Dell unveiling its own brand of printers, cartridges
March 24, 2003 11:57:00 PM ET
By Caroline Humer
NEW YORK, March 25 (Reuters) - Dell Computer Corp. (DELL) on Tuesday is unveiling its own brand of printers and ink cartridges, broadening a personal computer market share battle already underway with Hewlett-Packard Co. (HPQ) to the lucrative printer business.
Round Rock, Texas-based Dell said it will to begin taking orders on Tuesday for its new inkjet and laser printers, as well as ink and toner cartridges that were made for it by Lexmark International Inc. (LXK).
Dell, which is a close second to HP in the personal computer market, said it will sell one inkjet printer and three laser printers priced from $139 to $839. It will also sell ink cartridges starting at $29.95 and toner cartridges from $75.
The printers and cartridges are competitively priced compared to other printer makers such as industry giant HP, which has nearly 60 percent market share and has sold more than 260 million printers, but do not offer a substantial discount, Dell said.
"We look at the total delivery of the system - not just the printer. It's the cartridge, the services, everything," said Tim Peters, general manager of Dell imaging and printing.
Peters said that Dell will make it easier for customers to use its printers because it has created an online replenishment system in which the printer warns that toner is getting low and then prompts the user to order more over the Internet. Dell will ship the cartridges out without charging for handling.
Dell enters the printer market after a more than two year slump in the technology market. Printers are a profitable business for HP, Dell's biggest competitor, and one which it had eyed as it diversified into other businesses like computer servers, handheld computers and network switches.
Dell had previously sold printers from HP, Lexmark and others but last summer the relationship between HP and Dell soured after Dell executives said they were planning on getting into the printer business.
HP pulled out of its agreement with Dell and in September Dell said it would work with Lexmark. The following month, Dell founder and Chief Executive Officer Michael Dell promised to cut prices sharply, saying he thought there was room for significant price reductions compared with what HP charged.
In order to make significant price cuts, analysts said that Dell needs to make the printers itself which is difficult because HP, Lexmark and others own the intellectual property and have the know-how.
"They thought they would be able to step into this game and drive down the pricing on supplies without owning any IP (intellectual property) or doing any R & D (research and development). Their pricing doesn't indicate they've been able to do any of that," said Gartner Inc. analyst Peter Grant.
In addition to the pricing issue, analysts said that Dell's online ordering system needs to be attractive enough to overcome the fact that the vast majority of cartridges are purchased in retail stores, another analyst said.
"They've really taken what other companies do and taken it one step higher by adding a link to click on to actually order the stuff," said Jim Forrest, managing editor of Hard Copy Supplies Journal, a monthly newsletter published by market research firm Lyra Research.
Cartridges are particularly important to Dell because they are the high-margin products that make the printer business work in the same way that razor blades fuel razor profits at companies like Gillette Co.
An HP printer executive said he was not worried about the competitive threat from Dell. Compaq, which HP acquired in May of last year, had a similar deal with Lexmark, but it did not yield huge market share gains for Compaq, analysts said.
"We've been competing very successfully against Lexmark and others for quite some time," said Rich Raimondi, general manager for HP's U.S. commercial printer business. "I'm confident that we will continue the growth that we've seen." (Additional reporting by Duncan Martell) REUTERS
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