*NEWS*PRINTER CARTRIDGE BATTLE HEATING UP
*NEWS*PRINTER CARTRIDGE BATTLE HEATING UP
2007-05-29 at 2:53:00 pm #18149
Printer cartridge battle heating up
Refill company is suing Lexmark
Hewlett Packard, Epson, Kodak and Lexmark International have long inked profits by selling printers for less and toner cartridges for more.Popularized by King C. Gillette, the business model sells razors cheap yet scalps customers on blades.Of course the printer giants have always been at odds with those who recycle ink cartridges.Onetime mom-and-pop businesses during the advent of the laser printer in the mid-1980s, the “rechargers” have morphed into 2,500 companies worldwide, remanufacturing 67 million toner cartridges last year — and selling them for up to 30 percent less.
Now they are having their day in court.
In Lexington, U.S. District Judge James B. Todd is presiding over the trial in a landmark case that pits cartridge refillers against Lexmark.The case of Static Control Components of Sanford, N.C., against Lexmark has had the industry’s leading cartridge remanufacturers chiming in, as well as charity groups that depend on funds from donated cartridges.Charging violation of antitrust laws, Static Control contends that Lexmark locks out recyclers with computer chips that render their renewed cartridges defunct. Static Control also asserts that it should be allowed to use chips it built to outsmart the Lexmark printers.Through hefty discounts, Lexmark entices customers to return cartridges for refilling to the “Lexmark Return” program, formerly known as the “Prebate” program. Static Control seeks to freely recycle and resell those Lexmark Return cartridges too.For the printer giants, this is an intellectual property case — with Static Control’s new chips infringing on the company’s copyrights.The bottom line for Lexmark is 62 percent of its $5.1 billion revenues last year. The company received $3.2 billion selling laser and inkjet supplies alone worldwide.Of the 10 million toner cartridges Lexmark shipped last year, cartridge remanufacturers nipped away 27 percent of the empties for refilling and reselling — or about $200 million worth worldwide, said Jim Forrest, an analyst with Lyra Research in Boston, Mass.”This is like the Israelis versus the Palestinians. There is no middle ground for these players,” Rob Enderle, president of the Enderle Group, a San Jose, Calif., technology advisory firm, said of the case that has wound through the courts since 2004.”The only thing that is going to satisfy one thing is the death of the other,” he added. “There is not going to be an out-of-court settlement.”
In the printer business, empty toner and ink jet cartridges are valuable commodities, priced daily on Web sites like http://www.empties.com.
At the root of the supply chain are charities like the Bluegrass Technology Center in Lexington. The nonprofit sells donated cartridges, raising funds to outfit toys like Tickle Me Elmo with special switches so disabled children can play with them.”There is a human side to this too,” said Debbie Sharon, the agency’s training coordinator. The agency collects between 50 cents and $3 apiece for donated ink cartridges, she said.”For us, it’s an easy fundraiser,” she said. “I ask for people’s trash, and they are happy to keep it out of the landfill.”One issue in the dispute is how the “Lexmark Return” program removes empties from the global supply chain, making them increasingly expensive for cartridge remanufacturers to buy wholesale.Consider supplies for Lexmark’s popular Optra T-420 laser printer, a workhorse used by medium to large businesses.Optra T-420 owners can buy a black ink cartridge for $222 from Lexmark’s Web site. If purchased new for $193 through the “Lexmark Return” program, it arrives shrink-wrapped in a seal announcing a customer’s legal obligation to refill it only through Lexmark.The market price for an empty Optra T-420 cartridge last week was $33 on http://www.empties.com. That is a high price for rechargers, said Forrest, because they must clean it, replace some parts and refill it with toner before selling to a distributor who will demand a decent profit margin before passing it on to a dealer.The refilled and refurbished cartridge retails on the Web for between $100 and $173 — although companies like Lexmark dispute the quality of the aftermarket wares.Empties “are the bread and butter of the remanufacturing market,” Forrest said. Companies like HP and Lexmark, he added, “get a little upset when they see 20 percent to 30 percent of their profit going away.”
Others seek to alter the low-margin ink game altogether.
Unlike its rivals, Kodak recently announced a new strategy: selling printers for a little more while pricing ink at half that sold by Hewlett Packard.Hewlett Packard has countered with a new angle. The company is selling smaller ink cartridges cheaper to people who don’t print much. High-volume customers can save too. HP’s new, larger ink tanks cost twice as much but hold three times as much ink.