Published in Imaging Spectrum issue March 2009 and Recycler Trade Magazine issue March 2009

The fourth-quarter of 2008 officially ended, numbers are in and the OEMs are not looking too good. Most companies experienced decreased annual numbers; some are laying people off, while others are making do.

Canon’s fourth-quarter net income dropped over 90 percent to 11.6 billion yen ($130 million) compared to 127.8 billion yen ($1.43 billion) a year ago. In its 2008 summary, the company said this was the first decrease in sales and profits in nine years. For the 2008 fiscal year, net income fell to 309.1 billion yen ($3.46 billion) from 488.3 billion yen ($5.46 billion) in 2007, which is over a 34 percent fall.

Brother Industries, which runs under the Japanese fiscal calendar, from April to March, is expecting impairment losses on investment securities and investments in associated companies since their fair market value has declined significantly, an official Brother notice said. The company expects that the total amount of securities’ impairment losses for the third quarter of fiscal year ending 31 March 2009 will be 9.255 million yen ($103, 525) in non-consolidated securities or 3.722 million yen ($41, 620) of consolidated securities. Brother’s consolidated net sales forecast for the fiscal year ending 31 March 2009 is 475 million yen ($5.3 million), compared to 566,378 million yen ($6.33 million) from fiscal year ending 31 March 2008. Brother attributes the global economic slowdown and the sharp rise in the yen for the decrease in revenue. And it expects the “severe condition” to continue, a Brother notice reported.

Like Canon, Brother does not think things will pick up in 2009. They are bracing for more low numbers.

Seiko Epson Corp. (Epson) also experienced revenue decline. The company, also under the Japanese fiscal calendar, expects that at the end of its fiscal year, ending March 2009, it will be down 125.0 billion yen ($1.4 billion) to 1,138.0 billion yen($12.7 million), a 9.9 percent drop in net sales. Operating income is forecast to fall 86.7 percent to 6 billion yen ($67 million) and ordinary income is projected to fall 75.5 percent to 13 billion yen ($145.37 million).

According to its news releases, “Epson’s enterprise-oriented businesses have steadily felt the impact of the recession since the first half of the fiscal year. However, since the previous revision on October 29, 2008, the situation has deteriorated as the effects of the economic downturn have gradually spread to other businesses, including sales of consumer-oriented products and electronic devices.”

Fourth quarter also proved difficult for Eastman Kodak. The company lost $137 million and stocks fell more than 23 percent. Kodak also announced that it is cutting 3,500 to 4,500 jobs, approximately 14 to 18 percent of its workforce.

For the fourth quarter, Kodak reported a preliminary loss from continuing operations of $133 million, or $.50 per share. Fourth-quarter sales were $2.433 billion, a 24 percent decline from the year-ago quarter. For full-year 2008, the company reported preliminary earnings from continuing operations of $54 million or $0.19 per share. Full-year revenue totalled $9.416 billion, a 9 percent decline from 2007.

“The second half of 2008 will go down in history as one of the most challenging periods we have seen in decades,” said Antonio M. Perez, chairman and chief executive office. “During the last three months of the year, we experienced dramatic declines in several of our key businesses due to the slowdown in consumer spending and significantly reduced demand for capital equipment … We are taking the necessary steps to address this environment and to position Kodak to recapture the momentum when the recovery occurs.”

Lexmark International’s fourth quarter results followed suit and dropped significantly. Fourth-quarter revenue was $1.08 billion, down 17 percent compared to revenue of $1.31 billion last year. Net earnings for the quarter were $18 million and included a tax benefit of $23 million. Fourth quarter 2007 net earnings were $99 million. Lexmark expects revenue decline to continue into the first quarter of 2009 to the mid to high teens percentage range.

Xerox’s full-year results were not as devastating as other OEMs. The company reported break-even earnings per share and adjusted earnings per share of 30 cents. The full-year 2008 net income was $230 million and total revenue was $17.6 billion, a 2 percent increase from full-year 2007.

But Xerox’s fourth-quarter results did falter. Fourth-quarter revenue of $4.4 billion declined 10 percent, including a 5 point negative impact from currency. Post-sales and financing revenue was down 8 percent or 3 percent in constant currency and equipment sale revenue declined 15 percent or 11 percent in constant currency.  Xerox blames distributors holding lower inventory levels and weakened economic conditions around the world for its losses.

Although this paints a very bleak picture of what happened in 2008 and what’s to come in 2009, there is one company that did not have such a bad quarter. Hewlett-Packard saw growth in its 2008 revenue.

HP reported that its fourth-quarter net revenue of $33.6 billion was up 19 percent from a year earlier and up 16 percent when adjusted for the effects of currency. Excluding EDS revenue, net revenue grew 5 percent year-over-year or 2 percent when adjusted for the effects of currency.

HP’s 2008 net revenue was up 13 percent, or $14.1 billion, to $118.4 billion.

Although net revenue for the quarter and the year were up, HP’s Imaging and Printing Group (IPG) revenue declined 1 percent to $7.5 billion. Supplies revenue grew 9 percent while commercial hardware and consumer hardware revenue declined 10 percent and 21 percent. Printer unit shipments decreased 8 percent with consumer printer hardware units down 8 percent and commercial printer hardware units down 9 percent. Operating profit was $1.2 billion, or 15.5 percent of revenue, compared to $1.1 billion, or 14.5 percent of revenue, in the prior-year period.

HP has higher hopes than many of the other OEMs for 2009. It forecasts revenue of approximately $32.0 billion to $32.5 billion for the first quarter and full-fiscal-year revenue at approximately $127.5 to $130.0 billion.

With the help of the new President of the United States, President Barack Obama, other OEMs might adopt HP’s positive outlook on 2009. President Obama has proposed an $819 billion stimulus plan and held his first corporate sit down with executives in the technology industry to get their support.

Among them were Xerox’s Anne Mulcahy and Kodak’s Antonio Perez. Both represent companies that suffered from the economic downturn in 2008 and support President Obama’s stimulus package.

According to the Wall Street Journal, “Most of the attendees also stand to benefit from the stimulus package, which emphasizes energy, infrastructure and technology projects meant to create or save millions of jobs.”