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 user 2006-12-15 at 12:19:00 pm Views: 45
  • #17026

    Color-laser economics
    Pressures in printer marketplace squeeze consumers, producers alike
    consensus at one time was that a laser printer proved profitable on its
    sale alone.But because of fierce competition for customers, some color
    laser printers are becoming like much of their inkjet brethren — think
    those $20 inkjets — which long ago gave up hopes of initial
    profitability and pinned their prospects to selling multiple
    profit-laden ink cartridges over time.And why not? The cost to replace
    the four toner cartridges in some color lasers equals, and sometimes
    exceeds, the cost of the printers.But the problem lies with customers
    who don’t print enough, leaving companies like Lexington’s Lexmark
    International aiming for the high-volume customers in a high-growth
    product segment that, as one analyst says, includes the newest wave of
    disposable printers.

    Sticker shock
    disposable printer is one that costs less than its replacement
    supplies, such as toner.Such printers are prevalent in the inkjet
    business, where consumers are sometimes given a printer for free or can
    buy low-end single-function inkjets — no scanning, copying or faxing
    features — for easily less than $50.But manufacturers of laser
    printers had resisted that race-to-the-bottom price competition until
    recent years. The price slashing became commonplace in the color laser
    segment because of the replacement toner’s lucrative revenue
    potential.”Color laser utilizes four times the consumables that
    monolaser does because they have cyan, magenta, yellow and black,” said
    analyst Philip Grote of Current Analysis. “So you’re using basically
    four times the toner, which means more revenue.”Consider the costs for
    Hewlett-Packard’s Color LaserJet 1600, priced at $299 on HP’s Web site.
    A replacement set of the cartridges: $323.97.And although it would seem
    unconventional for customers to unplug their current laser printers and
    buy new ones, it can happen in small office and home office settings,
    Grote said.Those customers might not have computer networks, so it’s
    simpler to just unpack and plug in the new printer, and stow the older
    one, he said.Many companies ship new color lasers with starter
    cartridges that are filled with less toner than replacement cartridges,
    though, so a new printer’s cartridges wouldn’t necessarily print the
    same number of pages as replacement cartridges.Larry Jamieson of Lyra
    Research said he remains skeptical that customers would buy an entirely
    new printer, pointing out that supply purchases are often staggered.
    But he noted, as Grote did, that customers become more judicious in how
    much they print because of the cartridge sticker shock.The high prices
    can also dissuade customers from purchasing a color laser in the first
    place, Jamieson added.Grote said sticker shock was common with
    different types of Lexmark printers in past years.But the company’s
    newest color laser printer lines have “really stepped up the game,” he
    said, emphasizing that the company’s higher-yield cartridges help
    reduce the overall cost of printing.

    Unprofitable hardware
    why do companies mark down their laser hardware prices to the point
    that sticker shock’s a very real phenomenon?In a word: growth.The color
    laser segment is one of the fastest-growing product segments in the
    printer industry. In 2005, the market for color lasers grew almost 50
    percent, according to market research firm IDC. In the first half of
    2006, it’s grown almost 30 percent.Monolasers, by comparison, grew 20
    percent in 2005, and 15 percent in the first six months of this
    year.Color lasers remain only a small part of the laser market, though.
    They accounted for 13 percent of total laser units in 2005, according
    to IDC. But they are expected to be 22 percent of laser units in 2010,
    a Lexmark executive said at a recent analyst conference.Part of that
    growth is driven by their affordability. Prices have fallen
    dramatically, as they have for all printers.The lower prices make
    low-end color lasers available to a larger base of customers, including
    small and medium-size businesses, who might not have been able to
    justify the expense years ago. And with more customers come higher
    revenue expectations.By 2010, color lasers are expected to account for
    22 percent of the laser units sold, but 53 percent of the revenue in
    the market, Lexmark Executive Vice President Paul Rooke said during the
    company’s recent Analyst Day event.So printer companies, Grote said,
    raced to enlarge their installed base of printers among customers –
    primarily businesses — by slashing prices, especially on lower-end
    products.”As soon as the printer is installed in the office, you’ve
    planted your Trojan horse. Then nobody is watching the printing costs,”
    Grote said.To get that initial buy, however, low-end color laser
    printers are generally thought to be sold at a loss.”Clearly, people
    are being very aggressive on price, taking losses up front, they’re
    hoping to make it back over the life of the product in the supplies,”
    said Lexmark CEO Paul Curlander during a recent conference call with
    analysts.”It’s pretty clear that the color laser business has become
    like the inkjet business,” he said.The idea of selling a printer at a
    loss is not new.Jamieson said a past Lyra Research study estimates that
    printer manufacturers lose about $30 on each inkjet printer sold for
    $150 or less.At $200 price tags, the companies are still “losing a
    bit,” he said.Traditionally, laser printers were sold at a profit. But
    competitive pricing has led Lyra to suggest that low-end monochrome
    lasers priced below $200 are probably sold at a loss by their
    manufacturers.And Jamieson said any color laser sold for less than $500
    and “maybe even higher than that” is probably below cost.

    Frequent printers
    upfront losses necessitate that companies find heavy users of printers
    to meet profit expectations.Jamieson said that besides large
    enterprises, a good color laser customer can be a small or medium-size
    business like a marketing company, or even churches and real estate
    firms that want to release color brochures.These small and medium-size
    businesses are becoming a battleground in the printer industry with
    companies offering more affordable products.”The difficulty is that as
    the market goes down, as more vendors come around, it drags people
    down,” Jamieson said.It can drag the prices so low that the printers
    become affordable for individual consumers who might not print enough
    copies to meet manufacturers’ hopes, he said.Jamieson said Lexmark has
    shown “admirable restraint” in avoiding those steep price cuts,
    choosing to target high-usage customers.Emphasizing the importance of
    high-usage customers has become a recent mantra for Lexmark executives
    when discussing the color laser segment.”It’s not so much about the
    market share and the units, per se, it’s the pages,” Curlander told