerbach's operations into those of xpedx, DuPont claims that xpedx is now selling a competing shrink wrap. But the big news came yesterday, and it's news that has caused quite a bit of gastric distress. UGI Corporation said it would buy Unisource Worldwide, Inc., the largest distributor of paper and janitorial supplies in the US. UGI's most well known subsidiary is AmeriGas which supplies propane gas delivered in tanker trucks to almost a million customers in 46 states. Predictably, some folks were a little surprised and even a bit miffed that a gas distributor would try to burn up the paper market. But why not? You wheel up to the warehouse to pick up a skid of 60 # coated and the charming clerk asks whether you'd like a tank of propane with your order. The newest color of pink paper will be called Shrimp on the Barbie, perhaps. Or, you go to a ballgame and you hear the vendor hawking: "Getcher paper and your propane here." OK we'll stop! Consolidation: Growth Incorporated Wow, the field of consolidators keeps growing even as the number of available 'consolidee' targets keeps shrinking. Two weeks ago in TMN, we reported on the 'masked man' entrant to the consolidation wars. A brand new company has emerged in New York City which owns, virtually overnite, 7 geographically dispersed firms doing a combined $100 million in sales. This new firm "who are those guys" is called Integrated Graphics. According to its CEO, Peter Faucetta, the new firm: "... was created to capitalize on the growing trend among customers to buy from fewer suppliers able to provide them with full service and integrated graphic solutions." Integrated Graphics is still a private firm being funded by venture capital, but several other public firms in addition to the oft-reported Consolidated Graphics and Mail-Well, Inc., are striding the highways and byways of the industry casting an acquisitive eye in all directions. Master Graphics was the featured company on Hoover's online profiles on 19 February. "Master Graphics is on the prowl. General commercial printing is a $43 billion industry with roughly 25,000 players. About 5,000 of them have revenues between $2 million and $15 million. So Master Graphics has plans to consolidate this fragmented industry.... When buying another company Master Graphics hopes it can significantly pare costs. First, it plans to reduce costs as a percentage of revenue by saving on paper and prepress supply expenses. For example, Master Graphics can save up to 10 per cent of its paper costs just from volume purchasing." The item goes on to suggest that Master Graphics had an operating margin of 8.6% in 1998 and is shooting for 10 per cent in 1999. Consolidated Graphics says its target is 14 per cent. Obviously, these kind of operating margin goals are extremely attractive given that the PIA reports the average profit before taxes in general commercial printing in the US was 3.3 per cent in 1997. Master Graphics has already grown to 16 divisions with sales approaching 250 million. In early February it acquired the well known Phoenix printer, Woods Lithographics, the firm which one a Best of the Best award in the 1998 International Gallery of Superb Printing as well as many other awards. On 19 February Master Graphics said it would acquire Eagle Direct in Denver. Other firms continued their growth track as well. Cunningham Graphics acquired Boston Towne Press on 17 February. R.R. Donnelley and Sons reported on 26 February that it has agreed to purchase Cadmus Financial Communications with financial printing operations in Baltimore, Charlotte, Raleigh, Richmond and New York. The financial printing business has been affected by the Asian flu in an indirect manner. On 23 February Bowne & Company said that although its overall sales grew by 18 per cent in 1998, its core financial printing business only grew by 3 per cent, as a result Bowne is diversifying into other businesses including Internet consulting services. And the prepress field is not immune to the consolidation trend -- Wace Group, a London, England based digital imaging services company had received an bid from Schawk, based in Chicago, under which Schwak would buy Wace for $155 million, but then on 23 February Applied Graphics Technologies in New York said it may make an offer for Wace. Digital not in Dutch! Both of the well known pioneer digital printing press manufacturers, happen to be based in the Netherlands. Indigo NV is in Maastricht and Xeikon NV is in Morstel. Things may be looking up for an industry still seeking full market acceptance. Indigo reported on 24 February that it actually booked a paper profit (before adjustments) in the fourth quarter; and Xeikon had a record year, shipping some 500 systems in 1998, bringing the total to 1,448 shipped since 1994. Our recent travels brought us to Vancouver British Columbia where some of the early pioneers in digital printing have left the wars still bleeding from their wounds. Nonetheless, the market is growing, and with new players like NexPress and the Karat 74 from KBA Planeta and Scitex on the horizon, the market will begin to mature more rapidly. Scitex Digital Printing introduced a digital book press configuration of its VersaMark product at BookTech '99 held in mid-February. The VersaMark system is capable of speeds approaching 2,200 pages per minute with resolution of 600 dots per inch and an operating cost per page below 1/10th of a cent. In other digital related news, Printware Inc. said on 22 February that it had installed its 500th computer-to-plate platesetter at Artco in Rexburg, Idaho. Digital Asset Management A popular buzzword, whose acronym has also become quite popular with folks trying to get an handle on the challenge as in: "DAM -- this is difficult!" digital asset management is getting serious attention from vendors and participants in the industry. As Fred Drasner, CEO of Applied Graphics Technologies, said on 18 February: "We have sharpened our focus on our digital asset management businesses, since such businesses bring us into longer term relationships with significant customers. Such long term relationships have the most promise for AGT achieving sustained profits and stable growth." At Seybold/Boston '99 taking place this week, Silicon Graphics announced its StudioCentral Library 2.0, a digital asset management system which it touts as being best in class. Adobe aims to Kevork Quark The quixotic journey of the good doctor Kevorkian has spawned an interesting piece of geekspeak -- to Kevork. The folks at Adobe Systems have made quite a splash at Seybold in Boston this week, first with the release of PageMaker 6.5 and then with the news first reported in yesterday's Wall Street Journal that Adobe has targeted QuarkXPress in the high end of the desktop publishing software where Quark has an estimated 60 per cent of the market. Adobe says its new product will be called InDesign, (code named K2) will appear sometime in the third quarter, and will retail for $699. Current PageMaker users as well as current QuarkXPress users will be able to buy the new product at a discount. Adobe said a number of software developers have already created beta plug-in products to work with InDesign. Adobe expects that the new product could bring in $500 million in new revenues over the next 3 years. One of the speakers at Seybold in Boston is San Francisco Club member Lonn Lorenz. As we have mentioned several times before in this space, Lonn is an expert in Adobe Acrobat and PDF. Lonn sent us a note: "I invite any members to e-mail me so I may share my knowledge on this and other digital prepress technologies." Lonn's e-mail is Adobe also announced today a new product called PressReady, which is a software proofing tool for some desktop color inkjets. This should really help graphic designers produce more accurate color comps. Other Industry News Tidbits On 1 March, Datamonitor, a London based market research firm predicted that the number of people using the Internet will double to 300 million by 2005, with the largest growth spurt in the Asian and South American markets. One startling statistic offered by Datamonitor is that the cost of transferring one terabyte of data on the Internet (the equivalent of 25,000 music CD's) will fall to $300 by 2003; that compares to $80,000 in 1998. Deluxe Paper Payment Systems released on 24 February, a free Y2K Small Business Survival Guide. To receive a free copy visit or call 800-328-0304. The Graphic Arts Marketing Information Service (GAMIS) has pre-released some tidbits from its upcoming "Status and Future of Direct Mail" report. Len Kubas of Kubas Consultants in Toronto, is performing this research project for GAMIS. He writes: "The Internet and e-commerce present a challenge to direct mail. Post office delivered direct mail provides unsolicited obtrusiveness (a crucial element of all direct marketing) which seems to be accepted almost as benign compared to its Internet equivalent -- spam, or 'junk e-mail,' which is considered downright offensive. Solicited selling on the Internet, however, often involves a virtual catalog, which implies negative impacts on the catalog business." Apple Computer's Steve Jobs said in Tokyo at MacWorld Expo Tokyo on 18 February, that among Japanese users of the iMac consumer computer, 46 per cent are first time computer users and 16 per cent were former owners of non-Apple PC's. Reuters reported on 22 February that Apple is threatening to sue an enterprising Canadian youth for allegedly appropriating the iMac name in a web domain address. Abdul Traya, 16, a grade 11 student in Calgary registered appleimac.com Despite previous reports in Israel's Hebrew newspaper Ma'ariv, Clal Industries which owns 13 per cent of Scitex shares, said on 17 February that it won't sell its stake unless it gets a better offer from Xerox or another suitor.
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