Dell Computer Corp. will launch its first line of computer printers today, presenting a stiff new challenge to market leader Hewlett-Packard Co. in the area that generates most of its profit.
By entering the printer business, Dell, the No. 1 personal computer manufacturer in the U.S., is attempting to leverage its large customer base and reputation for convenience.
The move also reflects the Round Rock, Texas-based company's ambitions to broaden its offerings of technology products and become a vendor of complete computer systems.
Some analysts think HP, which is locked in a tight battle with Dell over PC prices and market share, should be worried about its printer business.
In its first-quarter results announced last month, the Palo Alto company's Imaging and Printing Group produced $907 million of HP's $1.2-billion operating profit.
"Dell can smell HP's blood," said Credit Lyonnais Securities analyst Gabriel Lowy. "They're going after HP's golden egg. If they are even moderately successful, you're going to see major trouble for HP."
HP had 70% of the monochrome laser printer market in the U.S. last year and 50% of the color inkjet printer market, according to the technology market research firm Gartner Dataquest.
Dell won't reveal its market share goal for the printers, which will be produced by Lexmark International Inc. and sold under the Dell brand name.
The first four models include an all-in-one copier-scanner-inkjet printer for $139, a personal laser printer for $239, and a high-capacity laser printer in personal or network configuration for $499 or $839.
The printers will make it easy for owners to replenish inkjet and toner cartridges, which Dell also plans to sell for $29.95 to $169.
When ink runs low, a message will appear on the screen of the PC user or network administrator. A couple of mouse clicks will link to Dell's Web site for processing orders, which can tell what kind of cartridge the printer needs.
"Our intent is to reinvent the value and convenience of printing," said Tim Peters, Dell's vice president for imaging and printing.
For Dell, getting into printers is more "a defensive position" that could lead to a 10% market share in two years, according to Gartner analyst Peter Grant.
"They need to get into this business because it's such a profitable business," he said.
Lowy of Credit Lyonnais said that with even 10% of the market, "they are going to bring the margins down in that business, and that's something that HP really cannot afford to happen."
For its part, HP is taking Dell's entry into the market "very seriously," said Rob Wait, U.S. commercial marketing manager for HP's Imaging and Printing Group.
But Dell can't match HP's expertise in printing technology, which stems from 17 years of research and development and more than 6,000 patents, Wait said.
Hewlett-Packard shares fell 96 cents to $16.55 on the New York Stock Exchange, and Dell fell 97 cents to $27.81 on Nasdaq.