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IBM: 'Time to Let Go' of Printer Division

IBM and Japanese printing company Ricoh are creating a vehicle for Big Blue's exit from another non-software segment: a joint venture printing company.

Ricoh said it would pay IBM $723 million for an initial 51 percent stake in the new company, called InfoPrint Solutions. Within three years, Ricoh will complete the purchase of IBM's remaining 49 percent stake.

In a statement, IBM CEO Samuel Palmasino said the transfer will allow the company to refine its focus on other, more strategic, business lines. IBM previously sold its money-losing PC business to China's Lenovo Group and its hard drive unit to Hitachi.

IBM's shares had eased up by about 1 percent to $97.61 in afternoon trading following news of the deal.

The move benefits both companies, a Gartner Research Director told internetnews.com. For some time, IBM's monochrome printer business has dropped as more commercial printing operations turn to high-speed color, said Gartner's Pete Basiliere. Selling its printer unit gets IBM out of the commercial color printing business.

At the same time Ricoh, which for decades made the guts of IBM's printers, has been gaining market share. However, Ricoh faces challenges as a name little-known within the industrial printing sector, as well as competition from business sector rivals HP, Xerox and Canon among others, according to analysts.

The IBM connection, which goes back 20 years, could help change some of that. After the buyout is complete, IBM will provide maintenance services to InfoPrint's clients.

Despite the change, much of IBM's legacy will remain in place. The new company will be led by Tony Romero, now general manager of IBM's printing unit.

Speaking to reporters during a news conference today, Romero said 1,000 IBM printer maintenance workers will be able to join InfoPrint's initial 1,200 employees. "Customers will come to appreciate [that] InfoPrint is committed to leveraging the combined strength of IBM and Ricoh."

InfoPrint Solutions Company's worldwide headquarters will be located in Boulder, Colorado, currently the headquarters of the IBM Printing Systems Division.

The companies said the deal will earn IBM between $175 million and $275 million in pre-tax earnings.

There comes a time when you realize you cannot continue to grow a technology, said Nick Donofrio, IBM's executive vice president of innovation and technology. "Over the past three years it became more and more obvious we needed to do something," he said. "Sometimes, we must learn to let go."