U.S., W. European and World Wide Market and Trends for Laser and Inkjet Supplies John Shane Director, Communication Supplies Consulting Service September 2010

Focused Credible Responsive Visionary Industry analyst firm focused on the consumer imaging, office document technology and production printing & publishing industries. UK Boston Beijing Tokyo Focused Credible Responsive Visionary

Relationship-Based Consulting Services Hardware Services Software Supplies Digital Photography Image Scanning Photo Printing Internet Imaging Digital Photography Internet Imaging Image Scanning Communication Supplies Photo Printing Consumer Digital Peripherals Solutions Image Scanning China Printers Network Document Solutions Managed Print Services Dynamic Content Software Network Document Solutions Communication Supplies Office On Demand Printing Wide Format Printing Jetting Technologies Production Workflow Solutions Document Outsourcing Business Development Strategies Dynamic Content Software On Demand Printing Production Workflow Solutions Communication Supplies Production

U.S. Print Volume (B) “Print” volume withstood previous recessions Explosion of devices, analog to digital Hint of some impact from recessions Print volume declines in ‘08 and ‘09 Market is mature Recession is be deeper Office market is most vulnerable Fewer people and less activity Focus on costs, electronic workflow Production is more resistant Analog to digital Higher value pages (color) Home may be the most resistant –but for photos?

Recession’s current impact on the supplies market Overall print volumes are down in ‘09, 9% from the peak in 2007 Reduced headcount and activity Emerging MPS impact Great incentive to save money on office supplies 3rd Party Product gains share but not enough to offset overall decline 35% share for B/W printer, 23% share for B/W MFPS, 6% share for Color devices Duplex rates Restricted color use Growing interest in Managed Print Services Print volume reductions come with MPS

Recession’s longer term impact on the supplies market Slower growth than previously forecasted Slow return of white collar employment Residual reluctance to increase costs Slower decline for B/W printing Slower shift to color, on-going controls Some aftermarket share gains to stay? MPS gains share and impacts supplies Print volume reductions within an organization Shift to less-paper processes Increased use of 3rd party Duplex printing Shift to higher volume machines with lower CPP? InfoTrends believe that the recession will have a long term impact on print

Supplies Market Forecast 2008-2013

U.S. & Western Europe Installed Base Forecast Units (000)

U.S. & Western Europe Total Print Volume Forecast (B)

World Total Print Volume (B) Electrophotography and Desktop Inkjet

World Total Print Volume (B) Electrophotography and Desktop Inkjet

U.S. & Western Europe Electrophographic Marking Supplies $M at Final POS Electrophotographic Copier and Printer and MFP Total Value=Toner, Developer, photoreceptor and Residual Cartridge US Western Europe

U.S. & Western Europe Electrophotographic Marking Supplies $M at Final POS Electrophotographic Copier and Printer and MFP US Western Europe

U.S. Serial Inkjet Cartridge Units (M) Serial Inkjet Printers/MFPs Small growth in cartridge volumes….Cartridges increase despite stable print volumes as OEMs introduce smaller yield cartridges to lower the basket/entry price of their consumables. US larger again – Photo printing less of a home activity in Europe, office printing more likely to be black. US Western Europe

U.S. Serial Inkjet Cartridge $M at Final POS Serial Inkjet Printers/MFPs Revenues flat due to OEMs trying to lower their consumables entry price. Inkjet unlikely to decline due to maturity of the market…..Product evolution (i.e. Wi-Fi etc) may cause shift in overall IB levels, but print volume expected to remain stable. US Western Europe

U.S. Facsimile Marking Supplies $M at Final POS Revenue declines inline with IB US Western Europe

U.S. Total Marking Supplies $M at Final POS Western Europe

World Total Marking Supplies Value at Final POS $M Electrophotography and Desktop Inkjet

World Total Marking Supplies $M at Final POS Electrophotography and Desktop Inkjet

WW Marking Supplies Value at Final Point of Sale $M

OEM vs. Aftermarket

U.S. Aftermarket Share of Total Marking Supplies $M Electrophotography WE

U.S. Total Aftermarket Supplies Revenue at Final POS $M Electrophotography WE

U.S B/W Laser Cartridge Channels 2009 Share of Units

U.S Color Laser Cartridge Channels 2009 Share of Units

U.S. Color Aftermarket Issues Aftermarket penetration about 7% Higher for separates and for non-Chemically produced toner Lower for AIOs Developer AIOs very difficult . Barriers are: Toner Matching toner to drum Process problems/reliability Reseller concerns? Users are ready to try aftermarket color Resellers may not be ready to offer them

Leading laser cartridge manufactures supplying to the US market Remanufactured Cartridges New Build Clover (US, Mexico, Canada, Vietnam) Ninestar / G&G (China) (Clover) West Point Products (US) Print-rite (China) Nukote (Mexico) Uninet (China) MSE (US) Media Sciences (production in China) PTI (US) GPI (Taiwan) Print-Rite (China) GCC (Hong Kong) Turbon (US/Europe/Asia) Hana (Korea) AFEX (China) MMC (China) Mipo (Hong Kong) Others

Q47: Toner Cartridges Typically Purchased for Laser PRINT Devices Which type of toner cartridges does your company typically buy for your laser printers or multi-function devices? N = 306 303 302 303

Q53: Whether Toner Cartridges are Refilled For the non-OEM, refilled, remanufactured, compatible toner cartridges that you use. N = 177 110 115 163

U.S Inkjet Cartridge Unit Demand (M) Integrated cartridges remain the majority in the US, due to the dominance of HP. Decline in lexmark has been offset by growth of Dell.

Western Europe Inkjet Cartridge Unit Demand (M) Tank based cartridges are much larger in Europe due to the strength of Epson and Canon. In addition, the emerging brands (Brother, Kodak) both use tank based systems, and even newer Lexmark models are switching to tanks. As a result, tank based cartridges are expected to increase their share over the coming years.

U.S. Aftermarket Share of Inkjet Cartridge Units Some significant shifts were seen in 2007 when Epson suceeded in getting the ITC injunction. Around the same time HP’s agreement with Staples also saw their AM share impacted, and Canon’s shift to integrated cartridges and use of encrypted chip technology also had a visible impact on their loss to AM.

Western Europe Aftermarket Share of Inkjet Cartridge Units Less volatility in Europe – Canon has succeeded most due to their introduction of integrated carts and encrypted cartridges…..Brother have seen an increased loss over time as their installed base has increased, and they now present a more sizeable opportunity. Lexmark’s loss to AM has also increased over time as their installed base has aged as they have reduced the number of new printers they are bringing to market.

U.S. Aftermarket Share of Inkjet Cartridge Units Here we clearly see the effect that the Epson ITC……

U.S. Inkjet Aftermarket Product Types Integrated Cartridges While you wait cannibalising other AM solutions rather than impacting on the OEM share

U.S. Inkjet Aftermarket Product Types Ink tanks Growth in Reman driven by transition of Epson product away from new build……again while you wait impacting upon other AM rather than OEM

Western Europe Aftermarket Share of inkjet Cartridge Units In Europe the aftermarket share of tanks has declined but is expected to recover slightly over time. On integrated cartridges the AM share is likely to decline slightly as Lexmark becomes a less important player, and the average moves more in favour of HP

U.S Inkjet Cartridge Channels 2009 Share of Units Aftermarket in US heavily reliant on Internet channel……Retail channel only stocking most popular SKUs/brands to maximise shelf space

Q48: Inkjet Cartridges Typically Purchased for Inkjet PRINT Devices Which type of inkjet cartridges does your company typically buy for your inkjet printers or multi-function devices? N = 306 303 302 303

Q54: Whether Inkjet Cartridges are Refilled For the non-OEM, refilled, remanufactured, compatible inkjet cartridges that you use. N = 158 71 68 138

MPS Impact on Supplies and our evolving need to print

Reasons for Office Printing Emerging Rapid Growth Peaking Declining Fading Read and Discard Temporary Reference Printing Growth Transactions Collaboration/Editing ? Archival/Storage Time

Document Printing Migration and Losses Short run color Variable data Conventional Print Photo Books On demand Marketing Mobility Social Media Promotional Production Digital Newspapers Forms Magazines Invoices Office Print Statements Reports/Memos E-mail

Office Document Printing Lifecycle Emerging Rapid Growth Peaking Declining Fading Contracts/Legal Docs Forms/Invoices Engineering Docs Printing Growth Web Pages Financial Reports Maps Proposals Spreadsheets E-mail/Memos Color Brochures Presentations Marketing Collateral Reports Mobile? Newsletters Social Media? Time

U.S. MPS Market Forecast $M

U.S. MPS Share of Supplies Market $M at Final point of Sale – Supplies in Office Environment (Excludes Home and Production)

Percentage of Money Initially Saved by Assessment U.K. France, Germany N = 184 128 Respondents who are currently engaged in MPS

MPS disrupting the supplies market Less print in the workflow More duplex printing Lower cost per page Migration to more cost effective devices Cost pressure across all classes of office devices Increased use of 3rd party supplies Controls on color Cost per coverage pricing model? Disruptions in the distribution channel

Distribution Issues MPS impact on the channels? Who will lose who will win the business as it shifts under an MPS plan All suppliers need to position for MPS What is the role of the contract stationer in MPS? What is the role of the internet specialist? Distributors? How does MPS change supplies buying and delivery?

U.S. MPS Impact on Supplies 2010 Level of MS Service Channel Legacy of MPS Provider End User Organization Size

Mean Importance of Criteria in Choosing to Engage in Managed Print Services – Total (Q.26) (1) Q.26: Rate the importance to each of the following criteria to why you chose to engage in Managed Print Services? (1 to 5 - 1 not important to 5 extremely important) Extremely Important Not Important N = 439 U.K. France, Germany

Importance of Criteria for Engaging in Managed Print Services (1) Rate the importance to each of the following criteria to why you chose to engage in Managed Print Services? U.S MPS Study Not Important Very Important N = 343 Source: Professional & Managed Print Services Multi Client Study

Current Types of Supplies Companies Are Getting Through MPS Services (Q.88) Q.88: What types of supplies are you currently getting through your MPS services? U.K. France, Germany N = 208 Respondents who are currently engaged in MPS

Type of Supplies Received Through MPS Services What types of supplies are you currently getting through your MPS services? N = 157 Respondents involved or familiar with Managed Print Services who are currently using Managed Print Services for their company U.S MPS Study Source: Professional & Managed Print Services Multi Client Study

General Category of Supplies Company Opt to Use More of What general category of supplies did your company opt to use more of as a result of its document assessment? N = 76 Respondents that have used/is using document assessment software or has engaged in some sort of consulting services U.S MPS Study Source: Professional & Managed Print Services Multi Client Study

Marking Supplies Distribution Channel Share 100% 90% Other Channels 80% Internet Specialist Other Consumer Retailer 70% Which channels will make way for MPS? Paper Merchant Hardware Vendor Direct Forms MFR/Dist. 60% Direct Mail Catalogs Warehouse Clubs 50% Computer Superstore MPS Office Superstores 40% Printer Dealers BTA 30% IP Specialist Small BPIA 20% Contract Stationer 10% 0% 2006 2007 2008 2009 2010 2011

Green/Environment

Importance of Environmental Features When Making the Decision to Purchase Printer Products How important are the following environmental features when making the decision to purchase printer products for your business? N = 319

USA: OEM Toner Cartridge Return Programs Company Program Name Year Began Canon Canon’s Toner Cartridge Return Program Recently expanded 1990 Dell Use and Return Program 2003 Epson Epson Toner Recycle Program 2005 HP Planet Partners 1991 IBM IBM Printer Supplies Return Program 2001 Lexmark Lexmark Cartridge Collection Program 1996 Ricoh Used Toner Cartridge Collection Program 1995 Samsung STAR (Samsung Take Back and Recycling Progam) 2008 Toshiba Close the Loop’s “Zero waste to Landfill” recycling program Xerox Green World Alliance 1960s

USA: OEM Inkjet Cartridge Return Programs Company Program Name Year Began Dell Inkjet Recycling Program 2003 HP Planet Partners 1998 Epson Ink Cartridge recycling program Lexmark Lexmark Inkjet Cartridge Return Program (Close the Loop) 1996

Environmentally Responsible Printer Brands Please indicate which of the following printer/printing brands are best described by the following statements: 'is environmentally responsible' N = 319

USA and W. Europe Remanufacturer Laser Cartridge Flows 20% are Collected again ~74% Good* Remanufactured = Recollect only 15% of cartridges needed 85% fall out of the loop ~26% Bad* Recycle or Landfill 80% Land Fill

USA and Europe Remanufacturer Inkjet Cartridge Flows 14% are Collected again ~70% Good* Remanufactured = Recollect only 10% of cartridges needed 90% fall out of the loop ~30% Bad* Recycle or Landfill 86% Land Fill

U.S. What happens to Cartridges/components that remanufacturers collect but can’t use or sell?

Update on Legal Issues

Patents and Intellectual Property OEMs are increasing their vigilance to protect their intellectual property Increasing pace of lawsuits and actions through the US Government International Trade Commission to receive damages, court injunctions or exclusion orders to protect against product that infringes intellectual property We expect that US based vendors and resellers will develop a heightened concern about new-build supplies especially those made in China.

Companies Involved in Recent Suits with Lexmark, HP, Canon or Epson Ninestar Technology Company, Ltd. ● Ninestar Image Co. Ltd. (a/k/a Ninestar Technology Co., Ltd.)   Ninestar Image Int’l Ltd. Acecom Inc.-San Antonio d/b/a Inksell.com ACM Technologies, Inc. Copy Technologies, Inc. Direct Billing International Incorporated d/b/a Office Supply Outfitters and d/b/a The Ribbon Connection Print-Rite Holdings Ltd. Nano Pacific Corporation Nectron International, Inc. Mipo International Ltd. Comptree Ink d/b/a Meritline ABCInk, EZ Printer Essentials.com, Inc. Mextec d/b/a Mipo America Ltd. Seine Image International Co., Ltd. Town Sky Inc. Zhuhai Gree Magneto-Electric Co. Ltd. Ziprint Image Corporation

Companies Involved in Recent Suits with Lexmark, HP, Canon or Epson 123 Inkjets.com   ● Jahwa Electronics Co., Ltd. 123 Refills, Inc. John Does 1-20 Abacus 24-7 LLC L2 Commerce, Inc. d/b/a PrintMicro.com ABCCo.net, Inc. Laser Toner Technology, Inc. AcuJet LD Products, Inc. All Amedia Outlet Corp. d/b/a Inkandbeyond.com Linkyo Corp. d/b/a Supermediastore.com Alpha Image Tech Master Ink Co., Ltd. Apex Distributing Inc. Media Street Inc. d/b/a mediastreet.com Artech GmbH MicroJet Technology Co., LTd. Asia Pacific Microsystems, Inc. Mipo Science & Technology Co., Ltd. Aurora Eshop, Inc. d/b/a butterlyinkjet.com Mipo Technology Limited Butterfly Print Image Corp. Ltd. MMC Consumables Inc. C&R Services, Incorporated d/b/a C&R Distributors and C&R Distributing Ninestar Japan Co. Cartridge Hut and Paperwork Plus Ninestar Management Co., Ltd. Cartridges R Us, Inc. OHM Electric Inc. Chung Pal Shin Ourway Image Co., Ltd. Clickinks.com, LLC Polek & Polek Inc. Color Creation Inc. Price-Less Inkjet Cartridge Co. Compu-Imaging, Inc. PTC Holdings Limited Copylite Products Corp. Quality Cartridges, Inc. Dataproducts USA LLC R & L Imaging Group, Inc. formerly known as IEM Consumables, Inc. Eforcity Corporation d/b/a Eforcity.com Red Powers, Inc. EIS Office Solutions, Inc. REV Corporation E-Toner Mart, Inc. Ribbon Tree (USA) Inc., dba Cana-Pacific Ribbons Inc. Futurewell Holding Limited RibbonTree (Macao) Trading Co., Ltd. Gerald Chamales Corp., d/b/a Rhinotek Computer Products Shanghai Angel Printer Supplies Co. Ltd. Global Business Support Systems, Inc. d/b/a Printcountry.com Shenzhen Print Media Co., Ltd. Glory South Software Manufacturing Inc. SinoTime Technologies, Inc. d/b/a All Colors Huizhou Jahwa Electronics Co., Ltd. SmartOne Services LLC d/b/a InkForSale.net IJSS Inc., d/b/a TonerZone.com Inc. and d/b/a Inkjet Superstore Tatrix International Ink Lab (H.K.) Co. Ltd. Tully Imaging Supplies Ltd. Ink Tec America Corporation Union Technology Int’l (M.C.O.) Co. Ltd. Ink Tec Co. Ltd. Virtual Imaging Prouducts Inc. Ink Technologies Printer Supplies, LLC d/b/a Ink Technologies LLC Wellink Trading Co., LTd. Inkjetmadness.com d/b/a inkgrabber.com XP Solutions Properties, LLC d/b/a Clickinks.com Inkjetwarehouse.com Inc. XSE Group, Inc. InkPlusToner.com Zhuhai National Resources & Jingjie Imaging IowaInk, LLC d/a/b iowaink.com Zhuhai Seine Technology Co., Ltd.

Q55: Opinion on Counterfeit Cartridges Do you believe that there is a lot of counterfeit toner and inkjet cartridges in the market? N = 306 303 302 303

Q56: Counterfeit Cartridges Causing Problems Do you believe that counterfeit toner and ink cartridges present a problem for your company? N = 306 303 302 303

Summary US and WE are flat with potential for slight revenue growth MPS is a threat to the supplies market growth MPS likely increases aftermarket share and disrupts the channels Green is of growing importance but may have the PR edge Legal is moving into high gear

John_shane@infotrends.com