DOMINANCE IN PRINTERS GIVEN GLOBAL FOCUS

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Dominance in printers given a global focus The San Diego executive in charge of Hewlett-Packard’s workhorse Imaging and Printing Division outlined a strategy yesterday to transform the business in the face of onslaught from Dell and other competitors. At a meeting with analysts in Half Moon Bay, Vyomesh Joshi said that recent job cuts at HP were part of the company’s effort to find a balance between fast-growing parts of the printer business, such as digital photography, and slow-growth segments, such as black-and-white laser printers for businesses. Last month, HP offered a voluntary retirement package to the division’s employees. In all, 1,905 accepted the offer. The layoffs were heaviest in Boise, Idaho, and Corvallis, Ore. But about 100 employees at HP’s inkjet research lab in San Diego took the deal. Workers also were affected in Vancouver, Wash., and Fort Collins, Colo. “My view is we need to get this business in a healthy position,” Joshi said. “I think our first step was a very important step.” HP’s $24.4 billion printer business is the company’s cash cow, accounting for more than 70 percent of the technology giant’s profit last year. But the landscape is changing. Dell in particular has taken aim at HP. Through aggressive pricing and promotion, the computer giant has amassed $1 billion in printer sales in only about a year in the business. “The result of this profit-free business plan is to quickly increase market share and drive down prices throughout the industry, thereby driving down the profits of all competitors, especially HP,” said Peter Grant, an analyst with market research firm Gartner. Joshi’s strategy to maintain HP’s lead in printers involves going global. He aims to extend the life of older, core products that are growing slowly in the United States and Western Europe by focusing more on emerging countries. Targets include Brazil, Russia, China and India. To make these slow-growth products affordable in these countries, costs must be squeezed out, Joshi said. That was part of the rationale behind the job cuts. Joshi declined to comment on whether more cuts were forthcoming. Ian Hamilton, an analyst with the research firm Current Analysis in San Diego, said sales of black-and-white laser printers and other products are growing in countries targeted by HP. “The problem is, much like everything in the printer industry, they’re doing it at the expense of (profit) margins,” Hamilton said. “It’s just a difficult business.” In addition to extending the life of older products, Joshi aims to push resources into products that are growing fast now. Those include digital photo printers and the color laser printers used in the office. HP thinks more small businesses will create marketing materials in-house using high-quality printers. Among the new printers aimed at this market is HP’s Color LaserJet 2600n, which starts at $399 and is up to 60 percent faster than comparably priced color laser printers, HP said. “We feel strongly that color in the office is here, and it’s a tremendous opportunity,” Joshi said. HP’s printer business has a series of large product announcements planned for 2005, including an effort to broaden the market for its branded Vivera inkjet cartridges, which it introduced late last year. While Dell has made some progress in printers, Joshi said he is not yet overly concerned over the direct computer seller’s recent entry into HP’s bread-and-butter market. “The key for me is the next two years,” Joshi said. “They need to show some profit, because just a break-even business is not interesting.”

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May 20, 2005 at 3:59 PM