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Avision eyes distribution deal

In a move to increase revenue from its own-brand products, Avision Inc (虹光) announced yesterday that Kodak Taiwan will use its distribution network to market and sell Avision's high-end products in Taiwan. The companies will sign the agreement on Wednesday.

Avision is a major scanner manufacturer in Taiwan and derives more than 90 percent of its revenue from original equipment manufacturer orders.

Its main clients are Hewlett-Packard and Canon. Kodak is a world leader in imaging. Its diversified product portfolio includes the manufacturing and distribution of digital imaging products such as digital cameras and computer scanners.

Taiwan manufacturers supplied 91 percent of the world's scanners last year, according to the Market Intelligence Center, and are expected to provide a similar amount this year.

However, overproduction of scanners and stiff price competition have reduced local scanner makers' profit margins and revenues in recent years.

As a result, some have been forced out of the scanner market, while others have diversified into other products such as digital cameras and image projectors.

Avision focused on the production of advanced high-performance scanners to OEM clients. The strategy helped earn the company NT$6.3 billion last year and an earnings per share of NT$6.23.

This year, the company plans to sell between 3.5 and four million scanners and earn about NT$7.2 billion in revenue. It had already reached over 90 percent of that revenue target by the end of September.

However, by selling mainly to OEM clients, profit margins remain low this year, the company is expected to make an after-tax profit of about NT$4.3 per share after it increased its capitalization, analysts said.

As a result, the company aims to increase sales of its own-brand products, which have a larger profit margin.

"We hope to increase the proportion of sales from high-end self-branded products from less than 10 percent now to 15 percent next year," said Luca Lo, special assistant to the chairman of directors at Avision. "Self-branded products have higher margins and the high-end products won't conflict or compete with our OEM products," she said.

Lo hopes the agreement with Kodak will help to achieve this goal. Kodak will distribute high-end products such as Avision's color, high-speed document image scanners which scan large numbers of documents quickly and without needing to be hand-fed by the user.

"Kodak is very strong in the marketing and distribution area. Our marketing isn't that strong," she said. Avision therefore hopes to benefit from Kodak's strength in this area to increase the market share of its own products, and as a result, increase revenue and profits.

The strategy is a good one, analysts said, though many had reservations about Avision's decision to sell its products under its own name in such a competitive market.

"Kodak is a very famous brand name to market its product," said an analyst at International Securities Co. "Of course that's good."

A branded product also makes a much higher profit than an OEM product, said Eddie Wei, senior analyst at First Securities Consulting.

However, the product's market is small if the company isn't known, and it will face strong competition, he said. "It will be very difficult if they use their own brand," he said.

"If Kodak helps them sell, or uses Kodak's name, that would be great," said Wei. "If Kodak can combine Avision's products to its marketing system and bundle them together with its PCs and other equipment, maybe they will succeed," he said.

Other analysts were less optimistic. "Avision is the best in the scanner industry," said an analyst at Entrust Securities Co.

However, in such a competitive sector, the company would find it difficult to maintain strong profit levels whether it sold its products as its own brand or on an OEM basis.

Most electronics companies receive big orders, but that doesn't mean their future profits will be strong, the analyst observed. Meanwhile, "no one in Taiwan's electronics industry, even including Acer, seems very successful in selling their own brand-name products," he said.
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