2004 Industry Forecast:

Canon U.S.A.
Tod Pike
Senior Vice President and General Manager of Sales, Marketing and Administration
Imaging Systems Group

Technology has fundamentally changed the way businesses create, move, store and use information. To fully leverage these advances in technology, businesses want imaging systems that can be networked, are scalable, and can easily be integrated with existing operations. As a leader in networked imaging solutions, Canon delivers a complete line of business solutions that address changing market needs. The R&D behind our digital on-demand solutions allows easy integration and improvement of workflow in today's enterprise, and maximizes customer system investments by providing continuous integration of the latest technological innovations.

We expect to see these trends continue to evolve in 2004. From our viewpoint, in 2004 there will be an even greater emphasis on the use of network technology to streamline workflow. We also see an increased demand for customized imaging applications and a dramatic upturn in the use of color in the office.

Consider, first, the emphasis on streamlining workflow. Companies of all sizes want solutions that will improve information gathering, distribution, reporting and retention. At the same time, companies must "do more with less" — the goal being to operate more efficiently and streamline costs. To be competitive, companies are making the move from standalone printers, scanners, copiers and faxes to networked systems to improve information usage and workflows across the extended enterprise. At Canon, a very high percentage of our customers today are printing over networks, and have incorporated document distribution systems. We believe this number will continue to increase significantly in 2004.

What is the main driver of this increase in 2004? The continued use of multifunction products (MFPs). We see a dramatic upturn in the number of MFPs employed as centralized communication hubs for leveraging the cost-efficiencies of the Internet. Canon is leading this transition through products like the affordable, new imageRUNNER MFP solutions for small and mid-sized departments and corporate workgroups. These mid-range devices offer built-in network connectivity and advanced digital copying, network printing, mailbox functionality and network scanning features. Since MFPs are more economical than standalone devices, we expect to see continuing high demand across all market segments in 2004.

The emergence of the networked office, while opening profitable new sales avenues for dealers, also presents a major challenge. As new products get introduced at an ever-increasing rate of speed, dealers must not only offer a full line of integrated hardware and software solutions, but their sales representatives must be continually educated and trained on new features and technologies. Dealers can look to major product vendors like Canon for comprehensive educational programs covering new products, the underlying technologies (e.g., computing, telecommunications and imaging) and "how-to" sales instruction on the latest generation of enterprise-wide document systems. In this way, dealer sales representatives will have the information and skills needed to customize hardware/software solutions for specific customer needs.

The dealer channel is of the utmost importance to Canon. We are committed to providing not only world-class products, but the educational services, sales training and technical support dealers need to fully employ the product solutions at their disposal. At every point in our product line, from industrial-strength digital presses to entry-level faxes and scanners, our "blended learning" combines instructor-led classes with self-guided online coursework. In a growing number of cases, Canon's educational content is available directly on dealers' own e-learning portals. Our educational offerings will continue to keep pace with the growing demand for knowledge and skills training in the coming year.

We also are collaborating with dealers to implement the Computer Technology Industry Association's (CompTIA's) Certified Document Imaging Architect certification program for their sales forces. The CompTIA CDIA+ certification is the internationally recognized industry standard for validating document imaging and management skills.

Another major growth market in 2004 is color in the office. As speed expectations increase and cost barriers fall, leading industry analysts have targeted color as the prime potential area of growth in an otherwise maturing market. The fact is that advances in color technology and quality have improved speed, accuracy, cost and ease of use. Canon's All-in-One cartridge technology, featuring a four-drum, single-pass vertical engine, offers quantum leaps in ease of use, ease of maintenance and affordability. As a result, small to mid-size organizations can cost-effectively implement color, and even publish their own marketing collateral, technical manuals, financial reports, publications and newsletters through products like the Color imageRUNNER C3200. Advances in Canon's mid-range to high-end color devices, and a migration of black-and-white MFPs to color-capable devices, will continue to take center stage in 2004.

Canon also has made significant headway in high production requirements, with new additions such as Magnetic Ink Character Recognition (MICR) printing and the Bourg Perforating Rotating Folding (BPRF) Unit for the Canon imageRUNNER 110M and imageRUNNER Pro 150+. Our advances focus on the needs of different vertical market groups. For legal, health care and insurance industry customers, Canon is making available new large-size paper decks for production-level imageRUNNER devices. For Print-On-Demand (POD) environments, Canon and T/R Systems jointly launched the Digital StoreFront, a fully automated Web storefront solution for in-plants and On-Demand printers, available through authorized dealers.

During 2004, we will also continue to develop customized solutions. It used to be that building custom applications to meet specific print and copy needs was a labor-intensive and costly undertaking. Canon tacked this common business problem with a novel approach: "Don't change the process, change the device." We made an important step in this direction with this year's introduction of MEAP (Multifunctional Embedded Application Platform) architecture, a Java-based, customizable software application platform. MEAP enables Canon, third-party software developers and customers to write custom software applications for a wide range of business workflow requirements. In 2004, MEAP-enabled MFP devices will give dealers a unique advantage with customers that are migrating to an enterprise e-business solution, and want to integrate an MFP device into their customized document workflows and IT infrastructure.

To summarize, Canon believes that the trends that shaped 2003 — workflow management, customization and color — will continue to grow in 2004. Education is the key to success in this rapidly evolving, technology-enabled office technology space. In the coming year, both independent dealers and clients will benefit from the introduction of new, enhanced ways of managing complex document management and imaging needs. We will continue to increase our consultative selling practice and e-learning offerings to help independent dealers master this new "learning curve," and ensure our customers get the greatest ROI from all of this digital imaging innovation. We believe it will be to our continued mutual success.

Ricoh Corp.
Tom Salierno
President
Ricoh U.S.

One of the most significant changes we at Ricoh see in the workplace is clearly a demand for increased workflow efficiency through the management of documents with software solutions. (For example, more and more people will be working right from the multifunction printer [MFP] and will not have to be at a computer to change and manipulate a document.) As a result, software applications will continue to be developed that will make office workflow ever more efficient.

Of the many new products Ricoh has developed to help increase workflow efficiency, the most successful is GlobalScan. GlobalScan was designed to easily turn a Ricoh Aficio MFP into a network scanner and serves as a digital document routing system that accepts scanned documents and creates files for electronic transmission over the network as an attached e-mail — all from the operation panel on the Aficio product.

Other examples of products developed as a result of the demand for increased efficiency include SmartNetMonitor, a dynamic suite of utility software that simplifies all aspects of installation, monitoring and management of Aficio network output systems, and DesktopBinder, a document management program that enables users to file and view any application file and image file effortlessly, creating a "paperless office" environment.

We continue to see increased demand for applications like these from our customers through their communication with our independent dealers and it is that communication that enables Ricoh to develop products that meet our customers' evolving needs. Therefore, it is incumbent upon Ricoh to continue to work with its independent dealers to best serve our customers' needs by providing training and keeping independent dealers up to date on all future and current software applications. Manufacturers must support their dealer partners with the latest in training, alliance solutions, software and hardware.

We also know that independent dealers are going to have to constantly respond to changes and new demands in today's work environment, or become extinct. Ricoh is confident that our independent dealers will be able to respond because they have proven themselves to be intelligent business people and they see these applications are part of a package that they need to market as a strategic advantage. Change is all part of doing business in today's world and independent dealers will certainly be able to change to survive and prosper with the times.

One of the tools Ricoh has developed to help independent dealers cultivate their business is a new way of demonstrating products. Ricoh's "Technology Portal" Showroom provides dealers with a location to demonstrate hardware and software solutions that will directly impact a customer's bottom line. This showroom is designed as a fully networked business environment that depicts typical customer workflow with the various Ricoh solutions designed to meet these requirements through four distinct sections of the showroom floor: Workgroup, Production, Enterprise and Professional Services.

Another change that we are seeing in the workplace is the adoption of general office color. Ricoh views the general office color market as one of its main growth areas and our color strategy is designed to bring color to the general office. The AP3800C and its successor, the CL7000, are prime examples that are perfect for this market, since they changed the industry and made high-quality color printing available at a previously unprecedented affordable price. Now others are suddenly going in this direction — but Ricoh dealers led the way.

Throughout the coming year, the independent dealers will play a vital role in growing Ricoh's business throughout the United States — just as they have in years past. The independent dealer channel is a vital distribution method for Ricoh — in part because the independent dealer has a unique position as a local businessperson who is well known in the community, who people trust and are comfortable with. Therefore, it is a major advantage to Ricoh to be able to leverage this force within the office equipment industry. Ricoh continues to offer independent dealers cutting-edge products, hardware and software applications and provides the training needed to sell these products through Ricoh University. The independent dealers continue to be the backbone of Ricoh's success — they always have been and always will be.

Ricoh continues to be recognized as the leading provider of document imaging products and enables the office knowledge workers to maximize productivity through the use of accessible technology. This is not by accident, as we foresaw the coming of the digital age and have one of the most complete lines available for our dealer partners. Using software utilities and networked solutions, Ricoh will continue to streamline document workflow, develop cutting-edge technology in both hardware and software, and will make advanced features accessible to all. And this will continue to keep Ricoh dealers ahead of the competition.

Xerox Corp.
John P. (Jack) Lafferty
Vice President and General Manager
North American Dealer Channel

One of the trends leading the office market today is the continued shift from standalone machines to connected systems. One in five office workers spends at least 60 percent of his or her workday dealing with documents. By using networked devices to replace and consolidate old hardware, organizations will save on supply and maintenance costs while increasing the efficiency in managing documents in both digital and paper form. According to an October 2003 Gartner report, through 2008, enterprises that actively manage their document output fleets will be able to save between 10 percent and 30 percent of their recurrent spending (0.8 probability). By 2008, there will be 10 percent fewer document output devices — copiers, multifunction devices (MFPs) and fax machines — installed in companies in developed markets (0.8 probability). (McNee, Sharon and Weilerstein, Ken. Right-Sizing: Put Your Document Output Fleet on a Diet. Gartner Inc., Oct. 20, 2003.)

Due to customer demand, Xerox's channel partners are asking for MFPs that copy, print, scan and fax. By offering a selection of MFPs ranging from basic to more advanced functionality, dealers expand their portfolio and are more attractive to those customers who want a choice. Customers have also come to expect certain product capabilities and now want new features and more functionality at the same low price. Fortunately, many of today's Segment 1 and 2 MFPs are very affordable. Dealers who carry these products and target the small to mid-sized business (SMB) market have a terrific opportunity for growth and will win in today's office market.

A second trend Xerox expects to see in the office is the explosion of color. The former industry perception that color is expensive has drastically changed. Technological advancements make it easy and affordable for office users to print, copy and scan documents in color. An increasing number of organizations are bringing color printing in-house and can now produce high-quality collaterals and presentation materials at a fraction of what it might cost to outsource the jobs.

Xerox is leading the transition to color in the office and knows how color can help improve work processes, particularly for SMBs. According to a recent survey conducted by Xerox and International Communications Research (ICR), 90 percent of the U.S.-based small businesses that participated in the survey agree that adding color to their business documents assists in attracting new customers, makes companies appear larger and allows them to gain a competitive edge.

This office market segment is one to watch, as research shows IT spending in SMBs is on the rise. According to a recent study from AMI-Partners, small businesses spent $86 billion on IT products and services over the past 12 months. SMBs represent the heartland of Xerox's channel efforts.

Education, training and support are vital components as well. It is the vendor's responsibility to ensure its dealers are armed with product knowledge and that they know what to expect in terms of service and quality. Xerox's dealer channel provides extensive training to help its dealers achieve their sales goals. Xerox's primary focus is educating dealers not only on the speeds and feeds of a product, but also the enhanced functionality of a device, and most importantly, how to sell it.

By meeting these demands, dealers are in an opportune spot to capture a large chunk of the office pie. Customers count on dealers to help them understand how to get the best IT investment for their dollar. Offering network-ready color devices with advanced capabilities at affordable costs gives dealers a distinct advantage over competitors.

As the office climate continues to evolve, Xerox, too, will continue to expand and alter its channel distribution strategy to reflect the changing demand. Xerox's dealers will continue to play an important role in the selling and distribution of its office printers and multifunction devices, especially as it offers more products in the SMB space.

Over the past year, Xerox revamped its product offerings and presented an action plan to reclaim a significant portion of the $52 billion office document market opportunity. The company launched numerous digital, color products, including several devices with multifunction capability. With this new push, Xerox has been focused on expanding its worldwide distribution channels. Along with offering high-quality solid ink and laser printers, for the first time in the United States, Xerox offers select multifunction devices through the dealer channel, including the WorkCentre PE16 and the WorkCentre M15 and M15i. Additionally, Xerox will be announcing the availability of its WorkCentre Pro 423 and WorkCentre Pro 428 digital multifunction devices this month.

Xerox came out with a bang on April 30 of this year and intends to build on that momentum by continuing to expand channel distribution. In the next year, Xerox's dealer channel will focus on segment growth, specifically with the addition of its new digital multifunction devices. Xerox is actively recruiting dealers in many key cities in both the United States and Canada. (Dealers who are interested in participating in Xerox's dealer program should contact xeroxdealershq@usa.xerox.com for more information. Dealers can also fill out an application online by visiting Xerox's Dealer Web site at http://partner.xerox.com/dealerconnection.)

Konica Minolta Business Solutions U.S.A. Inc.
Yasuo Matsumoto
President and CEO

We at Konica Minolta Business Solutions U.S.A. Inc. (Konica Minolta) see 2004, and the years following, as a time of great opportunity for dealers. For more than 10 years, the imaging industry has been transitioning from the traditional analog-copier-based business into the digital age and, more recently, into the application software and workflow business.

Now, dealers have the chance to expand the range of products and services they offer. Our view is that the dealer has to be a "one-stop" provider of document solutions ranging from printers, multifunctional products, production print, and the related software and workflow solutions. In this market environment, we believe the dealer's keys to success will be: capturing all of the customer's page volume, leading the movement to office color, pursuing the production print business and developing a services business to expand revenue opportunities outside of the box.

In the first instance, we think the industry, in general, has had a somewhat myopic view of print volume being generated by the installed base. Often, we have tended to ignore the printer opportunities in the customer or stayed away from application-intense areas like the datacenter and production-print environment. By adopting the strategy of owning the total print volume of our customers, we can develop a more strategic relationship with customers, save them money and increase the service revenue.

Regarding office color, we firmly believe that the future is here today. As mentioned in last year's forecast, we could see the beginning of the migration to office color. While many customers insist they are not using color, quite often a variety of inkjet printers and other technologies producing color can be found in the office. By not having a strategy to embrace color, many organizations are wasting money on the large per-page cost of technologies like inkjet color. In 2004, we see the cost gap shrinking dramatically between traditional black-and-white devices and color devices. This new generation of equipment will be highly stable, with competitive monochrome print costs and affordable color page costs. Next year, we will see the acceleration of the replacement of black-and-white devices with color devices in the installed base.

We also continue to see changes in the market for production print that are favorable for the dealer. The "light production" device market is expected by industry analysts to be a high-growth business over the next several years. Light production can be loosely defined by a page volume of 300,000 to 1.5 million impressions per month. Changes in the print-production arena brought about by the widespread adoption of print-on-demand, as a business process, combined with continued growth in the variable-data printing market, will drive this growth. The success of our recently introduced ColorFORCE 8050 Color Imaging System validates the expectation of market growth in this segment.

Finally, the services business will be vital. With service margins under constant pressure and with a hyper-competitive equipment market, services offer the chance to differentiate the product offering and bring a higher margin level into the deal. We have already seen dealers succeed in this area with technologies like document imaging and forms replacement. By offering both the hardware, software and design, and implementation services the dealer again can create a stronger relationship with the customer and a higher margin on the overall deal.

At Konica Minolta we are coming off an exciting year. We are well into our merger and have a great story for our dealers. Our focus is on helping them realize the potential of their markets. Our success will be driven by the following factors:

First, a strong product line. We will be offering everything from desktop color laser printers to production devices capable of producing well in excess of one million pages per month. We also will be aggressively moving further into the office color market with compelling new products. We will be expanding our integrated software offerings along with third-party partner relationships to generate opportunities beyond the box.

Second is support. We are investing heavily to continue the growth of our dealer support structure to help them succeed in this emerging market of integration, services and solutions. Joining this support with a strong product line will be a powerful combination.

Third is dealer development. We will continue to add resources to help our dealers move into this new direction. We will have the production-print infrastructure to assist our dealers in the pre-sale process. We will expand our solutions team to work with our dealers to build the business is this area.

In summation, Konica Minolta sees a healthy growing dealer channel as key to our success. Our interests are aligned because without our dealers, we cannot achieve our objectives. We see many avenues of growth for the dealer today. And, Konica Minolta plans to provide the support they need to achieve this growth.

Kyocera Mita
Michael Pietrunti
Vice President of Marketing

Kyocera Mita and its network of independent dealers are poised to capitalize on strong economic growth prospects for the U.S. economy in 2004. Kyocera Mita's market share will continue to increase in 2004 as optimism and the improving economy lead more businesses to invest wisely in printers and multifunction products that offer superior performance at a low cost of ownership.

To take full advantage of the improving economy, Kyocera Mita dealers will have the opportunity to sell a new generation of technologically advanced output devices in 2004. These new products will arrive in the market when businesses are prepared to capitalize upon pent-up demand for productivity-enhancing technology and will be supported by the introduction of a new generation of Kyocera Mita controller technology. Instead of continuing to maintain their current fleet of aging printers and MFPs, businesses will invest in their technological infrastructure and improve their productivity by installing applications involving color, scanning, forms printing and enterprise-wide document-management capabilities.

Therefore, if businesses are planning to free up their information-technology purse strings, what will they ask of office equipment manufacturers and the dealers on the front lines? Kyocera Mita believes they will insist primarily upon two things. First, they want a tangible and immediate return on investment (ROI) realized by implementing Kyocera Mita output devices with our industry-leading low total cost of ownership (TCO). Second, businesses prefer quality customer service from a single point of contact for hardware, software and service as delivered by our expanding teams of Total Solution Provider and J.D. Power-certified dealers.

Given our commitment to helping end users achieve a lower TCO through innovative technology, Kyocera Mita welcomes the increased attention to the steep prices companies are paying our competitors per printed page. Kyocera Mita's award-winning printers and MFPs deliver the lowest TCO in the industry, thanks to the longest drum life among the competition based on our ECOSYS cartridge-free printer technology. Therefore, the attention finally being paid to long-term costs of operation will be a tremendous benefit to Kyocera Mita and our dealers.

In fact, we are helping create pull-through customer demand for our dealers and resellers by the deployment of our "TCO Tracker," a groundbreaking, Web-based program that allows our dealers and their prospects to calculate their fleet of printers' total cost of ownership and potential savings right from Kyocera Mita America's Web site. The data used in these calculations is independent and provided by ARS Inc., a competitive market intelligence firm specializing in the daily tracking and analyzing of printer and imaging products.

Nowhere is the TCO issue more compelling for Kyocera Mita dealers than in the color market. Deployment of color within the workplace is often directly proportionate to its cost. Clearly, users prefer producing documents with vibrant color output, and as younger users and recent college graduates who grew up printing in color increasingly populate the workplace, color demands will only multiply. In fact, we anticipate the 11-20 page-per-minute printer market to double in 2004.

A major obstacle to broader utilization of color has always been its high costs, which can run as much as 15 cents per page for some color printer models. The analyst community has long stated that breaking the nickel-per-color-page barrier will finally trigger broad-based deployment of color within the workplace. In 2003, Kyocera Mita became the first manufacturer to shatter the five-cents-per-page color barrier with the introduction of the FS-C5016N 17-ppm color printer. Qualified by comments from Gartner FirstTake ("Kyocera Mita Printer Halves the Copy Cost for Color," July 22, 2003) and IDC Product Flash ("Kyocera Mita Introduces the FS-C5016N Color Page Printer" July 2003), Kyocera Mita has clearly set a new pricing benchmark for color printing.

In addition to equipping our dealers with quality, reliable products, we are investing in their efforts and recognizing them for superior customer service. For example, earlier this year, Kyocera Mita America commissioned J.D. Power and Associates to develop a first-of-its-kind Certified Dealer Program for providing an Outstanding Customer Experience.

The certification program recognizes only those dealers who meet or exceed national benchmarks for sales and service satisfaction as determined by the J.D. Power and Associates 2003 Copier Customer Satisfaction Study. Relative to the sales experience, certification is based on customer satisfaction with a dealer sales representatives' product knowledge, expertise in product operation, ability to advise customers about their specific needs and timely delivery of the equipment. From a service standpoint, the ability to schedule and conduct service calls in a timely manner, concern for customer operational requirements and clear explanations of the services performed are also measured.

We anticipate that during 2004, most of the current 130-plus Total Solution Provider dealers will become certified and benefit from the additional sales and marketing prestige that the J.D. Power and Associates Certified Dealer Program provides.

In the technology arena, there are a number of initiatives that Kyocera Mita will roll out in 2004 that will offer dealers additional points of differentiation as we work together to serve the evolving needs of the workplace. For example, the importance of security and end-user network authentication becomes extremely essential to not only control operating expenses and optimize document workflow, but also to protect companies from industrial piracy. This development is becoming increasingly relevant since more and more documents are being scanned and sent over the office network. Kyocera Mita plans to equip our dealers with solutions that address these relatively new requirements.

Software solutions will be another key growth enabler for Kyocera Mita and our dealer partners. Kyocera Mita has always offered a universal print driver and common controller to simplify the use of our products for end users and IT managers. Today, businesses increasingly want to consolidate vendors that can satisfy both mainframe and software needs. This trend presents an important sales opportunity to Kyocera Mita dealers to not only meet specific workflow application needs, but also deliver a complete document management solution to their customers, thereby eliminating the need to contract with multiple vendors. Kyocera Mita dealers, who already have a technologically advanced and "budget friendly" hardware advantage, will have even more of an edge when we announce several leading-edge software initiatives early in 2004.

Kyocera Mita is committed to maintaining its current industry-leading position of having one of the strongest, most comprehensive and reliable product lines in the marketplace. As we continue to refresh our product line with innovative laser printers and MFPs, we look forward to 2004 because we believe it will provide Kyocera Mita with a platform for accelerated growth as we proceed on our mission to double our business to $1 billion in revenues by 2006.

Kyocera Mita attributes much of our success to our loyal dealers who have overcome many geo-political and economic obstacles over the past several years to continue their accomplishments within their local markets. But the reality is that 2004 will be a great year to be a Kyocera Mita dealer. In fact, many of our dealers are projected to experience tremendous growth. Our dealers are fortunate to represent one of the strongest, best-managed companies in the world, and a brand that is becoming stronger every day. Led by the energetic and driven leadership of our president, Tony Pater, we will carry on our efforts to become the independent dealers' manufacturer of choice. With the solid combination of a loyal dealer channel, incredible products and a clear vision for how to market solutions in the near future, 2004 will prove to be a banner year for Kyocera Mita and our dealers.

Sharp Electronics Corp.
Ed McLaughlin
President
Sharp Document Solutions Company of America

Just as information and the speed of its communication grows and changes each day, the evolution of the imaging marketplace is dynamic. Sharp and its dealers are committed to take on these challenges, answer customer requirements and maximize their workflow. And, the efficiencies and creativity of an independent dealer channel has and always will be the cornerstone of Sharp's success. Our mission is to provide them with the tools to capitalize on their strengths in application customization and customer focus.

The turning point of these changes is the role of the MFP in the office. As more organizations become accustomed to the capabilities of their MFP as a robust network printer, the natural progression will be to discover more ways to maximize their investment and increase productivity. The next step will be making the MFP not only the default output device, but also the input device of choice. The goal of scanning documents, digitizing non-coded information and bringing paper back onto the network will be one of the goals of every successful organization. The implementation of this task will be their challenge.

Fortunately, independent dealers are best positioned to take advantage of this evolution. The strength of the dealers has always been the ability to quickly adapt to the needs of their customers and provide services to help them fulfill their requirements. The expertise needed to provide these services should be the goal of every dealer.

Sharp dealers have an enormous opportunity to take advantage of this change with Sharp's innovative technology. As an example, Sharp continues to lead the industry in providing network and data security for its MFPs. The increased awareness of security has gone beyond just the government and is also a concern within the commercial environment. As companies input more information onto the network, security of the network becomes even more important. There is a definite need to protect sensitive information. Sharp has addressed this concern and our dealers have been able to take advantage of this with Sharp's Data Security Kits and provide the answer for secure information.

As dealers continue to better define the role of an MFP on their customers' networks, the next challenge will be how to store that information. The market potential within this arena is dramatic, but the expertise required to truly provide a value-added proposition will fall in smaller skill segments. I would encourage dealers to take advantage of all of their manufacturers' training programs to sharpen their competitive edge.

The other significant development in the market will come from the growth of workgroup color in the office. Sharp's strategy will be built upon the introduction of several workgroup color products in 2004. We anticipate that color will become as common a feature as duplexing is today. We are prepared to capture a significant portion of this emerging market with our new AR-C260. This is the beginning of Sharp's plan to bring to market practical/cost-efficient products that will position Sharp as a long-term leader in the future of business color.

Clearly, product is critical to the success of any independent dealer. Our focus is to provide a complete and profitable line of innovative products by decreasing support costs and providing innovative designs that increase serviceability.

Sharp focuses on the independent dealer channel because it is best positioned to meet the needs of the changing market. We are unique among manufacturers because our sole focus is on the independent dealer channel and we operate every day without any risk of conflicting interests or goals. The focus manifests itself in many ways, centering on how to best support our dealers. As an example, our Online Training through Sharp Academy continues to lead the industry by providing online seminars and Broadcast Shows on how to grow businesses and maximize selling skills. "My Sharp" will also take training to the next level by providing dealers with an online program to train their customers. It allows dealers to provide customized online training sites for their end users. This will help reduce dealer support costs, and help users understand the complete capabilities of a Sharp MFP.

If there is one constant in the annual industry forecasts, it is that there is more change on the way. Just as these forecasts look to the future, our goal is to continue to provide our dealers with the tools to prepare them for the challenges ahead. Our collective success will be built upon allowing Sharp dealers to do what they do best: manage and grow their business in the market they know best, their own.

Toshiba America Business Solutions Inc.
Rick Taylor
Senior Vice President of Sales, Marketing and Business Operations

In challenging economic times, companies look for cost-cutting, profit-saving solutions that demonstrate tangible, traceable benefits to their bottom line. In recent years, manufacturers like Toshiba have stepped up to provide the combined effectiveness of technologically advanced multifunction products (MFPs) and document management software solutions to meet these needs, offering enhanced productivity benefits that translate into significant return on investment.

Today, industry analysts are forecasting an economic upswing for 2004 and beyond, with companies beginning to make the turn from protecting profitability to driving growth. The office equipment industry is ready for this economic shift, and independent dealers who are well prepared to meet the needs of their customers will reap the benefits of this upturn.

The adoption of increasingly sophisticated, network-connected MFPs is changing the sales landscape, with more and more dealers selling to IT managers who can easily understand the impact efficient document management systems can have on their company's bottom line. In fact, industry analysts have recently forecasted an increase in overall IT spending to replace aging equipment and integrate new technologies that will improve efficiencies in the workplace.

As we move into 2004, our industry will see accelerated growth in two primary areas: (1) the continued emergence of electronic document management; and (2) the increased desire for affordable color in the office.

Today, half of all network-connected users are looking to MFPs to meet their growing document management needs — products that offer copying, printing, faxing, scan-to-file, scan-to-e-mail and e-filing capabilities all in one unit. This represents a staggering leap versus years past when an overwhelming 90 percent of networked users still held firm in their commitment to standalone products. While MFPs certainly are not new to the industry, a few key influences are contributing to this user shift.

First, companies are beginning to recognize their document management process as a legitimate cost center that can be better managed and, as a result, are looking for better product integration and the improved productivity that electronic document management offers. Second, less complex and intimidating products are making it easier for users to grasp their full productivity and cost-saving potential. Finally, dealers continue to become better educated on product capabilities as well as identifying their customers' business needs, and are recommending total solutions packages versus simply selling "the box." It is a combination of the need for new solutions, better available products and dealers conducting themselves more as business consultants that is enabling the marketplace to catch up with technology's current capabilities.

Toshiba recognizes that our future lies in the direction of integrated office equipment, allowing businesses to seamlessly handle the input and output of both electronic and paper documents. This year, Toshiba created an all-in-one, multifunction processor called e-Bridge, a technology platform that combines copying, printing, scanning and networking capabilities into a single, unified architecture. e-Bridge ushers in a new era of connectivity and will ultimately unify Toshiba's entire MFP product line — both black and white and color.

Toshiba envisions 2004 as the year that realizes a significant shift toward color integration in the general office environment. Customer desire for affordable color in the workplace is growing stronger every day as color is being more widely used in routine business applications.

Toshiba is expecting significant market growth for its entire color segment, fueled by the upcoming launch of the e-STUDIO3511 and 4511, the most significant products in Toshiba's history. A full-featured monochrome copier, printer, scanner and fax that also copies and prints in color, the e-STUDIO3511 and 4511 feature the same monochrome cost per copy (CPC) as comparable products currently available, as well as a color CPC competitive with existing color MFPs. And just last month we introduced the e-STUDIO280CP, offering organizations an affordable color printer option without sacrificing speed, productivity or image quality.

Beyond superior technology and software solutions that meet the needs of the marketplace, the key to Toshiba's growth is our dealer network. As the backbone of Toshiba, the independent dealer represents our most valuable customer. Just as we make it a priority to develop the highest quality products for our end users, we are equally committed to making sure Toshiba dealers have the tools they need to be successful.

Today's independent dealer is best able to compete in the current environment by being educated and well prepared to not just meet, but exceed customers' needs. To ensure dealers stay a step ahead, Toshiba offers the most comprehensive dealer training program in the industry. From our award-winning FYI Internet portal to our training methodology, we incorporate today's technology, such as e-Le@rning, to connect dealers to training resources, free downloadable materials, live training sessions and archived Webinars — anytime from anywhere in the world.

Additionally, with new program offerings like Toshiba's Web-based Encompass Document Analysis Program, our dealers can easily gather the information needed to gain valuable insight regarding a customer's document output processes and expenditures. Encompass allows dealers to uncover a wealth of hidden cost-savings opportunities and easily develop proposals that optimize a company's fleet, while demonstrating an overall reduction in total cost of ownership (TCO).

Toshiba is dedicated to supporting our dealer channel through the delivery of leading-edge products, software solutions and sales tools, like Encompass, that will enable you to succeed in our ever-changing

Samsung Electronics America Inc.
Jonathan Fischer
National Sales Manager, BTA
Digital Information Technology Division

Samsung Electronics America's Digital Information Technology Division (DITD), located in Irvine, Calif., is the U.S. subsidiary of Samsung Electronics Company Ltd. (SEC). Samsung's DITD markets a complete line of award-winning laser printers, fax machines and multifunction devices, TFT and CRT computer displays, and ODD (optical disk drive) and HDD (hard disk drive) drives for professional, corporate and SOHO users. DITD also markets large-screen plasma displays designed specifically for the professional and commercial markets.

When it comes to laser printers and multifunction products, Samsung is the world's second largest laser engine manufacturer and winner of more than 160 editorial awards in the last two years. The company has experienced tremendous growth since entering the U.S.-branded printer business in 1999. Today, Samsung offers a complete line of monochrome laser printers, fax and multifunction products that are ideal for home and small-to-medium-size business use, as well as corporate workgroups. With MSRPs ranging from $249 for printers to $2,195 for multifunction products, the current lineup offers output rates ranging up to 25 pages per minute (ppm).

Samsung has recently seen a dramatic evolution in the way workers conduct business in that they require access to documents anytime and anywhere. Because of this change, we believe there will be more non-traditional methods of creating, distributing and storing documents that involve a seamless integration of different digitally based products. This includes the ability to print documents wirelessly from a PDA, the use of thumb drives and USB drives, and a closer synergy between fax and e-mail. Additionally, full-color output will become more prevalent. To accommodate these changes, the level of training and support by the dealer will need to increase as digital products become more robust and application oriented.

The independent dealer should focus less on vertical selling and more on horizontal selling within their accounts. A successful dealer will be defined as one that not only "capitalizes on the clicks," but also provides a total solution to their customers by supporting the needs of the entire network. Dealers will need to expand their products and services to include network and server support as well as peripherals such as monitors, hard drives and memory. If a dealership does not move toward the network, they will lose out to the non-traditional dealers who are providing the total solution — the one-stop shop. Additionally, we see a critical need for cross-training of hardware and software solutions. The dealer must invest in human capital and training, and then strive to protect their investment.

Samsung expects that the business laser color printer category will grow dramatically as sub-$1,000 color laser printers start to proliferate in the market. Business users that settled for color inkjet printers in the past are now offered color laser printers that are both affordable and highly innovative. Additionally, we see a similar migration occurring from inkjet to laser technology that occurred between thermal and plain-paper fax machines.

For Samsung, the independent BTA dealer channel provides an additional opportunity for growth and we intend to invest resources in building this channel. We see the independent BTA dealer as an important channel partner in providing a comprehensive level of service and support to the end-user community.

Samsung intends to continue offering products that provide our customers with the features and capabilities that truly impact their business. We have recently offered well-received features such as a low-toner report that allows the dealer to control aftermarket sales; ID Card Copy that has satisfied the overwhelming demands of the medical industry; remote programming that eliminates programming a fax machine from the key panel (saving time and increasing productivity); built-in duplex printing; and internal network cards and built-in wireless solutions that provide an overwhelming value proposition to the customer.

In addition, Samsung consistently increases its research and development expenditure through reinvestment. In 2002, Samsung Electronics invested about 7.4 percent of total sales in R&D ($2.45 billion). Our mission is to continue to provide our customers with innovative products that possess exceptional technology, quality, features, performance and value.

Muratec America Inc.
Jim D'Emidio Vice President of Sales and Marketing

As a secondary product line manufacturer, Muratec may have a somewhat different perspective on the prospects for 2004 and beyond. We share, however, the widely held belief that it is a fantastic time to be in this industry and the prospects for success are outstanding.

For all the talk of today's "ultra-competitive marketplace" (when has it not been?) and the need for businesses to be fast and flexible, the fact is that day-to-day business operations do not change quickly or dramatically. Basic functions making up the creation, distribution, management of documents and business communications in general become ingrained in a company's culture. As a result, they are not easily changed.

So no matter what actual changes do occur in the workplace or what industry analysts' projections may be, it is important for the independent dealer to become part of their customers' business culture. This happens, obviously, through the products and services a dealer offers, but also by establishing a strong and respected dealership brand name.

Muratec is in a unique position to help independent dealers succeed along these lines. Our view is that an emphasis on lower-segment machines — desktop and workgroup units — is important to the success of independent dealers for a variety of reasons: a diverse product offering helps differentiate dealers; quality lower-segment placements contribute significantly to dealership profitability; lower-priced offerings help open doors to potentially larger opportunities. The list goes on.

We also believe that the ever-expanding capabilities of lower-segment machines will make them critical components in daily business functions and, as a result, difficult to displace. Our future Network Gateway Platform, for example, will demonstrably change the nature of lower-segment MFPs. The ability, for example, to search network folders directly on the LCD and then scan hard-copy documents directly to a network file — all from a desktop unit — will be tremendously valuable.

Will end-user demands change and impact what they expect from independent dealers? Yes and no. Independent dealers need to be in position to react to changes in the marketplace driven by end users, but also able to guide the majority of their customer base into taking advantage of products and services that dealers are uniquely qualified to provide.

Consider the notion that independent dealers are doomed if they do not quickly change their business models to a more "solutions selling" approach by providing document management and other service-oriented offerings. Certainly, dealers are well advised to have a strategy for changing, but the market does not seem to suggest this is a pressing issue. Dealers, however, who have made this leap are already reaping the benefits and will be in more favorable positions when the market starts to demand this more consultative approach.

To this end, Muratec has developed the OfficeBridge suite of document distribution applications. OfficeBridge expands the capabilities of Muratec MFPs with affordable network printing, scan to e-mail/file and other functions. With primary manufacturers offering a host of proprietary solutions or partnering with various document management application providers, we believe it is important to offer solutions that integrate with all options. The combination of Muratec MFPs and OfficeBridge does just that.

The same "react and guide" approach for dealers applies to the color market. Until just recently, nothing short of world domination was predicted for color. Certainly color is gaining momentum and will play a big role in the future, but the road there appears longer than anticipated. Even as the cost of color becomes less of an issue, overcoming the perception otherwise and changing the perceived need for color use are obstacles to overcome.

As a secondary provider, it is important that Muratec enter the color market correctly rather than as a "me too" reaction. Our entry within the next few years will stay true to our core business approach of focusing on quality desktop and workgroup level units.

Part of a dealer's ability to respond to marketplace changes is to have a strong and respected brand name. An approach that simply talks about equipment speeds and functions, or one that emphasizes a manufacturer's brand, does little to distinguish a dealership. We find that our most successful dealers are recognized in their markets as trusted and respected providers of business equipment and productivity solutions.

Going forward, Muratec will also continue to focus on distributing our products exclusively through the independent dealer channel. Suggesting that our dealers simply need to get to their customers before they think about buying supplies at a retail superstore is not a particularly palatable message. Our approach is to treat our dealers as customers, not as extensions of a manufacturer's direct-sales branch. We believe it is a philosophy that benefits Muratec dealers and their customers.