*NEWS*HP EXPECTS BILLIONS IN COPIER SALES
*NEWS*HP EXPECTS BILLIONS IN COPIER SALES
2003-11-19 at 10:21:00 am #8565
H-P Expects Billions in Copier Sales
Hewlett-Packard on Tuesday said its entry into the high-end copier market, competing with the likes of industry giant Xerox, will bring it more than $2 billion in additional revenue within three years.
“We Believe that the approach that we are taking is really going to help us in transforming this $24 billion industry,” said Vyomesh Joshi, head of H-P’s printing and imaging business. “I am very confident we will be able to make this thing happen.”
According to Joshi, H-P controls about 1.5 percent of the copier market right now, mostly from sales of all- in-one devices that serve as printers and scanners, as well as copiers. But by also selling higher-end copiers that range in price from $18,000 to more than $37,000, Joshi says the company plans to control at least 10 percent of the copier market by the end of 2006.
“H-P is being opportunistic – they are expanding on their already profitable printer business,” says Bob Djurdjevic, analyst with Annex Research in Scottsdale, Ariz. “But this will be a marketing challenge, not a technical challenge. The question is, will they be able to lure customers from Xerox and others?”
Shares of H-P fell 35 cents to close at $21.65 in regular-session trading on the New York Stock Exchange. Xerox shares fell 23 cents to $10.17.
A long-held criticism of H-P is its lack of marketing prowess, according to Djurdjevic. In the past, the company has allowed competitors with a slick message, including Sun Microsystems (SUNW: news, chart, profile), to sneak up behind it in key markets.
Now, according to Joshi, it’s H-P’s turn to come up from behind, taking market share from established companies like Xerox with a marketing campaign that emphasizes how much H-P can save copier customers over the long haul.
H-P’s message, Joshi says, is that business customers are spending about $800 a year per employee on imaging and printing hardware, supplies and services which includes copiers. So a company with 5,000 employees will spend $4 million a year printing, copying and scanning.
Customers who already use H-P for printing and scanning can save 30 percent a year by also using H-P copiers, Joshi says. The savings, he says, will come from a combination of more reliable hardware, which uses H-P-designed electronics built by Konika, as well as consulting services that can help companies use only the copying equipment that really need, H-P software for managing copying environments, and pay- per-use services options.
“By adding copiers to its printing and imaging lineup, H-P becomes a one-stop shop for its customers’ imaging needs,” said Tim Bajarin, an analyst with Creative Strategies in Campbell, Calif. “The big IT guys who have to buy this kind of equipment really like that.”
So far, H-P says it has signed up several large copier customers including electronics retailer Best Buy, chipmaker National Semiconductor and sandwich chain Subway. H-P says it is working with each company to “transform their imaging and printing operations,” but didn’t disclose the value of those deals.
Although H-P lacks a rich business tradition in copiers, Bajarin calls the company a “very worthy competitor”, and says H-P could affect the profit and sales of Xerox and Canon over time.
For customers that already have an established relationship with a copier-servicing company, H-P also plans to resell printers through Malvern, Pa.-based Ikon, a leader in offering office services. Ikon already sells H-P laser printers and some other types of H-P equipment.
Joshi says H-P’s copier business will be profitable from the start, and that the company will garner a profit margin similar to its printer business. Printing and imaging has typically been H-P’s most profitable group in recent years. Sales increased 10 percent to $5.24 billion in the company’s fiscal-third quarter.
In addition to its move into copiers, H-P also announced on Tuesday a new digital pen-and-paper system. H-P plans to sell it to companies that can benefit from creating forms electronically, such as health care and insurance businesses.
Unlike tablet-based computers that use a dummy stylus and have the bulk of the technology in the computer, H-P’s system puts the technology in the pen. The system uses “smart” paper that looks much like a normal typing sheet.
After filling out a form on the special paper, the pen is placed in a docking station, where data is downloaded, so it can be set to a storage system, or printed on an H-P printer. The pen-and-paper system costs about US$45,000 each, as well as a 20-cent handling charge per form. The system is supposed to handle up to 200 forms a day.