HP Rolls Out Fast Printers to Keep Lead
In an effort to keep its most profitable division from losing more ground to competitors, computer maker Hewlett-Packard Co. on Monday introduced a line of printers featuring a new high-speed printing technology.
The lineup includes what HP calls the world’s fastest photo printer and is aimed at fending off challenges from hard-charging Dell Inc. and other rivals, including Lexmark International Inc.
Palo Alto-based HP’s share of the U.S. market for so-called all-in-one inkjet printers, a benchmark for success in the consumer market, fell to 35% in the first quarter from 47.4% a year earlier, according to research firm Gartner Inc.
Most of the lost business went to Dell, whose share of the market skyrocketed to 15.6% from 1.5% during the same period. Although HP is still the world’s No. 1 seller of printers, “it’s important for HP to defend its market share,” said Bruce Raabe, chief investment officer for Collins & Co. in San Francisco, which owns HP shares.
“This is an industry that is always changing,” Raabe said. “Because of that, it’s important for HP to be aggressive about developing new enhancements to their printer line so existing customers will consider upgrading and new customers will consider coming to the brand.
“That should go a long way to protecting their margins in the printer business.”
In HP’s fiscal second quarter, which ended in April, operating profit for its imaging and printing division was $814 million, down 15.4% from the second quarter of 2004. Over the same span, the division’s operating margin fell to 12.7% from 15.8%.
HP’s latest printers are based on new technology -- developed over five years at a cost of $1.4 billion -- that dramatically increases the number of ink-dispensing nozzles.
The high-speed photo printer, for example, crams 3,900 nozzles into the print head, compared with 1,200 previously. The new model can produce 4-by-6-inch color prints in 14 seconds, four times faster than before, said Vyomesh Joshi, HP’s executive vice president for imaging and printing.
“Lexmark has no similar technology from a business model point of view,” Joshi said. “Even others like Epson and Canon don’t have similar technology, and it will take them three, four or five years to catch up.”
Dell doesn’t make its printers. Lexmark builds Dell’s inkjet printers, and Dell has partnered with other printer makers that manufacture laser and photo printers with the Dell brand.
“We don’t comment on moves by our competitors,” said Dell spokesman Venancio Figueroa.
HP’s new printers and future product offerings should help the company raise its share of the global imaging and printing market to 17% from 11% by 2010, Joshi said.
He said HP should be able to expand into new markets such as retail photo finishing, labeling and printing on packaging, signage and corporate brochure printing.
“We can double our business in the next 10 years,” he said.
HP’s stock slipped 15 cents to $24.13 on Monday. Analysts, although impressed with the new printer lineup, still want to see improving profitability in the company’s printing division.
“Product introductions are important, but the financial markets will continue to focus on the margins of HP’s printing segment, which have been pressured the last few quarters,” said Nick Nilarp, an analyst for Fitch Ratings in New York.
Still, he noted, “HP is the leader in the market and has enough [research and development] and intellectual property to remain the leader for the next few years.”
HP also contends that its new printers produce photos for about 24 cents apiece, 5 cents less than the industry average.
Apple Computer Inc. prints and mails photos for 19 cents a copy, and so does Snapfish, HP’s recently acquired online photo service. With a prepaid card, however, photos from Snapfish can cost as little as 10 cents each. Hewlett-Packard has signed a deal with Walgreen Co. to offer customers of the largest U.S. drugstore chain access to Snapfish.
HP also introduced three digital cameras that incorporate new features including the ability within the cameras to stitch together several photos in a panorama view, “video action prints” to extract publishable photos with resolution of about 1 megapixel from video clips taken by the camera and automatic saving of photos with three levels of backlight adjustment so users don’t have to set the adjustment manually.
Although Dell is encroaching on HP’s printer territory, HP struck back at its rival Monday, announcing that it has hired Randall Mott from Dell to be its new chief information officer. Mott held the same job at Dell for the last five years.