HP admits it's the ink that counts

By Peter Judge, ZDNet.co.uk, 7 March, 2002 10:38

NEWS

It is well known that a lot of Hewlett-Packard's profits come from ink, but the company rarely makes much of this in public. At the launch of a new multi-function printer for business in London on Tuesday, a quote from the company's head of imaging and printing revealed that selling more supplies is now the main aim of the company's printing division. The revelation was on a slide from Vyomesh Joshi, president of HP's imaging and printing systems (IPS) division, presented by Peter Urey, IPS manager for the UK. The slide featured a list of the division's aims; along with plans for new markets, the number one aim was to "fuel supplies growth". Hewlett-Packard's reliance on revenues from printer supplies has been much-criticised in recent years, but the shape of that revenue is inevitably shifting, as the company moves towards consumer-oriented printers. Consumers are less willing than businesses to pay high prices for toner and ink cartridges, HP acknowledged last year. The issue deserves prominence, say critics, given that those opposed to HP's acquisition of Compaq are suggesting an alternative plan, which includes the sale of HP's imaging and printer division. Seventy percent of HP's profits come from printing and imaging, with about 30 to 35 percent coming from supplies, according to Technology Business Research analyst Humberto Andrade. Prices of consumer ink cartridges are falling, despite HP's efforts, and HP's IPS division's response is to find new avenues for ink sales. "We are looking to other markets, other pages to print," said Urey. If you include all hard-copy output such as photographic prints, faxes and photocopies, HP's ink is only on about 4 percent of the world's pages, he said. One of the biggest opportunities is to use multi-function devices, which scan and fax, to displace pages from traditional copiers and fax machines. "Copiers have traditionally been sold under lease to facilities managers, while printers are sold outright to IT managers," said Urey. It is easier for HP to add copy and fax to a printer already on the network, than it is for the copier manufacturers to convince an IT manager to hook up to their device for the first time, he argued. Another opportunity is in photography, where digital cameras allow printer companies to sell higher-end machines to domestic users. "If we take a couple of percent of the photo processing market, we get a few billion dollars," said Urey. HP is also moving on high-end print systems, having bought Dutch digital printing specialist Indigo in September. The company had previously worked with Indigo on very large printers. The LJ3300 printer, launched by HP on Tuesday is a 14 page/min multi-function device intended for printer, scanner, fax and copier use by a small business or home worker. Unlike previous HP low-end multi-function devices, it includes a flat-bed scanner so it can be used more like an ordinary photocopier, copying books and material other than single sheets. While this is HP's first LaserJet device to include a flat-bed scanner, it is not the first in the industry, though at a list price of £525 it may be cheaper than previous ones. Existing devices include Brother's MFC9750, which has a RRP of £999, but may be available for less on the street.

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