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Japan-Update

After year of cost-cutting Ricoh opens $1.8bn M&A war chest

Office equipment maker puts on a brave face, despite rivals and challenges

Ricoh President Yoshinori Yamashita announces the company's new growth strategy at a Tuesday news conference in Tokyo.

TOKYO -- Following Fujifilm Holding's announcement in late January that it would take over U.S. copier giant Xerox, creating the world's largest maker of office machines, the head of rival Ricoh put on a brave face, insisting business would not be threatened.

"We will shift the focus of our strategy toward growth," said Ricoh President and CEO Yoshinori Yamashita at a news conference on Tuesday, outlining a new five-year business strategy.

The plan through the fiscal year ending March 2023 calls for greater spending on mergers and acquisitions to lay the foundation for renewed growth by expanding business printing and digital services.

The strategy, which provides for an M&A budget of over 200 billion yen ($1.82 billion), envisions group sales of 2.3 trillion yen and operating profit of 185 billion yen in the year through March 2023. That would beat the company's all-time high operating profit of 181.5 billion yen in the fiscal year ended in March 2008.

If the strategy pans out, the company's share of new strategic businesses in printing and digital services would surpass 50% from slightly over 30% currently. The share of office equipment in overall sales would fall below 40% from over 50% currently.

The plan comes after a year of cost-cutting and restructuring of global operations. Since Yamashita took over nearly a year ago, Ricoh has pushed through significant structural reforms focused on North American operations, shedding jobs and cutting costs. As a result, the group workforce is expected to shrink to under 100,000 by the end of March.

Ricoh also terminated its financial support for its Indian subsidiary, which has little prospect of getting its head above water. It has reduced its stakes in operations that have little synergy with its core business, forging partnerships with other companies instead.

Such efforts appear to have paid off, putting the company on the track to just about break even in the current fiscal year through March, rather than posting a loss as previously expected.

But skeptics warn that Ricoh's growth strategy has many reasons for caution.

For one, the global market for office equipment is shrinking. Global shipments of office machinery fell nearly 30% over the past nine years, according to U.S. market research company IDC.

The fact that Ricoh estimates its traditional core business -- making and selling office equipment -- will still account for nearly 40% of sales in the year to March 2023 is a concern, casting doubts on its projection for a record profit that year.

The enlarged Xerox could also take a big bite out of Ricoh's customer base.

Other rivals have been making bold moves as well. In 2016, Canon spent 665.5 billion yen to acquire Toshiba Medical Systems (now Canon Medical Systems).

Last year, Fujifilm Holdings, which owns Fuji Xerox, bought reagent maker Wako Pure Chemical Industries for 155 billion yen.

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