As president and CEO of a major industry manufacturer, Mike Marusic must be tempted to wear a fireman’s helmet to the office. Just like an effective FD captain, the leader of Sharp Imaging and Information Company of America takes a measured approach to the smoldering post-pandemic flare-ups he encounters on a seemingly daily basis. After all, rushing into a burning building can have dire consequences.
president and CEO,
Sharp Imaging and Information
Company of America
Marusic’s calculating nature has enabled Sharp to weather the storm in spectacular fashion, at least by pandemic standards. Most importantly, the manufacturer finds itself nestled in the top four among industry OEMs by market share. That’s as much a credit to the entire organization as it is Sharp’s handling of supply chain woes and chip shortages. As Marusic sees it, the success comes down to two areas: execution and communication, with a dash of emphasis on the latter.
Having Foxconn as a technology partner certainly gives Sharp a leg up in proffering technologies that can add revenue opportunities for resellers. The OEM has also made (and continues to back) significant investments for rollouts across the A3 and A4 lines. Marusic sat down with ENX Magazine to provide insight into the cadence and decision-making approach he’s followed to enable Sharp to continue garnering more share while ensuring dealer partners are fully aware of the whens and hows that will enable their own growth amid the product disruptions.
Provide some insight into Sharp’s financial performance during 2021. What were some of the variables that played into how the company performed?
Marusic: Our revenues from a top-line perspective were down about 3%, but we managed a good profit level. We had supply chain impacts stemming from companies that provide us components. All our divisions made money in 2021, which is a strong position to be in and provides a lot of stability. In the B2B space, that business was up 8.5% for the year, which was very nice to see. It was similar to where we were in the U.S. operations. We don’t disclose the local markets, but that was in line with where we were, and also a good profit for business—about 4.5%. We did a good job of managing inventory. With supply chain impacts, especially the shipping, we maintained a lot more inventory than we usually do. And that was a big part of our success last year. A lot of dealers have shared with me the difficulties their other OEMs have experienced, so it’s nice to be on the positive end of that conversation. Plus, it helps that we’re well diversified, and we’ve had a good balance of investments. It’s been a very positive year.
What were some of the highlights for Sharp during the past year?
Marusic: The most important thing this year has been supplying product to our dealers, and maintaining inventory was key. When I talk to dealers, I always use 2019 as a basis for inventory comparison so they get a better understanding of pre-pandemic versus post-pandemic. When you look at a dealer and they have product coming off lease that they placed in 2018 or 2019, the ability to have a Sharp product ready to go in 2021 and 2022 was tremendously valuable to the dealer. They didn’t have to worry about extending the leases. The vendor-managed inventory program we put in place about seven years ago really positioned us well for the supply chain issue. We had to understand supply chain A to Z to do that program. As we entered this period, our team was really well positioned to understand what needed to get done, how to do it, and how to make those changes. It’s been a crazy year, but certainly interesting.
In terms of market share, we finished 2021 at about 10%, according to IDC. During the last two quarters, we were over 11%. Considering we were about a 6% market share company a few years ago, that’s tremendous. And as a result, we’ve moved into fourth place in market share among OEMs for the last two quarters. That’s made for a little disruption in the playing field, which dealers have been taking notice of. With that type of sustained success, it’s allowed Sharp to continue investing in new products and categories. We’re seeing the dealers take advantage of our AV and laptop offerings. The ability to get product to our dealers and let them sell other technologies that we can provide on one invoice has been key to our success.
Sharp hosted its first-ever hybrid employee event in conjunction with the start of its new fiscal year. What were your goals for this gathering, and did it meet expectations?
Marusic: It was great just getting people in the room. We had done a few employee meetings where it’s just a few of us in our atrium talking to a camera. You really lose that in-person energy, and I’ll be honest, it was awkward. When there’s so much negativity around, being able to share positive news about the company was really well received. Employees are happy to hear that their contributions actually meant something. We had about 150 people in the audience, and we brought in about 50-75 people for meetings that week. Getting everyone together and planning out things for the coming year was also a nice byproduct. It was productive to have that face-to-face interaction and really talk about the issues confronting us. It comes across better when you can have casual conversations rather than a Microsoft Teams meeting. All in all, I felt it was very positive, and we’ll probably do another update soon with all of our employees. Hopefully, we’ll be able to get everyone together this fall.
At the onset of 2022, Sharp issued guidance to its dealer community regarding chip shortages. Can you provide an update on where you stand with these efforts?
Marusic: We’ve continued to do this monthly. It’s critical to share this with the dealers because they need to plan out what’s going on. We were a little ahead of the curve in this regard; we actually started sharing a monthly update in July 2021 that showed the next 60 days’ worth of incoming product for our dealers. The dealers helped us manage our inventory better because they understood what was coming in and what wasn’t, and they adjusted their business accordingly. That allowed us to load balance our business. It was mutually beneficial. We typically give a 60-day map, but for the May update, I provided guidance through August. Usually it’s been a lot of fun sending that out, because it’s generally good news. But obviously, we had the Shanghai shutdown, where the whole region of China production was down for about eight weeks. So it looks as if Sharp, along with everyone else, will have some challenges in the late summer timeframe. But the most recent updates we received forecast a quick recovery for Sharp. Our production and availability through June are going to be well above the 2019 levels. In fact, as we close May right now, this will be our highest May on record for shipments.
It’s going to be a long year. This supply chain issue isn’t going away until 2023. Others were saying they’d be okay in the fall of 2021, but we were honest; we knew it wasn’t going to be the case. We knew it would be at least a year at that point, and now it looks like it’s going to be a year and a half.
If the supply chain issue continues for another year, how would that impact your bottom line?
Marusic: We’ve done well. We’ve been profitable in the U.S. and over in Japan. I think the real issue is the investment in chips that Sharp has been willing to make. There are enough chips, but it’s an interesting dynamic. In 2021, more chips were made than in any other year in history. It’s not that production is down, but rather that demand is up. OEMs have to decide if they’re willing to pay slightly more for those chips, and we’ve been willing to do that. There’s a cap in growth though; with increased demand comes higher pricing, which makes it harder to buy even more chips. So there’s a balance. We’ve been comfortable with pricing of chips at 120% of 2019 levels, so we should be fine. I think the bigger issue is how many companies continue to make those investments in providing the chips. That’s really where the opportunity is for Sharp.
Earlier this year, Sharp rolled out the latest iteration of its AQUOS Board interactive displays. How have these products fared in a post-pandemic landscape?
Marusic: Right before the pandemic, we introduced our Windows collaboration display, and it came out exactly a week before everything shut down in March 2020. And that really, really hurt us. People were completely out of the office, and companies shifted their priority to other technologies. As companies now have done a hybrid approach, I think it’s actually helped us. With the unpredictability of remote and on-premise, there’s a focus on the ability to share content and do collaboration in real time. People understand how to use Microsoft Teams, Zoom meetings and Google Meet, so they’re able to share content. It allows for a little bit more interaction than perhaps was done during face-to-face meetings. You might not draw something when you’re face to face, but you’re more likely to do that when remote. So we’re having a lot of success.
It’s going to be a long year. This supply chain issue isn’t going away until 2023. Others were saying they’d be okay in the fall of 2021, but we were honest; we knew it wasn’t going to be the case. We knew it would be at least a year at that point, and now it looks like it’s going to be a year and a half.
What’s nice is our copier dealers are picking up on it. In April, one of our copier dealers—not a huge dealer, either—won a $1.5 million deal on the interactive board. We’re beginning to see a lot of dealers take these products on. Dealers don’t have to be Sharp customers to sell our interactive boards. They’re available through IT distribution, and a lot of our biggest customers are actually non-Sharp MFP dealers. With our AV business, the office space is doing well. Surprisingly, what’s really been harder for us is digital signage. Brick-and-mortar-type businesses are struggling with openings and traffic. We haven’t seen investments there in digital signage, but as far as office technology, it’s been pretty good.
While A4 and hybrid/remote tools continue to grow, Sharp has also been busy with the launch of the A3 color workgroup document systems as well as the Pro Series line of production printers with inline finishing capabilities. Can you tell us a little about both releases and the philosophy on fortifying the entire catalog?
Marusic: We’ve been trying to do all the above. In the A4 space, as we maneuver the supply chain issues, I told our dealers in early 2021 that I would pause some production of A4 because we needed the chips in our A3 products. I got some criticism from others about it. But looking at it from a dealer perspective, Sharp was not strong in A4 a few years ago, so the majority of fleet turnover would be A3. I wanted to secure the dealer’s existing business; I didn’t want them to not have product in A3. We quickly recovered and were able to catch up a little bit later in the year. As far as our A4 business, we’re actually up over 200%. I’d like to do a lot more, but it’s really hard right now due to chip prices. It’s a tough balancing act, and we need to layer in the logistics side of it. It becomes really hard because the cost of importing the $600 printer becomes fairly high relative to the cost of printers.
We’ve made a lot of investments, and the decision to build out the products that we’re introducing this year was made during the pandemic. A lot of companies were able to introduce products during the pandemic, but those planning periods happened prior to knowing what was going to happen in the world. Right in the midst of a pandemic, Sharp decided “we’re going in.” We were refreshing our entire A3 color and, ultimately, monochrome lines this fall. We’ve introduced new production printers. Hopefully, the dealers are seeing that we’re really committed to the office space. We’ve been able to bring new technologies. I’ve talked a lot with our dealers the last couple years about our access to new technology before most of the market can get it due to our Foxconn relationship. Bringing these new products out with different chipsets in them that maybe aren’t yet available to the industry allows us to avoid some of these supply chain bottlenecks. And we’re buying from different suppliers and using different chips. That’s another advantage we’re seeing.
How has your Sharp Business Systems direct business fared?
Marusic: We had challenges a few years back in driving profitability. I think a lot of OEMs struggle with their direct branches as far as being profitable and growing the business. Over the last year and a half to two years, we’ve made a lot of progress. The branches are profitable and growing. Like everyone else, our branches struggle with the click counts, which has had an impact on the overall business. From my standpoint, branches really allow us to understand the life of a dealer. As we go through the struggles of clicks and different types of service, we’re still servicing the machines but not getting the same volumes as before. All those struggles help us better understand what we need to do for our dealer community. We’re also seeing what’s difficult or easy and what does or doesn’t work in selling laptops and the displays to existing copier companies. We bring that knowledge and insight into our dealer channel.
What else can we expect to see this year from Sharp in terms of new product rollouts?
Marusic: In the fall, we’ll be refreshing the monochrome A3 line, and we’ll be sharing more details with the dealers shortly. With some of the hiccups in the supply chain, we’ll be announcing products a lot earlier than previously. Traditionally, companies such as Sharp have tried to wait until the 11th hour to introduce products. I think more communication is better at this point. We’re going to have a pre- pre-announcement in the sense that it’ll be months before we introduce the product, but we’ll share the details with our dealer community. In the spring or into 2023, we’ll have more A4 products coming to market. The entire A3 product line will be refreshed and we’ll have a lot more A4 products coming soon.
Is there anything new on the horizon from a program or partnership standpoint?
Marusic: We’ve done a lot of revamping of our programs during COVID. I think we have a solid program in place right now that our dealers really like, and we’ll do any necessary tweaks to make it better. In terms of partnerships, we can’t announce any right now, but we’re looking at a number of different things. For Sharp, it’s a little different. Other OEMs have to go outside their organization to bring in technology for their dealers. We can do it in house, so things such as Dynabook or NEC displays bring another level to our dealer community that they don’t get elsewhere. Whether you sell a display or Dynabook, we try including that in your goals. It’s another value we bring to our dealers. We’re still not where we need to be; we can always get better at it. We have a lot of dealer participation, but I think we can probably get another third of our dealers involved in that space.
What are Sharp’s goals for the balance of 2022 and beyond?
Marusic: We’re in a good spot because we were lean going into the pandemic. Now, it’s all about building out our foundation so we can be more nimble than our competitors. I want to continue that progress of expanding our market share and expanding penetration with the dealers. I think the industry really shifted its viewpoint of Sharp. Five years ago, I think it was fairly common for a dealer to question whether or not Sharp would be in the space. I heard that a lot. Today, few people doubt Sharp’s going to be among the last standing—dealers tell me as much. That topic’s been closed.
Dealers can see how we keep making investments in the office space. It’s great to talk about it, but how do we support our dealers in selling these other products? How do we support them in going into markets and understanding how to lock in customers across all technologies? That’s where we have to improve. Dealers see Sharp’s commitment to staying in the space, not diversifying away. We need to make sure our dealers are fully capable and buying and selling on a regular basis. Finally, we just need to secure that position. We’ve had a lot of growth, and growth can be fickle. So we’ve got to stay grounded and really focus on executing what we’ve been doing. If we can continue with our market share growth and get dealers buying into those other technologies, I would say that would be a successful year for us.
And hopefully, there’s a brighter light at the end of the tunnel—one that doesn’t include supply chain snafus and inflation. Obviously, that’s going to make it really tough.
Marusic: The biggest thing I see right now is inflation, as companies have made tougher decisions. If we go into a recession, I think things will change dramatically. Some have argued that we may be in a recession already; I’m not there yet, but I’m not an economist. For our industry, it comes down to how do we execute properly? Too much was spent for years in this industry on pie-in-the-sky ideas. I think execution always wins, and communication always wins. Effective communication can get you through any issues, and hopefully as an industry, we continue to focus on it.
