HP TAPS NONTRADITIONAL PRINTING MARKET
HP TAPS NONTRADITIONAL PRINTING MARKET
2009-05-06 at 12:21:04 pm #22040
HP Taps Nontraditional Printing Markets
Where HP could once count on pairing a printer with 70 percent of personal computer purchases, the conversion rate is much lower with laptops. HP has identified new areas that require printing — like photo printer kiosks at retail outlets, outdoor signage and even aspirin. HP also now owns Snapfish. com, a popular photo service.
New Printing Markets Focus for HP
The company that built an empire selling a printer Relevant Products/Services with every computer is struggling to reinvent itself as environmentally minded consumers eschew paper.Hewlett-Packard Relevant Products/Services, whose $23 billion Imaging and Printing Group is based in San Diego, has been working to identify nontraditional printing markets — essentially seeking to be the solution wherever words and graphics are printed.The Palo Alto-based company once employed 2,000 people at its Rancho Bernardo [San Diego] campus.It doesn’t say how many people work there now, and analysts have pointed to layoffs in IPG in order to cuts costs and fund the integration of the $13 billion purchase of Electronic Data Systems in August.On the quarter that ended Jan. 31, IPG’s net revenues fell 18 percent to $5.98 billion, compared to the year before. Unit sales in commercial hardware Relevant Products/Services fell 39 percent and sales in consumer hardware fell 31 percent on the quarter; and net revenue in commercial hardware fell 34 percent, consumer hardware fell 37 percent and supplies fell 7 percent.HP said it would decrease operating expenses and boost printer supply sales — essentially increase the life cycle of products and use ink and toner sales to augment revenues, says Gary Peterson, a principal analyst with Gap Intelligence in San Diego.”That’s the profit driver for them. A third of HP’s overall profits come from its inks and toner,” he said.Where HP could once count on pairing a printer with 70 percent of personal computer purchases, the conversion rate is much lower with laptops, said Darrell Simek, local HP operations manager.So, HP has identified other areas that require printing — like photo printer kiosks at retail outlets, outdoor signage and even aspirin. HP owns Snapfish. com, a popular photo service, and recently purchased Logoworks, an online commercial publishing service for small businesses.”I think HP’s biggest challenge is to get people to print, regardless if they’re buying printers or not,” said Peterson. “HP launched a number of efforts to drive print volumes.”
IPG General Manager Glen Hopkins said the recession has hurt the company’s bottom line.”When consumer spending slows, we’re going to feel it,” says Hopkins. “That’s the bad news. But recessions are accelerators. They accelerate the bad business models quicker, and the good business models quicker.”To that end, HP has made huge investments in its Edgeline Technology to handle high-volume, commercial printing to compete against analog presse “There are 59 trillion pages of print. Digital is only 10 percent of the market,” said spokeswoman Alison Graves.Most printing is still dominated by analog presses. HP only commands 2 percent of the worldwide printing market.Imagine going to Home Depot and designing your own wallpaper or carpet pattern from a monitor or a scanned photo and having the pattern printed within minutes.”The future is not far,” Hopkins said. “The point is that printed material is all around us.”
Employees in San Diego are testing environmentally friendly pigments and equipment that use less energy Relevant Products/Services. IPG is partnering with pharmaceutical companies to print anti-piracy protected logos onto medical pills. And IPG this quarter rolled out the commercial Inkjet Web Press for small to medium-size publishers.With it, publishers could theoretically print a book on demand long out of print, or print a personalized magazine or newspaper.The Web Press is being tested by three publishers on a trial basis: O’Neil Data Systems, a Los Angeles-based financial services firm; CPI, a European book manufacturer that had $600 million in sales in 2007; and The Taylor Corp., a gift card and commercial printer.It prints in full color at 400 feet per minute at 600-by-600 dots per inch, or 3,200 pages per minute.”You can convert it 10,000 different ways,” Hopkins said. “We send the information to the bank of ink jet print heads, every page can be all the same or every page can be different. Now the ability for me and you to have a separate newspaper is possible.”He declined to say what the price tag of the printer is, except that it’s in excess of $1 million.
Yet the printing industry is a mature one, and there is a movement within HP to use IPG’s 18.5 percent profit margin not to grow the printing segment, but move it into IT services, where IBM Relevant Products/Services dominates, says Peterson.”What we’ve seen from (CEO) Mark Hurd is that he’s very interested in infrastructure Relevant Products/Services services. He wants to slowly evolve HP into IBM.”And they’re using IPG profits to power Relevant Products/Services that transition, he said.”It’s really a matter of IPG funding the transitional costs of acquiring EDS and funding how that division of HP grows and succeeds,” he said. “They purchased EDS to get a better foothold in the enterprise Relevant Products/Services market.”For example, when IBM approaches a huge company like General Motors, it can give them high-level customized server Relevant Products/Services, software, hardware and support.”That’s what HP wants to do,” Peterson said.