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Kodak to Buy Big Part of IBM Copier Business

April 20, 1988|VICTOR F. ZONANA | Times Staff Writer

SAN FRANCISCO — Eastman Kodak said Tuesday that it agreed to buy the sales and servicing arm of IBM's U.S. copier business in a deal that would give Kodak a leg up on industry leader Xerox in an important segment of the market.

Terms weren't disclosed, but analysts estimated that the business Kodak is buying had revenue of approximately $1 billion last year. Kodak is also negotiating to buy IBM's overseas copier sales and service organizations.

Under a five-year agreement, IBM will continue to manufacture its model 50, 70 and 85 copiers for marketing under the Kodak name. It's unclear whether Kodak will sell IBM machines beyond that.

Kodak will recruit employees from among IBM's copier sales and service work force, which numbers less than 2,000, though the workers may choose to remain with IBM in another capacity.

Richard C. Norton, director of copier research at Dataquest, said, "Kodak is effectively doubling its size in the lucrative 70-to-90 copies per minute segment of the industry." He said such high-volume machines are particularly profitable because they consume a lot of supplies, require frequent servicing and--in the case of leased machines--run up big rental bills.

The $2.5-billion-a-year market for 70-to-90 copies per minute machines has been divided almost evenly among Xerox, Kodak and IBM. The Japanese, who dominate the low end of the copier market, "are not a factor," Norton said.

The deal could face tough antitrust scrutiny. It would combine the second-largest domestic copier sales and service organization--IBM's--with the third largest.

Norton said IBM's machines are based on 12-year-old technology and speculated that IBM opted to sell the business rather than invest in developing new products. IBM said it sold the business to focus on areas "more strategic to our information-handling and telecommunications business."

IBM entered the copier business in 1970 as an adjunct to its thriving typewriter business. But in the 1980s, personal computers and printers have become a much more fundamental office automation technology for the company.

A Kodak spokesman said Dataquest was "in the ballpark" with its estimate that there are about 61,500 IBM copiers in service, though he declined comment on Dataquest's market share and dollar volume estimates.

An IBM spokesman insisted that the company was not withdrawing from the copier industry, noting that it would continue to manufacture its various machines. Without providing details, he said its copier business "exceeded expectations" in 1987.

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