State of the Office Equipment Market and a Look Ahead  This article provides insight into the state of the office equipment industry, delivering market analysis and forecast data for the following market segments: monochrome single-function laser printers, Segment 1–4 A3 monochrome laser MFPs, Segment 1–4 A4 monochrome laser MFPs, ink jet all-in-ones, single-function color laser printers, and Segment 1–3 color laser MFPs. The analysis is based on key findings from Lyra’s first-half 2011 Hard Copy Industry Advisory Service (IAS) Forecast 360. Monochrome Single-Function Laser Printers : The Office Standard Monochrome laser printers are steady and reliable and have been the standard printers used in offices for more than 25 years. However, the global economic slowdown caused a drastic decline in shipments and revenue for the single-function monochrome laser printer market in 2009. Unit sales fell by about 30 percent from 2008 levels. Corporate layoffs dramatically reduced workforces, which in turn lowered printer requirements, and companies slashed IT budgets and replaced older printers only if they malfunctioned and could not be repaired. Also, many medium-size and large companies initiated managed-print engagements, reducing the number of desktop printers deployed in their offices. Many of the devices being eliminated are single-function monochrome laser printers. As the recession appears to be coming to an end, monochrome printer sales are rebounding. Unit shipments for the segment grew in 2010, reaching 14.3 million units, but they were not as high as they had been projected to be in mid-year 2010. Unit shipments will continue to grow slowly through 2013 before declining again. With its large share of unit volume, the small office/home office (SOHO) monochrome laser printer segment largely dictates the condition of the monochrome laser printer market overall. More than 53 percent of units sold in 2010 were priced below $200. These low-end printers appealed to businesses in emerging markets, as well as home and SOHO users worldwide. Higher-end A3 printers accounted for less than 3 percent of unit sales worldwide. SOHO Monochrome Single-Function Laser Printers—The Market Driver Products in this category are monochrome single-function laser printers with list prices of less than $200. Speeds are generally under 25 ppm. Shipments of SOHO laser printers suffered during the economic slowdown. Sales were strong from 2004 through 2007, driven by the launch of new devices priced between $99 and $149. These products spurred growth both in emerging markets, where business users look for low-cost office printers, and in industrialized markets, where personal laser printers are highly desirable in SOHO and small and medium-size business (SMB) environments. Competition increased in 2007, and many vendors are now offering products in the $79 to $99 range. In 2008, low-cost monochrome lasers proved very attractive for SOHO and SMB environments, but sales declined heavily in both industrial and emerging markets later in the year. Shipments grew to 7.6 million units in 2010, still well below the 9.9 million units that were shipped in 2008. Growth will continue through 2014, and will remain flat in 2015. In the long term, managed print services (MPS) and migration to shared multifunction devices will slow growth in this market segment. These devices will continue to handle most office printing, but MFPs and color devices that can print in both color and monochrome will increasingly provide competition to single-function monochrome printers. Segment 1–4 A3 Monochrome Laser MFPs : A Market on the Decline Shipments of Segment 1–4 A3 monochrome laser MFPs sharply declined again in 2010 after suffering a precipitous decrease in 2009. The continued downturn in this market is a result of several factors. First, the decrease in employment among medium- and large-size businesses has reduced the need for new personal and departmental MFPs and has created a surplus of MFPs that can be redeployed as needed. In addition to the reduced number of employees at larger companies, small businesses are cutting back on the acquisition of capital equipment. The decline in shipments also can be attributed to vendors shifting their focus to faster-speed machines with better price/performance (Segment 5 and 6 A3 devices), as well as color MFPs and A4 MFPs, and corporations engaging in MPS initiatives. The direction that the Segment 1–4 A3 monochrome laser MFP market will take over the next few years depends upon the interplay between the positive and negative forces that are affecting it. Small to medium-size companies, especially in emerging markets, may still acquire these devices, but Lyra believes this segment will continue to dwindle through 2015 and beyond. Segment 3 A3 Monochrome Laser MFPs—Economic Impact Not as Severe Shipments of Segment 3 A3 devices, which feature print/copy speeds that range from 31 to 40 ppm, are under pressure from the migration to color and A4-size MFPs and continue to decline. However, the poor economic conditions of 2009 and 2010 did not impact this segment as severely as it affected Segments 1 and 2, though unit shipments did decline by 9 and 10 percent, respectively. The declines weren’t as precipitous partly because the migration to color slowed and some customers opted for monochrome MFPs in this segment rather than color MFPs. This is also a segment in which a good proportion of MFPs are leased, which means that acquisition decisions must still be made as leases expire, regardless of economic conditions. Segment 1–4 A4 Monochrome Laser MFPs : Short-Term Market Rebound Sales of A4 monochrome laser MFPs rebounded in 2010 after plummeting in 2009. Worldwide shipments of A4 monochrome laser MFPs increased to just over 5 million units in 2010 after decreasing by 20 percent in 2009 to 4.8 million. The A4 monochrome MFP market will experience a slight rebound over the short term but is expected to decline again between 2013 and 2015, primarily as a result of users migrating to faster segments. The recession has slowed this trend, but it will resume. The regional distribution of shipments of these devices will continue to shift, with markets in Europe, the Middle East, and Africa (EMEA) and Asia Pacific gaining prominence among the worldwide regions. Segment 2 A4 Monochrome Laser MFPs—Solid Performers This segment includes monochrome A4-size MFPs with print/copy speeds of 21 to 29 ppm. It is still dominated by models from printer companies, such as Brother, HP, and Samsung, rather than devices from traditional copier companies, such as Canon, Ricoh, or Xerox. Most models range in price from $250 to $650. Shipments are expected to keep growing in this segment as a result of migration from Segment 1 and a general trend away from A3-size models and toward A4-size models. In 2010, shipments in Segment 2 A4 rebounded to 2.3 million units, the same level as in 2008, after declining to just about 2 million units in 2009 as a result of the recession. Lyra forecasts that a strong recovery of shipments will continue in this segment in 2011 despite continued economic difficulties. Buyers looking for low-cost monochrome multifunction devices will find good price/performance in Segment 2 devices. After 2011, it is expected that the migration and the shift toward A4-size models will produce modest double-digit growth through 2015. Ink Jet All-in-One Market : Positive Outlook through 2015 Ink jet printers and all-in-ones (AIOs) are the primary personal printing devices used in homes and SOHO environments. Current signs indicate that the ink jet printer market is rebounding from the global recession. The delayed replacement of existing printers during the recession, the growth of the AIO market, and the mobile print drivers that ink jet printer vendors are offering with some of their new printers and AIOs will drive printer sales through 2015. Overall shipments of AIOs will increase from 60 million units in 2009, which was the low point of the recession, to 80 million in 2015 (see Figure 1). The development of business ink jet products and vendors’ willingness to promote ink jet’s cost-per-page advantages over their own low-end laser products also will help drive sales in office environments. <<Figure 1>> However, the ink jet market continues to show many signs of maturity. Emerging markets such as Latin America are growing rapidly, while markets in industrial regions are growing at a much lower rate. The growth rate in North America will be the lowest through 2015 as a result of the adoption of WiFi networks in homes, SOHOs, and SMBs, limiting replacement opportunities in environments where multiple PCs are more common. SOHO All-in-Ones—Strongest Growth Segment of the AIO Market The SOHO all-in-one segment will be the strongest growth segment of the AIO market. Products in the SOHO all-in-one category are multifunction ink jet devices designed for home office use. Introductory prices for base models are typically $150 or above. The SOHO ink jet AIO segment is a relatively new one, but shipments have grown quickly over the past few years, increasing to 11.7 million units in 2010 from 9.6 million in 2009. As shown in Figure 2, shipment growth for these products is expected to continue through 2015, increasing to 21 million units in 2015 for a very strong compound annual growth rate (CAGR) of 12.4 percent. <<Figure 2>> A major benefit of SOHO AIO devices is that they incorporate an automatic document feeder with a flatbed scanner, a feature previously found only on high-end units. The move among vendors toward lower-cost devices with small-capacity document feeders addresses the needs of SOHO users who have broad document-handling requirements and work in low print-volume environments. Single-Function Color Laser Printers : A Steadily Rising Market The single-function color laser printer market bounced back in 2010 after experiencing a significant decline in 2009 that was caused by the economic recession, high costs per page, and poorly defined office color applications. Over the short term, the color laser printer market will continue to rebound steadily as more buyers choose to purchase a single color laser device to replace existing monochrome printers and to produce both monochrome and color pages. However, over the long term, print vendors will have to address issues regarding cost per page and advances in ink jet technology and business-class ink jets. In addition, emerging markets such as Latin America and Asia Pacific are showing strong growth, while color laser printer shipments in EMEA are growing at a much lower rate—a 2.3 percent CAGR from 2010 to 2015—because developing subregions of Eastern Europe and Africa are falling behind Western Europe in color adoption. The growth rate in North America will be steady through 2015 based on the strength of the replacement market. SOHO and Small Workgroup Color Laser Printers—Replacing Older Ink Jet Devices SOHO and small workgroup color laser printers will remain the strongest segments of the color laser printer market through 2015. Many offices have been replacing older ink jet printers with SOHO and small workgroup color laser printers because users believe that laser devices are faster, have better print quality, and are cheaper than ink jet on a per-page basis. Shipments of SOHO/small workgroup color laser printers increased in 2010 to just under 2.3 million units, following a drop to 2.1 million units in 2009 from just under 2.5 million in 2008. The 2009 decline occurred largely as a result of several factors related to the economic recession. Although the economic outlook remains uncertain, unit sales grew in 2010, based largely on a good replacement market. Buyers who had delayed making replacement purchases in 2009 and early 2010 found some good bargains from many vendors and replaced some of their older monochrome lasers with color devices at prices comparable to or even lower than what they had paid for their old monochrome printers. Segment 1–3 Color Laser MFPs : Surge Driven by New Product Introductions The recession had a clear effect on Segments 1–3 of the color laser MFP market. Revenue dropped by $200 million in 2009 to just under $9.4 billion from approximately $9.6 billion in 2008. Revenue rebounded in 2010, increasing by 27 percent to $12 billion, primarily as a result of strong unit sales. Unit sales were driven by vendors’ introduction of new machines in almost all segments. Now, end users have a wider range of device options and are able to purchase devices that are tailored to their companies’ needs rather than settling for whatever devices may be available. Revenue will continue to increase through 2015, rising by 6 percent. Segment 3 Color Laser MFPs—Solid Growth Predicted Products in this category are electrophotographic printers that have a rated color print speed between 31 and 40 ppm. These devices typically are either laser- or LED-based and are designed for workgroups. Prices for A4 units typically range from $2,000 to $3,000, while A3 models list for $10,000 to $15,000. Segment 3 unit shipments will grow by 7 percent in 2011. The growth rate will continue through 2015, with shipments increasing through 2015. Revenue also will increase but at a slower rate than unit shipments as a result of increased availability of lower-cost Segment 3 A4 MFPs. Lyra expects revenue to grow by about 6 percent throughout the forecast period (see Figure 3). << Figure 3>> The Bright Spot in the Office Equipment Market Of all the segments discussed above, Segment 1–3 color laser MFPs collectively stand out as a bright spot in the office equipment market. Now that the economy is beginning to recover from the recession, many businesses are once again spending money on machine upgrades and lease replacements, which in turn is driving growth in these segments. Decreasing cost per page is also making color a more attractive option for customers who need to replace their older devices and is another factor driving growth in these market segments. Shipments and revenue will continue to grow in all three segments through 2015, with EMEA and North America driving the majority of sales. Lyra Research: The Digital Imaging Authority Larry Jamieson is a Director of Hard Copy Industry Advisory Service at Lyra Research. 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