HP TRIES TO PUT POSITIVE-SPIN ON SLOW INK AND TONER SALES

[Anonymous]

HP TRIES TO PUT POSITIVE-SPIN ON
SLOW INK AND TONER SALES
Hewlett-Packard Says Printing Market Is ‘Healthy’
 Hewlett-Packard Co. Executive Vice President Vyomesh Joshi
said the printing market is “healthy” and poised for a recovery in 2010
after customers held off buying new devices this year.“2009 was a
difficult year for printing hardware,” Joshi, who has led the Imaging
and Printing Group for nine years, said last week in an interview. “But
supplies sales were fine. What that means is that printing is healthy —
even with economic pressure, customers are still printing the content.”

Hewlett-Packard,
the world’s largest maker of printers, has posted five quarters of
declining sales in one of its most profitable businesses. Joshi, 55,
said he plans to win market share from competitors, including Lexmark
International Inc. and Eastman Kodak Co., while trimming costs. Those
efforts are aimed at helping Joshi achieve the 15 percent to 17 percent
profit margins he’s on the line to deliver to investors in 2010.Chief
Executive Officer Mark Hurd said last month the printing unit is
“poised for recovery and getting on the attack.” The company is
forecasting “double-digit” growth in printer shipments this quarter,
compared with the 20-percent drop in the three months ended in October.In
September, the company forecast 2010 revenue at the unit will be
unchanged or rise 2 percent. That’s the lowest sales- growth forecast
among Hewlett-Packard’s businesses, which include personal computers and
a unit that sells servers, storage devices, software and services.The
printing group accounted for 21 percent of Hewlett- Packard’s $114.6
billion revenue last year and 32 percent of its $13.4 billion profit.

Supply-Chain
Savings
The printing unit’s cost-cutting campaign began with an
August 2008 reorganization that reduced the number of groups in the
division to three from five, with some jobs eliminated as part of what
Joshi called “streamlining.”He also cut the number of laser and
inkjet printer models, which has saved on manufacturing, marketing and
sales costs, and shifted some customer-service and support functions to
the Web.The company focused on inventory during the economic
slump, working to reduce supply — and preserve cash — as demand fell.
Its inventory management was so aggressive, said Joshi, that the company
had shortages of laser printers late in the year after orders picked up
sooner than it expected.To pare supply-chain costs,
Hewlett-Packard began shipping printers directly from its Asian
factories to some distributors and retailers, as opposed to its own
distribution centers. Joshi wouldn’t detail the amount of the savings,
except to say they are significant.

No Price Cuts
“H-P
overall has a $60 billion supply chain. We have a fair share of that,”
he said. “When you have those kind of numbers, even a small percent of
those numbers are a big number.”Joshi said Hewlett-Packard will
gain market share by winning customers with products and new
technologies rather than by cutting prices, a move that would weigh on
margins.“We don’t need to cut prices,” he said. “In the market
right now, our product, compared with any of our competition, is much
better in terms of the innovation, in terms of ease of use, in terms of
quality, in terms of connectivity. That’s what the customer will be
looking at.”Lexmark’s laser and inkjet printers are innovative
and the company is winning orders around the world, said Jerry Grasso, a
spokesman for the Lexington, Kentucky-based company. Kodak is making
“significant” inroads with its printing business, and sales of its
inkjet systems are “significantly” outpacing the industry, spokesman
David Lanzillo said.

Struggling Rivals
Hewlett-Packard, based
in Palo, Alto, California, rose 47 cents to $52.46 at 4 p.m. on the New
York Stock Exchange. The stock has advanced 45 percent this year, making
it the fifth best performer on the Dow Jones Industrial Average.Hewlett-Packard
has an advantage that some of its rivals don’t have — it is profitable
and not dependent on printers for the majority of its revenue, said
Shaw Wu, an analyst with Kaufman Bros. in San Francisco.Lexmark,
the No. 2 U.S. printer maker, and Kodak, a 129- year-old photography
company that is working to build up its printer business, are both
struggling, Wu said.“Those are the competitors you like,” said
Wu, who has rated Hewlett-Packard shares as a “buy” throughout 2009.
“They don’t have the resources to fund a price war.”

‘Great
Opportunities’
Joshi, a native of Ahmadabad, India, joined
Hewlett-Packard in 1980 as a research and development engineer. He was
promoted to run the printing unit by former CEO Carly Fiorina in 2001.
Under his tenure, IPG has grown to $24 billion in sales from $19
billion, with profit more than doubling to $4.3 billion.

Still,
the Wall Street Journal reported in September that the company was
considering replacing Joshi and combining the printer and PC units under
Todd Bradley, who has led the turnaround of Hewlett-Packard’s PC unit
in the past five years.

Joshi said the company doesn’t comment on
rumors.
“What I can tell you is that the printing and imaging
business is a great business with great opportunities,” said Joshi, the
longest-serving employee currently on Hurd’s executive team. “I want to
make sure the transformational work I’ve started — I want to see that
all the way to the end.”
http://www.bloomberg.com/apps/news?pid=20601103&sid=an1fsIVB20sY#

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January 4, 2010 at 11:12 AM