After battling for years to be No. 1 in personal computers, Dell and Hewlett-Packard (HP) are at war again, this time over the market for PC printers.
Dell has been moving aggressively onto HP's turf in recent months with its own brand of printers, and this week announced a new line of laser printers aimed at small businesses and promising savings of up to 64 percent on ink and toner costs.
Analysts say this is a challenge to HP's most profitable business.
"The highest margins come from the cartridges, they allow HP's Imaging and Printing group to bring in 70 percent of [HP's] operating profit on an annual basis," said Megan Graham-Hackatt at Standard and Poor's.
This unit of HP generates some US$6 billion in sales each quarter, or about 30 percent of the company's overall revenues. In the quarter to last October, that means an operating profit of more than US$1 billion.
This is not lost on HP's longtime rival Dell, which is introducing a new ink-jet printer at prices 30 to 50 percent below those of HP and a new low-end monochrome laser printer priced 60 to 75 percent lower, noted Smith Barney analyst Richard Gardner.
"For the first time since it entered the printer market, Dell is also below HP on price per page," he said.
Dell's strategy is to put its name on printers from other manufacturers, and bring down prices by offering those makers a chance at Dell's huge customer base, in the manner of Wal-Mart.
Lexmark is Dell's main printer partner, but the new monochrome laser printer is based on Samsung technology. This irritates HP chief executive Carly Fiorina, who fumes, "Dell is not doing anything. It's just distributing other people's products."
But analysts say that Dell nonetheless is a long-term threat to HP's printer business.
"Small businesses have very little brand loyalty, price is their first consideration," notes Malcolm Hancock at the research firm Gartner, who foresees an escalating printer war.
But Dell, which has been jockeying with HP for the No. 1 position in the PC market in recent years, may not necessarily end up a winner in the printer business, since other players like Canon and Epson are also active, says Hancock.
The analyst notes that Dell's reliance on direct sales via the Internet or by telephone -- in contrast to HP's large retail distribution -- are a handicap in Europe, for example.
"If your printer is running out of ink in the middle of the night, do you really want to wait one or two days ... when a competitor's products can be found in a store downstairs?" he said.
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