IS HP LOSING ITS INKJET RELIGION ?

[Anonymous]

IS HP Losing its Inkjet Religion?
In recent weeks, the world has gotten a much better sense of HP CEO Mark
Hurd. If Carly Fiorina liked sweeping visions and bold growth strategies, this
guy is pure pragmatism. That’s why he’s killed high-profile R&D projects,
such as one effort led by former Xerox, Apple and Microsoft luminary Alan Kay to create a kind of next-generation Internet
browser. And that’s why he walked away from a high-profile deal to sell Apple’s
iPod, which was never going to be a big money-maker for the company. Even though
HP is contractually locked out of the digital music player market for another
year or so, Hurd evidently felt there’s no time like the present to stop
investing time and money in something that’s not critical to the company’s
future.

That’s all fine. But now that we know what he doesn’t want HP to do, what
does he want?

We got a clue yesterday, when HP purchased Israel-based Scitex Corp Ltd. The
company makes industrial-strength digital printing presses used to do
large-format printing used to create product packaging, billboards and such–all
the way up to those mega-advertisements that cover buses and buildings.

It’s not a huge market, to be sure. But the acquisition implies that HP may
be ready to take the gloves off and finally get after its biggest single
opportunity: expanding its printer empire. Today, HP dominates the market for
inkjet and laser priniters used by consumers and in offices. But more than 90%
of printed pages–from newspapers, to brochures, to junk mail–are handled by
more industrial strength equipment. This is a $200 billion-plus market, making
it one of few potential markets big enough to matter should Hurd want to make HP
a growth company again. But besides lots of nifty slideware, HP has made very
little real progress.

Buying Scitex indicates a change–particularly with regard to how HP hopes to
make its move. Over the years, the company has spun a vision in which its
homegrown thermal inkjet cartridge would single-handedly conquer this vast new
world. It was an understandable ambition. Since this tiny device spit out its
first image in a closet in an HP R&D center in Corvallis, Oregon in the
early 1980s, the diminutive device has turned into one of the great profit
engines any company has ever known.

But many experts say the thermal inkjet cartridge has pretty much reached its
full potential. For starters, HP would have to figure how to line up hundreds of
thousands of tiny nozzles (rather than the few thousand that are in HP’s most
advanced current products) to crank out pages nearly as fast as other
approaches. What’s more, thermal inkjets used inks that are water-based.
Skeptics say that means thermal inkjet-based output is never going to be as
long-lasting or rain-proof as other printing techniques can offer.

To be sure, HP hasn’t given up on its dreams for thermal inkjet technoloogy.
It recently unveiled a new scaleable printing
technology, on which it spent $1.4 billion over five years, which it
claims can be used for commercial printing and possibly in photo-processing
gear.

But buying Scitex shows that HP is losing its thermal inkjet religion to some
degree. That’s because Scitek’s gear is based on a piezo technology that uses
electricity to force droplets of ink onto the page (thermal inkjets, such as
HP’s, use heating elements to vaporize the ink for a few micro-seconds, so it
can be shot onto the page). It’s not the first proof point of the changing
philosophy. Just days before it bought Compaq Computer in 2001, HP bought a
digital press company called Indigo Ltd, whose high-speed printers use a liquid
ink more similar to the type used in traditional offset printing presses.

But Hurd’s backing of the Scitex deal suggests that he agrees with this
approach. To be sure, hedging its bets by developing many different print
technologies simultaneously may not be the most efficient way for HP to proceed.
But if HP is serious about expanding its printer empire, and printing big
profits rather than just slideware, it’s the approach that’s most likely to
succeed.

[Author]

August 15, 2005 at 7:55 AM