Electronics For Imaging, Inc. Business Information, Profile, and History

Company Perspectives:

EFI's greatest strength is its spirit of innovation. This spirit is fueled by the creativity of Fiery users and the ideas of our employees. From our intuitive and universal Fiery user interface to our advanced ColorWise editing software, EFI technology creates workflow efficiencies by making copiers and printers invaluable extensions of the desktop computer. These extensions do more than simply print a document. They empower you to quickly and easily express yourself in eye-catching presentations, personalized proposals and more. The only limit is your imagination.

History of Electronics For Imaging, Inc.

Electronics for Imaging, Inc. (EFI) designs and sells hardware and software that support high-quality, low-cost color printing in office environments. The company has established itself as a global leader in its niche since its inception in 1989. Through strong overseas sales, strategic acquisitions, and the introduction of new technology, EFI has been achieving impressive growth throughout the 1990s and into the new century.

Company Origins Up to 1989

Electronics for Imaging (EFI) was founded in 1989 by 51-year-old Efraim "Efi" Arazi, a native of Israel. By the time he established EFI, Arazi had already developed a reputation as a pioneer and visionary in the computer graphics industry through his founding and leadership of Scitex Corporation Ltd. Arazi earned an engineering degree in the 1960s at the Massachusetts Institute of Technology (MIT), where he was also exposed to computers. After graduating, Arazi remained in the United States for a few years and helped NASA develop an early version digital camera. He then returned to Israel and, in 1968, started the company that became Scitex.

During the 1970s and 1980s Arazi built Scitex into a leading developer and manufacturer of graphic design and publishing hardware. Importantly, Scitex is credited with pioneering the electronic color imaging process in 1968, as well as with numerous related breakthroughs in the succeeding two decades. By the late 1980s, Scitex was known as a world leader in computerized color printing. The company's products were used to generate high-quality, prepress, computerized color images that were printed using conventional "long-run" printing techniques. Before Arazi left Scitex, the company was generating revenues approaching $600 million annually and had sold more than $1.5 billion worth of equipment.

In 1988, Arazi walked away from his chief executive post at Scitex, despite the company's surging sales and profits, and started a new company that he dubbed Electronics for Imaging, or EFI, as he nicknamed it. Arazi's plan for EFI was to explore a new sphere of the color imaging industry that had been mostly untapped until that time. "While CEO of Scitex, I began to see an opening for color software, but discovered there was no way to do it within a $600 million company," he said in 1993 in the San Francisco Business Times. "You don't use a Boeing 747 to go shooting at flies," Arazi wryly observed.

Arazi's specific plan was to develop a relatively low-cost, easy-to-use system that would allow users to process and print high-quality graphics, including photo images, in a low-technology environment. Prior to the late 1980s, high-quality color processing and printing was done only on expensive equipment, like that developed by Scitex, and typically by graphics professionals. The potential for a major shift in computerized color graphics printing technology began to emerge in the mid-1980s. During that time, such major copier manufacturers as Canon, Kodak, and Minolta began developing and introducing machines that were capable of generating high-quality color copies for the mass market. The price of that technology declined rapidly in the late 1980s, putting it within reach of many small and midsize companies.

Arazi wanted to initiate a revolution in color desktop publishing similar to the one caused by the black-and-white desktop laser printer. Those systems, introduced in the 1980s, made it possible for individuals to generate black-and-white text and graphics that would have been created just a few years earlier only on expensive, professional, "offset" printing equipment. Rather than develop separate color imaging and printing machines that were the color equivalents of desktop laser printers, however, Arazi realized that all he needed to do was develop software that would allow a desktop computer or workstation to communicate with advanced color copiers. Users could then use their desktop computers and peripherals to print professional looking color images on their copiers.

Top-Notch Team and Pioneering Research Fuels Success in the Early 1990s

Arazi's new enterprise hardly resembled the classic startup venture on a shoestring budget. Aside from access to his personal hoard of cash, Arazi had connections to numerous sources of investment capital. For example, Scitex became a major investor in the company, and EFI was able to get $10.1 million in startup cash in the form of advances on products and sublicenses from copier manufacturers. Indeed, the copier manufacturers eagerly supported Arazi's effort because they realized that his planned system could vastly increase the market for their products. Support from outside sources allowed EFI to show revenues of $3.7 million during its first two years, despite the lack of a salable product.

EFI also differed from the typical startup in that its management ranks were packed with heavy-hitting talent. Experienced veterans on EFI's team included principal scientist Dr. Yigal Accad and director of research Dr. Jacob Aizikowitz, both of whom had worked for Arazi at Scitex. Among other members were: Liz Bond, a former director at Adobe Systems; Donald McKinney, a former vice-president at Silicon Graphics; and David Izuka, a previous WordStar International executive and software industry veteran. In addition to its own staff, EFI benefited from links with researchers at MIT.

The association with MIT was important because it provided the technological foundation upon which EFI would build its first product. EFI became the exclusive licensee of the W.F. Schreiber U.S. Patent 4,500,919. Issued in 1989 and effective for seven years, that patent was the result of eight years and $4 million worth of research conducted at MIT. The outcome of that research and development effort was the first layman-oriented, color preprinting, device-independent technology. A total of four Ph.D. and 12 masters degrees were awarded to researchers who contributed to the project. The chief advantage of the technology was that it brought under control the multiple variables that made it difficult to reproduce color images: lighting, inks, paper, and computer input devices, among others.

EFI's development team scrambled during 1989 and 1990 to build marketable products based on technology related to the patent. It started out focusing on four products: the Eport Color Server, a system that would move color between different desktop publishing and printing devices; the Fiery Controller, a device that would allow color copiers to function as color computer printers; Cachet, a software product that would allow desktop publishers to preview and manipulate color images; and the Color Receiver, which would effectively link desktop publishing and commercial printing systems. EFI planned to license and sell its technology and products to various software, hardware, and copier manufacturing companies.

Innovative Product Development and an IPO During the1990s

EFI introduced the Fiery color server, its first product, in 1991. The Fiery server was a box that housed hardware and software. The box could be used to link a personal computer—Macintosh or IBM-compatible—and a high-grade color copier to manipulate and generate four-color, offset-quality reproductions. A major technological advantage of the product was that it offered, for the first time on a nonprofessional system, WYSIWYG—what-you-see-is-what-you-get—functionality, meaning that the printer produced a true reproduction of the computerized image users viewed on their screens.

The Fiery system was a landmark device and represented the start of a transformation in color printing, enabling users for the first time to print short runs of high-quality color images at reasonable prices. Traditional offset color printers, in contrast, had to produce hundreds or thousands of images to achieve price efficiency. The Fiery system was capable of producing a color document or image for roughly 35 cents a page, whereas the first page printed by a conventional offset system effectively cost $2,000 due to laborious fixed equipment and set up costs. Furthermore, because the technology was new, the price differential between Fiery and color offset printing was expected to increase throughout the mid- and late 1990s.

With its licensing and distribution programs already in place, EFI was able to capitalize quickly on demand for its Fiery system. The company generated sales of $16.43 million and net income of $618,000 in 1991, its first year of product sales. Those figures rose to $53.7 million and $2.18 million, respectively, in 1992. In an effort to sustain that momentum, Arazi decided to generate investment capital in 1992 by taking EFI public. Although his plan was criticized by some analysts who believed that the company's short profit history would minimize cash flow from the sale, the October 1992 offering brought nearly $40 million to EFI.

In 1993 EFI was greeted with a deluge of orders for its Fiery systems from such companies as Canon, Xerox, Kodak, and Agfa (of Belgium), which put the systems in the hands of companies that owned or leased their color copying equipment. The Fiery units were priced between $20,000 and $38,000, depending on printing speed and other features. In addition, by 1993 EFI was beginning to introduce other products from its development pipeline. Early in the year it began selling its Cachet software, which allowed a computer user to scan a photograph into the computer and manipulate the image for printing. That shrink-wrapped product sold for $500 to $600.

Strong demand allowed EFI to boost revenues to $89.5 million in 1993 and net income to nearly $8 million. The company's stock price jumped to $24 going into 1994 and then to nearly $30 later in the year. However, the price subsequently fell to the mid-$20s on speculation that the company's sales would slide early in 1995. That speculation was caused partly by EFI's intent to introduce a new, less expensive line of Fiery controller systems. Some observers believed that the company was trying to dump its inventory before it brought out the new line, thereby artificially raising its stock price. Those critics were undoubtedly surprised when EFI sales and profits continued to surge.

EFI's sales rose more than 40 percent in 1994 to $130 million, and net income increased to a record $21.3 million. Management seemed determined to repeat those impressive gains in 1995. Importantly, the company began selling its new Fiery XJ product line, which was a line of three-color controller products, each shaped like a different-sized rectangular tower and offering progressively advanced features. EFI executed a pivotal agreement with Canon for that company to market, sell, and service EFI's Fiery XJ products under the Canon brand name. That announcement and other positive developments pushed EFI's stock price past $50 by mid-1995.

By 1995 EFI had shipped more than 20,000 Fiery systems. That figure would rise to more than 50,000 by 1996. Sales surpassed $190 million for the 1995 year and were growing rapidly early in 1996 with units being shipped throughout the United States, Europe, and Japan. In 1994, Arazi relinquished his role as president and CEO but remained as chairman of the board while going on to found another new business venture, Imedia Corporation. Arazi was succeeded as president and CEO by 32-year-old Dan Avida, a talented computer engineer who had joined EFI in 1989.

Under Avida's direction, EFI doubled the cumulative number of Fiery controllers sold to a total of more than 100,000 by the end of 1996. In the last few years of the decade, EFI expanded its product offerings and business ventures. In 1999 alone, EFI produced more than 45 new or enhanced products, including its Web-based whiteboard-capturing technology, called eBeam. Also during that year, former vice president and general manager of the Fiery Servers Division, Guy Gecht, took over as EFI president. In January 2000, Gecht assumed the role of CEO, while Chief Operating Officer Fred Rosenzweig was appointed president. Under Gecht's and Rosenzweig's leadership, EFI continued strong growth through acquisitions, original equipment manufacturer (OEM) partnering, and new product development.

Into the Twenty-First Century

Introduced in 1999, EFI's eBeam appliance, which was designed to capture notes off any surface (such as a whiteboard) and transfer them to a computer, established the company's foray into Web-based technology. The eBeam's pen-like sleeves fit over standard whiteboard markers (or other markers) and transmit data to receivers that are mounted to the top of the whiteboard or presentation easel. The material captured by the eBeam can then be transferred to a computer or broadcast over the Internet using its built-in Web technology. The product sold for about $600.

In 2001, EFI introduced its ImagePort accessory, which worked with the eBeam and the growing arena of Personal Digital Assistants (PDAs). With ImagePort, data captured by the eBeam can be downloaded to a PDA or a printer without going through a computer by using ImagePort's infrared technology.

In addition to the eBeam, EFI new offerings included color servers and custom-made technology for the established Fiery product line. Their two new server platforms, Fiery Z4 (for agency and graphic arts) and Fiery X4 (corporate servers), performed two to three times as fast as their predecessors and featured many enhancements. Fiery color servers also stood on their own for the first time, working with color copiers and printers and establishing the basis for partnerships with companies such as Canon, Toshiba, Epson, Ricoh, Xerox, and Minolta.

In addition to those new products, the company designed a platform for digital black-and-white printing with its Fiery X2 controller. Designed to work with the Minolta Di620 black-and-white printer and copier, the Fiery X2 turned monochrome printing into a fast-paced, networked document-creation process. The server also worked with Java-enabled technology to allow users to control printing through the Internet or Intranet. These innovations boosted EFI's revenues for 1999 to $571 million. In 2000 revenues increased to more than $588 million, based on 50 new product introductions.

However, EFI was not focused only on new products during the latter part of the 1990s. The company also launched their Professional Services division, including EFI Academy, which provided training and coursework in computer graphics generation and management, including several personalized classes. During this time, acquisitions became a significant aspect of the company's growth strategy. The first of these occurred in 1997 when EFI took over Pipeline Associates, Inc. In 1999 the company acquired Management Graphics, Inc., a Minneapolis company, developer of the EDOX line of digital color document servers. In 2000 EFI acquired Splash Technology Holdings, a company had sued EFI for copyright infringement less than a year earlier. And in 2001, the buying continued as EFI acquired Dutch-based FAIR's Publishing Solution Group, whose variable data printing applications, which enable custom document processing, were a key asset.

EFI's vision for the future included more widespread use of color in a greater range of documents. The Internet continued to play a big part in the company's growth model. EFI had invested more than $200 million in research and development; the goal of the company into 2001 and beyond was to improve the color document printing process and to establish easy, effective means of communication through its printing tools and software.

Principal Competitors:Imation Corporation; Scitex Corporation Ltd; Interlink Electronics, Inc.; ScanSoft, Inc.; Colorbus.

Chronology

• Key Dates:
• 1989: EFI is founded by Efraim "Efi" Arazi.
• 1991: The company's first Fiery print server is introduced; European offices open.
• 1995: Avida is named president and CEO.
• 1996: Company reaches milestone 50,000 cumulative Fiery servers installed worldwide.
• 1997: EFI acquires Pipeline Associates, Inc.; company enters digital black-and-white market; 100,000 cumulative Fiery servers installed worldwide.
• 1999: EFI introduces eBeam, an appliance for capturing whiteboard images using Web-based technology; Guy Gecht becomes president; company acquires Management Graphics and its EDOX Document Servers.
• 2000: Gecht is named CEO; Splash Technology is acquired; Velocity workflow software is launched; over 700,000 cumulative EFI print controllers installed worldwide.
• 2001: Company acquires the Publishing Solutions Group of Dutch IT specialists FAIR bv.