Watch the birdy: Canon begins $10bn image overhaul

Speaking at Canon Expo in Paris, Fujito Mitarai, CEO of Canon, said the company's future lies in IP.

"Network connectivity is the first step in adjusting our focus to respond to the changing world and prepare ourselves for the 21st century," he said.

"We are shifting our business domain to the IT domain - Canon has already made a successful transition from analog to digital products. We will establish a solid position in the new digital arena and transform legacy printers and cameras into a digital business."

Canon's plans include using Bluetooth technology, speech recognition, printers within digital cameras, e-maintenance and document management services.

Canon will divide its business into three separate divisions - photo, industry and office digital products. In addition, Canon will operate three regional headquarters in Japan, America and Europe.

Mitarai claimed the company has undergone a programme of management and production reform to provide extra capital for reinvestment in its future technologies.

"Our automated warehouse system has made 18 other systems redundant and we have saved $1bn in inventory cost savings in management and production reform. These reforms and others have freed up cash flow, paid off $3.75bn in debt and upped our capital ratio," he said.

Julio Vail, analyst at IDC, said network connectivity was an essential but difficult change for a printer company to make.

Vail said: "It is very difficult to change a company. Any company can be successful if it has people and resources but there are other important things to consider- it is quite a culture change."

He explained the technological know-how required on the part of Canon will have to be stepped up as the demands in the digital marketplace are far greater. He said: "The analog printer business has high profit margins as the channels sell to administrators, but in the networked digital sector there are lower profit margins - you sell to the IT director and sales teams need greater expertise."

Vail added that Canon has a lot of work to do if it is to compete with market leader Hewlett Packard.