Dell and Hewlett-Packard Go Head-to-Head in Printer Market
May 28, 2004
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After battling for years to be number one in personal computers, Dell (Round Rock, TX, U.S.) and Palo Alto, CA, U.S.-based Hewlett-Packard (HP) are at war again, this time over the market for PC printers.
Dell has been moving aggressively onto HP's turf in recent months with its own brand of printers, and this week announced a new line of laser printers aimed at small businesses and promising savings of up to 64 percent on ink and toner costs.
Analysts say this is a challenge to HP's most profitable business.
"The highest margins come from the cartridges, they allow HP's Imaging and Printing group to bring in 70 percent of (HP's) operating profit on an annual basis," said Megan Graham-Hackatt at Standard and Poor's.
This unit of HP generates some $6 billion dollars in sales each quarter, or about 30 percent of the company's overall revenues. In the quarter to October 2003, that means an operating profit of more than U.S. $1 billion dollars.
This is not lost on HP's longtime rival Dell, which is introducing a new ink-jet printer at prices 30 to 50 percent less than those of HP and a new low-end monochrome laser printer priced 60 to 75 percent less, noted Smith Barney analyst Richard Gardner.
"For the first time since it entered the printer market, Dell is also below HP on price per page," the analyst said.
Dell's strategy is to put its name on printers from other manufacturers, and bring down prices by offering those makers a chance at Dell's huge customer base, in the manner of Wal-Mart.
Lexmark is Dell's main printer partner, but the new monochrome laser printer is based on Samsung technology.
This irritates HP CEO Carly Fiorina, who fumes, "Dell is not doing anything. It's just distributing other people's products."
But analysts say that Dell nonetheless is a long-term threat to HP's printer business.
"Small businesses have very little brand loyalty, price is their first consideration," notes Malcolm Hancock at the research firm Gartner, who sees an escalating printer war on the horizon.
But Dell, which has been jockeying with HP for the number one position in the PC market in recent years, may not necessarily end up a winner in the printer business, since other players such as Canon and Epson are also active, Mr. Hancock says.
The analyst notes that Dell's reliance on direct sales via the Internet or by telephone— in contrast to HP's large retail distribution—are a handicap in Europe, for example.
"If your printer is running out of ink in the middle of the night, do you really want to wait one or two days...when a competitor's products can be found in a store downstairs?" he said. (AFP)
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