Xerox is acquiring all Global Imaging operations nationwide. In our local market this means that Boise Office Equipment (BOE) will be owned and operated by Xerox. In a recent Idaho Business Review interview, BOE former owner Mike Shannahan did a great job of deflecting market concern over this acquisition... but the reality is that his comments are more wishful thinking than accurate predictions. It is more likely that BOE is about to go through DRAMATIC changes.

We believe that BOE/Xerox will change their product mix and will not be able to support their current products (Ricoh, Konica Minolta, and Kyocera).  Barring any unlikely formalized partnerships forged at the corporate level, we believe that BOE/Xerox will eventually only sell and service Xerox products.  Below are a few data points to substantiate this conclusion:

History is Consistent.  When manufacturers have purchased dealers, they have always converted the product lines.  Always.  The drivers to convert come from both sides:  The acquiring manufacturer wants to sell their own products (not the competition's) and the incumbent manufacturers don't want to give the acquiring manufacturer inside information (pricing, promotions, strategies, customer information, etc.).  Examples include:  When Toshiba bought Offtec, Ricoh cut them off the morning after the announcement was made.  Canon did the same when Hawaii Business Equipment was purchased by Toshiba.  This will undoubtedly happen with BOE and the question is not if... the question is when.

Xerox Admits Conversion will Happen within 18 Months.  According to a BLI news article, Jim Firestone, President of Xerox North America, said that Global will begin to sell all major Xerox office printers and MFPs,  following the close of the acquisition (mid May, 2007).  Firestone added that he expects Global will continue with its multi-vendor sales approach at least for the next 18 months.  This is a best-case scenario as many analysts think the transition will happen much sooner.

Analysts Agree: Global (BOE) will Lose its Current Manufacturers.  According to copier industry analyst Frank Cannata, "Global, of necessity has to play the role of the good soldier and play the game.  Any talk of a transition, whereby Global would continue to have relationships with offshore manufacturers, is a pipe dream.  Of the companies involved, Canon will act most aggressively.  In our opinion, they will refuse to transfer the franchise and even consider not shipping parts and supplies.  Ricoh will also not transfer the franchise but ship them parts and supplies at the highest possible prices.  As for Konica Minolta, we do not have a clue as to how they will react.  The others [Kyocera], who have less of a burden to deal with and will develop plans quickly to fill in the shortfall."  

This transformation is important to BOE's current customers who will see dramatic changes in the very near future.  Consider these facts :

Ricoh, Konica Minolta, and Kyocera will certainly reduce or discontinue support of BOE/Xerox, including availability of parts, supplies, and technical support.  This has already started with some manufacturers previously supporting Global dealers.

BOE/Xerox will be unlikely to invest in training of technicians and engineers on products other than Xerox.  BOE/Xerox's dedication to adequately service non-Xerox equipment will be reduced.

BOE/Xerox will attempt to transition its customer base to Xerox over time, leaving an inconsistent set of technologies in their environments.

Xerox, like any large corporation, will consolidate administrative functions to regional hubs.  This means that not only will BOE/Xerox not be local... some functions will not even have local people interfacing with their customers.

BOE/Xerox is, understandably, not being completely transparent about the massive change they are going through because of the uncertainty it would leave with their customers.  Shannahan stated in the IBR that BOE/Xerox will not shed its products, will be able to continue sell and service all its products, and that nothing changes other than the addition of new products.  We think that while his answers were true of Global Imaging (the Florida company who purchased BOE last year), they are likely false for the acquisition of Global by Xerox.