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Seiko Epson President Bets on Ink-Jet Printer Revival; Company Is Also Focusing on Wearable Technology, Developing ‘Smart’ Glasses

Seiko Epson President Bets on Ink-Jet Printer Revival

Company Is Also Focusing on Wearable Technology, Developing ‘Smart’ Glasses

ERIC PFANNER

June 23, 2014 8:15 a.m. ET

SHIOJIRI, Japan—While other printer companies are racing to introduce machines that can create three-dimensional objects, Seiko Epson Corp. 6724.TO +2.14% , the biggest maker of inkjet printers, says there is still opportunity in the two-dimensional business of putting words and images on paper.

3-D printers now on the market lack precision and efficiency, and operate with too limited a range of materials for commercial use, said Minoru Usui, president of Epson.

“Existing 3-D models are mostly for making plastic toys and things like that,” Mr. Usui said in an interview in this small city in central Japan, where the company’s printer business is based. “To Epson, this is a highly limited market.”

The company doesn’t plan to introduce its first 3-D printer until it has developed a model for industrial use—a process that could take another five years or so, Mr. Usui said.

Epson sees brighter prospects in wearable technology and is developing its lineup of “smart” glasses and wristbands, which Mr. Usui called a natural extension of the company’s roots in watchmaking.

At the International Consumer Electronics Show in January, Epson introduced wristbands that track heart rates, using a proprietary technology that does away with the need for the chest strap that most other heart-rate monitors use. It plans to begin selling them in the fiscal year ending next March.

The company also has introduced a new version of its Moverio smart glasses, a wearable device similar to Google Inc. GOOG +1.54% ‘s Glass. Epson plans to begin selling them in Japan this month.

Pilots and engineers at easyJet EZJ.LN -2.00% PLC, the European low-cost airline, are testing the devices to try to share information more efficiently. The Louvre-Lens, an annex to the Louvre museum in the northern French city of Lens, is testing the glasses to provide information on exhibits to visitors.

As Epson waits for those investments to bear fruit, it is counting on new applications of its mainstay business—inkjet printers—to bring back growth after a painful restructuring.

Though Epson’s sales have fallen significantly since 2006, the company recorded a small increase in the most recent fiscal year, which ended in March. After several years of losses or tiny profits, it posted net income of about $813 million in the latest year, rebounding from a loss of about $100 million a year earlier. Since bottoming out in late 2012, Epson’s stock has risen nearly tenfold, and is up about 19% so far this month.

Why such excitement among investors over a company that makes printers, a category that futurists and other fans of “paperless” homes and workplaces years ago declared obsolete?

“The stock had been really beaten down,” said Toshiya Hari, an analyst atGoldman Sachs GroupGS +0.24% “People were saying, ‘We won’t be printing in two years.’ Now we’re getting calls from U.S. investors that can’t believe a printer company is having this kind of rise.”

Sales to home users, long the main market for inkjet technology, have been declining for years. But Epson is upbeat about prospects for sales of inkjet printers to businesses, which now rely on laser printers from rivals such asHewlett-Packard Co. HPQ +0.88% , Canon Inc. 7751.TO +0.12% and Xerox Corp.XRX +1.38%

Until recently, inkjet printers were considered too sluggish for office use, but Epson says a new line it introduced this year rivals laser printers in speed and print quality, with lower running costs and less waste.

Big corporations may be reluctant to switch, said Tetsuya Wadaki, an analyst at Nomura Securities, but the new inkjet printers could be adequate for many small- and medium-size firms.

“Even though such companies are just a part of the market, it is a huge business opportunity for Epson,” Mr. Wadaki said.

The company has also introduced lower-end models for emerging markets that come with large, long-lasting ink tanks.

Meanwhile, Epson says it expects growth in niches such as textile and label printing. It plans to invest $100 million to expand a production line for the print heads used in its high-end models, executives said this month.

Befitting a company that has stubbornly resisted the temptation to move its headquarters away from the mountains of the Nagano region to more cosmopolitan Tokyo, Epson has also resisted the trend toward outsourcing. It makes most of the principal parts in its printers, and assembles them at its own plants.

The renewed focus on printers marks a departure from the company’s strategy before the global financial crisis, when it expanded into businesses such as small and midsize liquid crystal displays, cameras and other gadgets, with little success.

“We were chasing markets just because they were big,” Mr. Usui said. “In the future we will focus on our core technology. I’m not interested in making a smartphone—anyone can do it.”

In a wide-ranging restructuring, the 59-year-old Mr. Usui, who took over as president in 2008, scaled back Epson’s chipmaking and LCD operations.

Total sales climbed to $9.8 billion in the just-ended fiscal year from about $8 billion the year before. But that is still down from the $15 billion in sales in the 2006 fiscal year.

Though it is proceeding deliberately on technologies like 3-D printing, Epson isn’t entirely averse to exploring new business lines. One of these is wearable devices.

While Epson got in trouble when it expanded previously, executives say the move into wearable devices is a natural extension of the existing business because these gadgets use sensors and other technology that the company already specializes in.

While Seiko Holdings Corp. 8050.TO -1.61% , the watchmaker, and Seiko Epson are independent companies, they used to be affiliated and continue to do business with each other.

“The important thing is the core technology, not the device,” Mr. Usui said. “If we could make refrigerators with inkjet technology, we probably would.”

 

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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