Creo and Andy Tribute go head to head

Letter from Boudewijn Neijens, VP Marketing of Creo, in response to Andrew Tribute’s article entitled Creo: A Critical Assessment.

Oscar Wilde once claimed that “an unbiased opinion is always absolutely valueless.” Nowhere does that resonate more clearly than in the world of journalism, where contentious headlines always empty the news-stands faster. But sometimes there is no true controversy; just creative story-telling based on a personal – and often biased – interpretation of the facts. Case in point: industry analyst Andrew Tribute, who doggedly continues to resuscitate the decade-old thermal vs. visible imaging debate when it is clearly ready to be put to rest.

Mr. Tribute claims that Creo “never fails to decry any form of CTP except thermal.” Creo has consistently acknowledged alternatives to thermal imaging, most recently in a letter published in the UK’s PrintWeek on 1 July 2004. Indeed, the first CTP systems we ever sold used visible-light, so we know the alternative technology very well. However, we still stand firmly behind our choice of thermal. Both visible-light and thermal technologies will expose plates, but we believe that using thermal is the only practical way for a printer to differentiate through higher-quality output (e.g. using stochastic screening) or to reduce costs by using lower-cost thermal processless plates or Spotless™ printing. While Mr. Tribute may accuse Creo of burying our “head in the sand” by refusing to switch to violet technology, we believe we can deliver far greater value to our customers by developing even better thermal solutions and other innovative products in digital workflow and proofing, rather than investing in an alternate imaging technology that provides no added value to our customers. What really matters in the end is that each customer must decide what makes the most sense for their business and choose a suitable technology to achieve it.

Mr. Tribute claims that violet is taking over the world and offers as evidence that Creo “has lost an estimated 30% [market] share to Screen.” What he neglects to mention is that absolutely all of Screen’s 8-pg and VLF sales in the past few years have been thermal CTP systems...not violet. And while he observed that violet was a “major success” at Drupa, activity at the show indicated that thermal is easily outselling violet. All VLF systems and the vast majority of 8-pg systems sold were thermal, while new thermal systems were introduced by both Agfa and KPG for the smaller-format markets. This substantiates the recent report by VSM – the only group that computes market share worldwide on a systematic basis and interviews all vendors for future sales projections – which states that 64% of all CTP systems sold last year were thermal and predicts that thermal will remain the largest installed base for years to come. Actually, Mr. Tribute himself predicted the exact same thing a few years back: “all signs indicate that it [thermal] will be the dominant technology for the future.” (Seybold Report on Publishing Systems September 14, 1998).

Mr. Tribute also added financial analysis to his repertoire, offering up a pointed opinion on the health of Creo Inc. We respect that he has a right to express his views, but we hope that your readers will choose to form their own opinions, based on the facts and on a wider selection of information sources. We believe that growing a company from $6 million to over $630 million in revenues over 10 years in a very competitive market is generally construed as a success. Our revenues from consumables are up over 50% from last year and we have – in a single year – moved from an unknown player in the plate business to arguably the 4th largest plate vendor. Our revenues continue to increase and our target of 10 percent overall growth for this fiscal year is on track. Although it was not at Mr. Tribute’s suggestion, we have indeed recently announced efforts to cut costs and expect that a leaner operation will help us improve our profit margins in the coming quarters.

Most notably, Mr. Tribute claims that Creo has “failed” in the digital printing arena by only having one customer – Xerox. We chose to focus on building our relationship with Xerox – by far the largest vendor in the production-printing systems market – and our digital print business with them has grown tenfold in less than four years. We are now Xerox’s largest partner for production-printing systems, with over 50% market share.

When reading Mr. Tribute’s carefully selected quotes from financial analysts, one could come to the conclusion that Creo routinely withholds vital information and attempts to confuse the financial community with esoteric calculations. I encourage your readers to review our latest annual report or quarterly earning reports, and compare them to the most reputable public companies. I think you will come to the conclusion that our information is as complete and accurate as it gets. The fact that we state adjusted earnings in addition to GAAP earnings is simply driven by the fact that the financial community wants to compare apples with apples, i.e. wants to see the results of ongoing operations net of any exceptional or one-time items.

Finally, Mr. Tribute comments on Creo’s allegedly “huge” R&D spend of 13.7% of revenues. As with most financial ratios, the question is what is the benchmark? Obviously media vendors such as Agfa, Fuji, or KPG, who buy a large portion of their equipment from OEM vendors and whose revenues are dominated by consumables, spend much less on R&D. Equipment suppliers typically spend 10-15% (although EFI sits at over 25%) and software vendors like Adobe invest up to 25%. This is very much in line with Creo, which develops both equipment and software.

Which brings us to our conclusion: If Mr. Tribute plans to expand his activities to include financial analysis, perhaps we might encourage him to dedicate some time comparing profitability of equipment sales by all major industry vendors (including Agfa, Fuji, KPG, and Heidelberg). We expect he will find that Creo is actually doing quite well. Even better, a thorough analysis of the true cost and value of ownership of thermal vs. violet CTP would be of utmost interest to customers.

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