Hamilton--Behind the Urge to Merge
You gotta love America. Only here could Bill Gates be watching almost idly as the Justice Department prepares to dismantle his empire just as changes in information technology were about to do it for him.
Ironically, while Microsoft is about to be broken up into two or three pieces, just about every other industry seems to be moving toward larger and larger conglomerates in search of so-called synergies. That the payoffs are few and far between doesn't seem to dampen anyone's enthusiasm—and certainly not that of the investment bankers and corporate lawyers that put these deals together.
Of course, this has been going on for some time in the graphic arts industry. Although it is the printers themselves that have been most active, suppliers are not standing by idly, either. It all started with the merger of Linotype and Hell Graphic Systems back in the mid-1990s, which was promoted with the tag-line "Strong Together." Then, after it became clear that this was not the case, the behemoth Heidelberger Druckmaschinen came to the rescue.
The next round came when DuPont decided that graphic arts film and chemistry weren't pulling in enough profits—even though the unit's annual turnover barely qualified as a rounding error in DuPont's net income. Thus Agfa vaulted to the number-one spot as the largest supplier of film and offset plates in the world. This was followed by Kodak spinning off its graphic arts division into a cooperative venture with Polychrome to create Kodak Polychrome Graphics.
More recently we've had some lesser, yet important, changes. First, Polaroid punted the graphic arts unit when executive management decided it couldn't add enough revenue to placate Wall Street. Across the big pond, Harlequin faced a financial crisis that required the business to be sold to the Global Graphics holding company last summer.
And now we have Creo acquiring Scitex's prepress business unit. The new kid on the block, flush with cash from a very successful IPO, gobbles up the old guard. While it might seem strange that these two fierce competitors are now joined at the hip, it's important to note that Creo's CEO, Amos Michelson, is an Israeli with a keen business sense. In my opinion, he is buying market share and intellectual property—both real and potential.
Given that Scitex equipment is still dominant in many parts of the world, the real question is going to be which systems make the cuts. Already, Creo has signalled a clear intention to move away from its Harlequin-based workflow toward one based on Adobe's PDF. Now they will have to decide how to deal with all those printers and trade shops that have standardized on raster-based workflows using CT and LW.
This is not a minor issue that pertains only to the sales reps from the two companies. I am fully behind the movement to adopt PDF as the workflow standard, but it is not as stable or as mature as the one Scitex has developed for more than a decade. And anyone that has significant liability issues related to printing is going to resist PDF for a while. That is, the people that print pharmaceutical labels and other critical information are having a hard enough time convincing themselves that CTP is "safe enough"; asking them to drop a raster format for a vector one is going out on a limb, to say the least.
Beyond those fearful of lawsuits, there's the financial side to consider. Printers and trade shops have invested literally millions of dollars into equipment, peripherals and training to support the Creo Impact/Allegro (Harlequin) and Scitex CT/LW workflows, respectively. Asking them to migrate to an entirely new system based on PDF is not a trivial issue, and it is even more unpalatable given the horrible profit margins from which printing suffers.
Clearly, the prepress supply chain is down to about a half dozen "superpowers": Adobe, Agfa, Creo, Fuji, Heidelberg, Kodak Polychrome Graphics and Dainippon Screen. Of these, only Agfa and Fuji can offer the complete package, bundling their consumables with systems. And though the relationship between Creo and Heidelberg will undergo some changes in light of the Scitex acquisition, it's hard to imagine a complete divorce occurring.
In addition, one can argue that Adobe matters the least of these because its focus is really on content creation and is media neutral. Although it's taking longer than John Warnock and Chuck Geschke would like, the distribute-then-print paradigm shift is gradually gaining momentum.
Who or what will be next? More important, what does this consolidation mean to those of us that need to make investment decisions about prepress technologies?
While the rise of the Internet doesn't bode well for the long-term prosperity of the printing industry, it won't displace print media in the next few years and the need to package goods sold by all those "dotcoms"—and even normal businesses—will continue to generate demand for those that smear ink on smashed trees.
So choose your vendors wisely—who knows how long they'll be around.
—Alex Hamilton
About the Author
Alex Hamilton, a former technical editor with Printing Impressions, is president of Computers & Communications Consulting, which specializes in digital technologies for printing and publishing. He can be reached at (215) 247-3461 or by e-mail at alexh@candcc.com.
