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Goldman Sachs Warns Of Potential Price War In Printer Mkt
The printer market is taking a page from the personal computer industry, known for cutthroat pricing and aggressive competition, Goldman Sachs warned Thursday.“The printer industry appears to have entered a new and more dangerous phase where competition will be more aggressive, pricing will be more intense and growth will be slower, at least in inkjets,” wrote Goldman Sachs analyst Laura Conigliaro in a research report Thursday. “Every printer vendor we have spoken with, including Canon, Dell, Epson, H-P and Lexmark, seems to think they will be able to gain market share.”
Indeed the printer industry has been no stranger to competition. Ever since Dell Inc. entered the game in March 2003, printer makers have been forced to slash prices to maintain their competitive positions. Dell, famous for going into markets and driving down prices, put further pressure on its peers earlier this month when it announced a laser printer that sells for $99.
Dell’s competitors, namely Hewlett-Packard Co. (HPQ), have responded by cutting prices in a free-for-all to gain market share. That environment led to Goldman’s ominous warning Thursday about the printer market.
“H-P has already embarked on a strategy of pricing to regain share and we would expect its summer launch of photoprinters to be very aggressively priced,” said Conigliaro. “Dell’s $99 laser printer is just another indication of how aggressive Dell is willing to be to build critical mass in the space.”
While Goldman’s Conigliaro said some printer vendors think quality and not price will be the differentiator, she said they did acknowledge they could get into a price war with more aggressive competitors, particularly during the holiday selling season.
The way Conigliaro sees its, the battle will largely be between Dell and H-P. She said printer makers Lexmark International Inc. (LXK) and Epson are the most at risk in an aggressive pricing environment since the declines are expected to come in the inkjet and not laser printer area. According to the analyst, 54% of Lexmark’s sales come from the inkjet printer market while 36% of Epson’s sales are tied to that industry.
Officials at Lexmark, H-P, Dell and Epson weren’t immediately available to comment. Goldman’s Conigliaro does not own shares of the printer companies but Goldman Sachs intends to seek an investment banking relationship with the companies mentioned in this report.
Recently shares of Dell were trading up 0.5%, or 19 cents, to $39.76, on volume of 3.9 million. Meanwhile, H-P’s stock was recently off 0.7%, or 18 cents, to $23.89, and Lexmark was trading down 0.2%, or 12 cents, to $65.65.
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