Sales: $106.85 million (1997)
Stock Exchanges: NASDAQ
Ticker Symbol: INDGF
SICs: 3555 Printing Trades Machinery; 6794 Patent Owners & Lessors
Indigo NV is a pioneering developer and manufacturer of digital printing systems using patented liquid ink technology. Indigo’s line of printers enable high-speed, short-run, high-quality color printing on materials ranging from paper to plastic and foil. The company’s plateless, liquid ink design provides picture quality rivaling that of traditional offset printing, while matching the flexibility and speed of use of competing dry ink-based xerographic printing systems. With Indigo’s printing systems, customers—including the commercial printing and product packaging industries—can produce small orders of specialized print runs without the high cost associated with offset printing. In this way Indigo printers enable users to print labels, packaging, cards, and other products geared toward specific markets.
Indigo’s product lines are centered around its E-Print 1000 and Omnius series of digital printers. The company develops and distributes Yours Truly software designed to derive full benefit from the capabilities of digital printing. Indigo also manufactures consumable items, including the color inks developed for its printing systems. In September 1998 Indigo announced the launch of two new printing systems, the e-Print Pro, a low-cost entry into digital printing, and UltraStream, billed as the world’s fastest digital printer. Both printers were expected to ship in 1999.
Although Indigo is incorporated in the Netherlands, its manufacturing and research and development facilities are based in Rehovot, Israel, and its stock is quoted on the NASDAQ stock exchange. The company also maintains corporate offices in Woburn, Massachusetts, and facilities in Canada and Belgium. Being a digital printing pioneer has not been extremely profitable for Indigo. After a surge in revenues in the mid-1990s, the company has seen its sales level off in the late 1990s; the company has struggled for profitability, posting losses in 1996 and 1997, after a profitable 1995. But with the financial backing of investment heavyweight George Soros, who increased his holding from 18 percent to 30 percent in 1997, Indigo has the resources to build its still nascent market, while possessing a protective wall of more than 100 international patents for its industry leading technology. Founder Benzion Landa maintains more than 50 percent of Indigo’s stock through a family trust. In 1998 Indigo denied reports that it has been negotiating a possible takeover by Israeli printing specialist Scitex.
Digital Printing Pioneer in the 1980s
The printing industry’s reliance on liquid ink—and its ability to produce high resolution, high color images—faced a stumbling block with the arrival of the digital era. Digital processes offered vast possibilities for production enhancements, and the printing industry readily adopted computer-driven tools where these could be adapted to the printing process. Yet, if traditional offset printing remained the technology of choice for long print runs, the cost and effort involved in the setup phase limited its practical application for much of what digital printing could offer. Other printing processes, especially xerographic printing, were more adaptable; these electronic printing processes were able to process shorter print runs and even to process a different image for each printed page more easily than offset printing. But xerographic printing remained based on powdered ink, which sacrificed image clarity and color quality for flexibility of use.
In 1977 Canadian-born Benzion Landa established Indigo in the small Israeli community of Rehovot, near Tel Aviv. Later reincorporated in the Netherlands for financial purposes and quoted on the United States’ NASDAQ stock exchange, Indigo was nevertheless firmly rooted in Israel’s growing high technology industry. Landa’s company initially focused on research efforts for developing technology that the company could sell to other manufacturing industries. At the same time Indigo was working on developing liquid ink products suitable for the quickly growing digital printer/plotter market. By the early 1980s Indigo unveiled its Electrolnk, a liquid ink that when heated was transformed into plastic. Throughout the decade Indigo continued to invest heavily in its research and development activities, building a patent portfolio that the company itself would refer to as a “patent fence.” By the early 1990s the company had refined its Electrolnk technology to the point where it was ready to compete not only with xerographic imaging, but as well with traditional short-run printing techniques.
At the start of the 1990s Indigo prepared to move from a primarily research-driven and consumables concern into a full-scale printing equipment manufacturing company. The company’s first product would be a digital plotter/duplicator, bringing the tiny company (its 1991 sales totaled less than US$5 million, generating a profit of $440,000) head to head with such industry giants as Xerox and Canon. At the same time Indigo was attracting interest among other manufacturers in the industry, and the company began to generate revenues through licensing its technology. Nevertheless, Indigo remained focused on bringing its own products to market.
Digital Printing Revolution in the 1990s
In 1993 Indigo prepared to launch the E-Print 1000, a medium-speed sheet-fed press capable of four-color (later, up to six-color) printing directly from a computer file. The E-Print marked a revolution in the printing industry, eliminating the expense and labor of the plate-printing setup process, while offering a print resolution up to 800 dots per inch on a variety of paper stock. The E-Print enabled inexpensive short-run color printing. Images not only could be readily changed, they could be changed from page to page, requiring neither additional setup or pauses in the print run. Instead of printing to metal plates, the E-Print printed to a roller, which then transferred the ink directly to paper. Because the ink could be removed completely from the roller, a different image could be printed with each turn of the roller. At the same time, Indigo’s Electrolnk-based color inks offered print quality rivaling that of traditional printing processes. Indigo began marketing the E-Print 1000 in 1993.
As preparation for its move into full-scale manufacturing, Landa brought Indigo’s headquarters to the Netherlands, placing the company closer to the European market, especially Germany, long the seat of the modern printing industry. Landa next began seeking the financing Indigo needed to move the E-Print into full production.
This financing would come from none other than George Soros, the world-renowned investment giant of the 1990s. In 1993 Soros bought up 12.5 percent of Indigo for some $50 million. Soros’s backing also would prove to be an ingredient in Landa’s next project, that of taking Indigo public. In 1994 Indigo joined the NASDAQ stock exchange, selling 52 million shares at $20 per share. The offering reduced Landa’s personal holding in Indigo to 70 percent. As the stock continued to climb—marking one of the year’s initial pubic offering (IPO) successes—Landa’s paper worth soon would reach some $2 billion. The IPO netted the company nearly $88 million.
The company’s revenues remained more modest, reaching only $73 million in 1994, which nonetheless represented an increase from just more than $13 million the year before. Indigo reached a number of strategic agreements, in particular with Japan’s Toyo Ink Manufacturing company, which agreed to manufacture and sell the E-Print for the Asian market. Sales of the $400,000 E-Print were climbing steadily, meanwhile, nearing 300 machines sold by 1995.
Turning fully to the printing press market, Indigo ended production of its series of plotters in 1995. In its place the company prepared to launch another revolutionary product series: the Omnius press. Whereas E-Print focused on medium-volume single-sheet printing, Omnius brought digital printing to a variety of surfaces, including plastic, cardboard, film, and, especially, cans, bottles, and other packaging surfaces. The Omnius’s chief market target was the packaging industry. Based on the same technology as the E-Print, the Omnius enabled economical color printing for print runs under 100,000 on such surfaces as soda cans or product boxes—making the machine an ideal marketing tool. Packagers could use Omnius to produce personalized and market-specific labels, cartons, and the like, while avoiding the expense of offset printing. Gearing up for the anticipated boom in sales, Indigo rapidly expanded its work force.
On the basis of the new press Indigo’s stock started to soar, reaching $48 per share by the summer of 1995, representing a multiple of some 60 times estimated earnings for the year. Nonetheless, investors soon would become impatient with the company. At the end of 1995, Indigo disappointed. Sales had not reached the expected levels, and the company found itself overstaffed. Despite a strong rise in revenues to $165 million, the company posted its fourth year of losses, of some $40 million. In an effort to move into profitability, Indigo scrambled to restructure its operations, eliminating a large proportion of its work force between the end of 1995 and the first half of 1996. Soros, unshaken, increased his investment to some 18 percent of Indigo’s shares.
Only Indigo combines the quality of offset printing with the power of digital imaging, and the versatility of practically limitless substrates.
Equally important to Indigo’s revised strategy were its efforts to improve its products, especially their print volumes, and thereby improve its clients’ profitability. This had become especially necessary for the company to win new clients, who shied from the high initial investment cost of the E-Print and Omnius systems. Indigo would spend much of the following two years working toward these ends, successfully raising print volumes by some 57 percent on average. The company also would take steps toward lowering the prices of its machines, and it searched for ways to lower the entry barrier to win new customers. Launched in 1997, the company’s Easy Entry program introduced variable pricing for the E-Print 1000, ranging from $199,000 to $379,000. The company also began marketing used equipment as a means of lowering the price barrier for customers.
The company’s losses continued, however, as revenues slumped to $86 million, while net losses topped $73 million. To finance its activities, the company performed a private placement of shares, raising approximately $103 million in 1996. A new private placement in 1997 would add an additional $28 million. George Soros continued to be the company’s ally, building his investment in the company to some 30 percent. Founder Benzion Landa’s personal stake remained at more than 50 percent. In 1997 the company saw an improvement in its financial position, as revenues again topped the $100 million mark, and Indigo managed to cut its losses by some 39 percent, ending the year with a net loss of $45 million.
Through 1998 Indigo continued to improve its profit returns, while introducing two new products: the TurboStream add-on module for the E-Print system, providing a significant volume boost; and the Omnius CardPress, designed specifically for the electronic card market. With more and more businesses offering their own credit cards and customer fidelity cards, the growth in telephone cards, as well as the coming smart card explosion, the CardPress seemed to add yet another revolutionary product to Indigo’s portfolio. In September 1998 Indigo announced two new products, both based on its existing technology. The e-Print Pro was described as the world’s lowest cost digital color press, and the UltraStream promised to be the world’s fastest digital press. Both new products were expected to ship in 1999. At the same time, Indigo, which had steadily improved its ink, both in quality and efficiency, announced new pricing plans for its consumable products, offering what it claimed to be the lowest cost-per-page level in the digital press industry. While being a pioneer had not yet been entirely profitable for the company, Indigo continued to be a favorite of financial analysts, who remained convinced that the printing industry would soon catch up to Indigo’s digital press revolution.
Indigo International Inc. (U.S.A.).
Coy, Peter, “A Package for Every Season,” Business Week, February 6, 1995.
Jaffe, Thomas, “Mood Indigo,” Forbes, July 17, 1995, p. 322.
Rossant, John, “Out of the Desert, into the Future,” Business Week, August 21, 1995, p. 78.
—M. L. Cohen