IKON Office Solutions, Inc. - Company Profile, Information, Business Description, History, Background Information on IKON Office Solutions, Inc.



70 Valley Stream Parkway
Malvern, Pennsylvania 19355
U.S.A.

Company Perspectives:

At IKON, we believe delivering value to our shareholders is best accomplished by delivering value to our customers. Now more than ever, customers are searching for ways to gain efficiency and are looking at technology and document processes to streamline work flow and deliver improved productivity. Through the products and services we offer and the people behind them, we have set ourselves apart in the marketplace--creating flexible, customized solutions to meet our customers' expectations and to ensure IKON's place as an industry leader in the years to come.

History of IKON Office Solutions, Inc.

IKON Office Solutions, Inc. remains one of the world's leading providers of products and services that help businesses communicate. IKON provides total business solutions, including copiers and printers, color solutions, distributed print, facilities management, imaging and legal document solutions, as well as network design and consulting, and e-business development. IKON has approximately 600 locations worldwide including the United States, Canada, Mexico, the United Kingdom, France, Germany, Ireland, and Denmark and earned more than $5 billion during revenue in fiscal year 2001.

Tinkham Veale II and the Alco Oil and Chemical Company

IKON Office Solutions, Inc., can trace its heritage to Tinkham Veale II, founder of Alco Standard Corporation. Veale was born in Topeka, Kansas, on December 26, 1914, and earned a Bachelor of Science degree in Mechanical Engineering from Case Institute of Technology, Cleveland, Ohio, in 1937. Four years later, he married Harriett Alice Ernst, the daughter of A.C. Ernst of the accounting firm Ernst & Ernst. With the help of his father-in-law, Veale bought a stake in an engineered goods manufacturer, which prospered during World War II, and made Veale a millionaire by age 37. With his youth and newly found wealth, Veale retired to breed and race horses and invest his money. After a short-lived retirement, Veale admitted, "I retired when I was young and after I was finished being retired, I went back to work. I was very bad at being a retired man."

In 1951, Veale joined the board of Alco Oil and Chemical Company in Pennsylvania, and was named director and president of the company in 1954. In 1960, Veale and his associates formed a holding company, V & V Associates, and bought a large minority share in Alco Oil and Chemical, which in 1962 was renamed Alco Chemical. Three years later, Alco merged with V & V Associates, setting into motion a partnership strategy that would witness the birth of the Valley Forge, Pennsylvania-based conglomerate, Alco Standard Corporation. Veale served as president of Alco Chemical until 1954 and director until 1986. The success of Veale's strategy was based on buying small, privately owned companies with cash and Alco Standard stock, and making the proprietors his partners. By 1968 52 companies had been acquired.

Alco Standard Focuses on Office Products and Paper Distribution

Alco Standard branched out into a variety of industries, including electrical, metallurgical, and distribution businesses; coal-mining; and paper distribution. From the success of their national paper distributor, Unisource, the company entered into other distribution fields, including pharmaceuticals, steel products, auto parts, foodservice equipment and liquor, and in 1981 witnessed the growth of their distribution to 75 percent of sales.

As manufacturing ventures in plastics, machinery, rubber, and chemicals had not grown as rapidly as the distribution units, the manufacturers were merged into Alco Industries in 1984 and sold to its managers, with Veale keeping a minority stake. In 1986, Ray Mundt succeeded Veale as chairman of Alco Standard, and switched the company's focus to two main business groups: office products and paper distribution.

In 1987, IOS Capital in Macon, Georgia, was formed to provide lease financing primarily for office equipment marketed in U.S. marketplaces. IOS Capital would later become one of the largest captive finance companies in North America.

In 1992, Alco Standard entered into a joint venture with Europe's IMM Office Systems. Although this venture did not work out, the dissolution agreement gave Alco two subsidiaries: Denmark's Eskofot and France's STR. Another restructuring came about in 1993 when John Stuart succeeded Mundt as CEO (and chairman in 1995). Alco's largest purchase came in 1995 with the acquisition of the Southern Business Group PLC, a UK-based copier distribution and service company, which was renamed A:Copy (UK) PLC. In 1996, Alco acquired 97 businesses, and the following year spun off Unisource. During the second quarter of 1996, Alco completed two mergers: Legal Copies International, Inc. and JMM Enterprises. The Office Products group advanced rapidly due to strong cash flows and other strategic divestitures. By the end of September 1996, revenues had reached $4.1 billion. The paper distribution business was spun off to shareholders in December 1996 as a separate, publicly owned company.

Alco Standard Becomes IKON Office Solutions

Alco Standard officially changed its name to IKON Office Solutions, Inc., on January 23, 1997, reflecting the company's intention to focus solely on their office technology business. The New York Stock Exchange listing became IKN. Another 123 companies were purchased during fiscal years 1997 and 1998, but profits dropped. As a result, James Forese, newly elected president and CEO, cut IKON's workforce by about 3,000 between 1998 and 2000 to reduce expenses.

With a more streamlined workforce and centralized focus, IKON Office Solutions entered the new century as one of the world's leading providers of products and services that help businesses communicate. The main goals of CEO Forese in 1999 were cutting costs, improving productivity, and strengthening discipline throughout the company. Through an international distribution and services network, IKON concentrated not on manufacturing, but on providing customers with products and services, including copying, printing and scanning, network design, and Internet-based document repositories, through vendors like Canon, Ricoh, Oce', Hewlett-Packard, Adobe, EFI, IBM, Microsoft, and T/R systems. IKON office locations could be found worldwide in the United States, Canada, Mexico, the United Kingdom, France, Germany, Ireland, and Denmark.

IKON Integrates Operations into Three Major Business Sectors

In 1996, IKON began an acquisition strategy that was focused on supporting IKON's total office solutions strategy announced in early 1996. The company's acquisitive period ended in the second quarter of 1998, and at that time, the Company was structured into three divisions--Business Services, Document Services, and Technology Services. Business Services concentrated on providing office equipment; Document Services concentrated on the production of large quantities of legal and business documents; and Technology Services concentrated on furnishing networking and systems analysts expertise.



In 1999, though, IKON began to change the structure of its operations in order to function more effectively as a "one-stop" provider of integrated solutions matched to customer's business communications needs. First, IKON North America was created by integrating the company's largest businesses: Business Services and Management Services of the Document Services division. IKON North America now provided copier and printer equipment and facilities management services throughout North America and included the Company's captive financing subsidiaries in North America.

The remaining business units of Document Services--Business Document Services, Legal Document Services, and Business Imaging Services--as well as Technology Services, which had received several awards in 1999 for industry leadership, were now included in the Other operating segment. These focused on print-on-demand services, electronic file conversion, and providing information system expertise and education and training.

At this time, IKON Europe was fully integrated and providing customers with total office solutions including copiers and printer systems, computer networking, print-on-demand services, facilities management, hardware and software product interfaces and electronic file conversion throughout Europe as well as financing through the Company's captive financing subsidiary in Europe. In 1999, Marconi, PLC (U.K. General Electric) awarded IKON a multi-million dollar contract to provide all document production for Marconi locations worldwide. IKON was named "preferred vendor" for Marconi and its affiliates, evidencing the successful application of the integrated services concept in Europe.

In 2000, Business Document Services and Legal Document Services were integrated into IKON North America along with the network integration capabilities of Technology Services to support the shift toward providing higher-end, networked digital equipment and related services. In addition, separate units were established for e-Business development, named Sysinct, as well as Education and Telecommunications. These units (and Business Imaging Systems) remained part of the Other segment.

In the last quarter of 2001, IKON exited the telephony business in the U.S. and Europe, and in the first quarter of 2002, the company sold technology education. These actions were taken as a result of IKON's plans to eliminate or downsize certain business lines in 2002 that did not present long-term potential or fit strategically with IKON's core offerings, namely equipment sales, outsourcing, equipment service and supplies, and leasing.

IKON Positions Itself to Meet Digital Technology Needs

In 2001, IKON introduced a customized e-catalog, IKON Online, a Web-based means of ordering contracted equipment and supplies, placing service calls, and submitting meter readings. IKONSupplies.com was implemented as a public site which would allow customers to order low-end equipment and supplies via the Web. IKON also offered print e-procurement and online document-repository capabilities through Digital Express, a Web-based document management system.

IOS Capital became one of the largest captive financing companies in North America, with a lease portfolio of $3 billion. In 2001, it financed more than 75 percent of all IKON North America's equipment sales, a percentage that has increased steadily from 67% in 1999.

Other resources developed in 2001 by IKON to assist their customers, included the Solution Center and the Proposal Response Center. The Solution Center provided a single point of contact for critical information to sales personnel; the Proposal Response Center offered assistance in managing large bids and proposals. IKON University was implemented to provide programs in sales, management and leadership, project management, and technology training. The International Technical Olympics was held to challenge and reward service technicians by competing in events to test their skills in areas such as digital knowledge and problem solving.

IKON earned the designation as the largest independent distributor of office equipment in North America and the leading direct distributor for both Canon and Ricoh products. IKON's outsourcing business offered complete facilities management services, and was the leading provider to the legal community, providing onsite and offsite production and distribution of specialty legal documents, enhanced by digital scan-to-file services and document-coding. IKON also provided imaging services through its Business Imaging Services segment and it provided e-business strategy and solutions design through Sysinct.

Revenues for 2001 totaled $5.273 billion, down from $5.446 billion in 2000. Although a leader in its field, IKON experienced a 3.2 percent loss in revenues in 2001 due to decisions to de-emphasize or close down certain hardware and service offerings and the impact of a slowing economy. Overall decreases resulted from decreases in net sales, and service and rentals revenue. Revenues of IKON North America decreased by 3.6 percent, primarily due to a decline in revenue from sales of network integration, technology hardware, low-end copier/printer and facsimile equipment, as well as growing economic pressures. IKON Europe revenues decreased by 6.9 percent in fiscal 2001, due mainly to the impact of foreign currency translation and a decrease in sales of technology hardware, offset by an increase in revenue from the sale of office and production equipment. Other revenues decreased by 9.6 percent. The decreased revenues related to the telephony and education operations, from which the company exited in the fourth quarter of 2001. In addition, IKON planned to downsize the digital print production network and reduce the number of regional print centers.

IKON emphasized their customer-focused, value-driven approach by being profitable, generating strong cash flow, and building shareholder value, according to CEO Forese. Plans for the future included leveraging the size and scope of the company through centralized processes to streamline infrastructure, as well as investments to provide a competitive edge in the digital marketplace.

Principal Operating Units:IKON Europe Other; IKON North America.

Principal Competitors:Canon; Danka; Global Imaging Systems; Hewlett-Packard; Kinko's; Lanier Worldwide; Lexmark International; Oce'; Sharp; Tech Data; Xerox.

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