While we're on (or off) the topic of printers, a local store is selling
color inkjet printers (Lexmark, I THINK) for $27.99 this week. That's
approximately what ONE refill for either Black or Color ink costs--and it
comes with both. At that price, you could buy 4 or 5--keep one and scrounge
the others for their ink cartridges and toss the printers (or keep a spare
incase of lightning strike.)
I figure the price of gas will do to the same sometime this summer--Then
you'd just buy a new car ever week instead of filling up--assuming the
dealer sells it with a full tank.
-----Original Message-----
From: John Lee [mailto:[log in to unmask]]
Sent: Monday, May 24, 2004 1:43 PM
To: [log in to unmask]
Subject: [HP3000-L] NYTimes.com Article: The Distributor vs. the Innovator
The article below from NYTimes.com
has been sent to you by [log in to unmask]
Very interesting story about the state of our industry.
John Lee
Vaske Computer Solutions
[log in to unmask]
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The Distributor vs. the Innovator
May 24, 2004
By STEVE LOHR
"The biggest mistake I've made,'' confesses Michael S.
Dell, the 39-year-old founder and chief executive of the
fleet front-runner among personal computer makers, "was not getting into
printers sooner."
Lately, Dell Inc. has been making up for lost time. Since
it started selling Dell-branded printers a little over a
year ago, shipments have risen at an encouragingly rapid
pace. Mr. Dell predicts "tremendous growth" for his
company's computer printer business over the next 5 to 10
years and vows to change the economics of the industry. Tomorrow, Dell plans
to announce that it will begin selling printers for the corporate and home
market that it claims will reduce the cost of some printing jobs by 30
percent or more.
Such talk sets Carleton S. Fiorina, the 49-year-old chief executive of the
Hewlett-Packard Company, the powerhouse of the printing business, on edge.
She regards Dell's declared ambitions as an irritating blend of hubris and
hot air. Ms. Fiorina notes that her company's printers and cartridges,
especially the inkjet printheads - clusters of nozzles, each smaller than a
human hair, spurting out millions of superheated droplets a second - are the
result of two decades of sophisticated semiconductor and nanotechnology
research.
"Somebody doesn't just come along, particularly a company
that is not an innovator, and say, 'We're going to do it better,' " Ms.
Fiorina said. "Dell isn't doing anything. It's just distributing other
people's products."
The confrontation between Hewlett-Packard and Dell is more
than a particularly lively bout of competition in the $106 billion-a-year
printing industry. It is a clash - and an intriguing test case - of two
different models of innovation and corporate strategy.
With its engineering roots and its corporate tagline "HP Invent,"
Hewlett-Packard is committed to spending heavily on research and then
funneling that home-grown technology into new products. Those products, in
turn, must be able to command profits high enough to keep financing the
corporate invention machine. Hewlett-Packard's printing business is a
showcase of success for internal innovation. Dell, by contrast, is pursuing
a "virtual" research-and-development model. It does some engineering
development work itself, but that typically amounts to tweaking an existing
product. Dell's main role is to scour the world for technology, fine-tune
the products of corporate partners, wring costs from the supply chain and
sell products directly to customers.
There is plenty of technology being developed by companies around the globe,
Dell executives insist, but the technology often lacks an efficient path to
the marketplace. And as it gets bigger and bigger, Dell is becoming the
Wal-Mart of high technology, a marketer so powerful it can set product
standards for its suppliers.
"This competition between Hewlett-Packard and Dell is a collision of two
rival models of innovation," said Henry Chesbrough, executive director of
the Center for Technology Strategy and Management at the Haas School of
Business at the University of California, Berkeley.
Today, Dell is an upstart in computer printing compared
with Hewlett-Packard. Dell sold an estimated 1.5 million printers in its
first nine months in the business last year. This year, analysts estimate
that Dell will sell 4 million printers or more. Its revenues from printers
and ink cartridges have already blown past the $1 billion-a-year threshold,
the fastest takeoff ever for Dell in a new product category.
Yet the printing group at Hewlett-Packard reported nearly
$23 billion in revenue last year. It sold 43.6 million printers, more than
double its nearest rival, Epson, reports IDC, a research firm. The business
is big and immensely profitable: it accounted for about 30 percent of
Hewlett-Packard's sales last year, but 80 percent of its earnings.
The Dell strategy is obvious: build a printer business,
attack Hewlett-Packard's crown jewel and, thus, hobble its principal rival.
And Hewlett-Packard is trying to return the favor by cutting prices
aggressively on PC's with the goal of grabbing sales in the corporate PC
market, which is Dell's stronghold.
Hewlett-Packard invests $1 billion a year in research and development for
its printer division, and that spending is on display at its laboratory in
San Diego. Jars and canisters of experimental ink rest alongside the
chromatographs, the scanning tunnel microscopes and the thermotron
environmental chambers. Anything that is not patented - Hewlett-Packard's
printing group holds 9,000 - is protected by trade secrets.
Every day, physicists, chemists and fluid-mechanics
engineers puzzle over ways to make the symphony of
nanoscale ink explosions more efficient and precise. They
speak of co-solvents, surfactants, polymers, humectants, friction
coefficients and tailhooking (when the trailing tail of a misfired droplet
splats wildly).
The hundreds of nozzles crammed onto the slender silicon
face of the printhead march to the nanosecond beat of an integrated circuit
inside the cartridge. Yet the hardware of the cartridge is only half the
story. The "software" of this technology is the ink. Hewlett-Packard has
more than 100 different ink formulations on the market. Three years or more
of research, development and testing go into each ink variety.
Since its commercial introduction two decades ago, the
inkjet printer has improved at a pace equal to Moore's Law
in semiconductors - its performance doubling every 18
months. Hewlett-Packard printheads, with up to 500 nozzles,
put ink on paper at the rate of 18 million droplets a
second, and its labs are on track to reach 1 billion tiny
drops a second before 2010. Many other companies, including Canon, Epson and
Lexmark (Dell's partner and main supplier), make inkjet printers today, but
Hewlett-Packard, the early pioneer, is still the technology leader, most
analysts agree.
Digital photography is a challenge for inkjet printing, but also a showcase
for superior technology. And printing digital photos looms as a huge growth
opportunity for the printer industry, with as many as 50 billion digital
photos taken last year, a number that is projected to increase steadily over
the next several years. A small fraction of digital photos are printed, but
Hewlett holds 50 percent of the market for those printed at home.
The really good news for the printer industry, though, is
that a digital photo is an ink-eating glutton. And the ink
is where the money is in printing - a classic razor and
razor blade business. The manufacturers lose money on the standard home
printer, but make hefty profits on all the replacement ink cartridges people
buy.
"Digital photo printing is a trend that H-P is leading, and
it is our single biggest growth opportunity," said Vyomesh Joshi, the
executive vice president in charge of Hewlett-Packard's imaging and printing
group.
Mr. Joshi sees promising growth opportunities in other
markets besides digital photos. These include color laser printers, as
businesses increasingly want color for presentations and marketing
materials, and fast multipurpose machines for corporations that combine
printing, copying and scanning, which cost up to $45,000 each.
"I want to add $2 billion every year in revenues," he said.
So far, so good. Hewlett-Packard's printer group indeed
added $2 billion in revenues last year and shows no signs
of faltering this year. It is too early to tell for sure, analysts say, but
Dell's initial success in the printer business seems to have come at the
expense of others rather than Hewlett.
Dell, according to Mr. Joshi, can sell several million printers, exploiting
its strength in the PC business, and still not pose a fundamental challenge
to Hewlett-Packard and its profitability. The reason is simple, he said: "We
own the core technology."
A central issue for Dell in printing is how easily it can
get its hands on technology that is comparable or nearly comparable to
Hewlett-Packard's. Dell says there is plenty of powerful printing technology
out there, and that its goal is to work with suppliers and use its efficient
distribution system to lower the cost of printer cartridges.
Over time, Dell contends it can drive down the cost of
printing by 25 percent to 35 percent a page. Shave a third
off the cost of a standard color inkjet cartridge for a
home printer, now typically $29.95, and the price tag would fall to $19.95.
Its lack of a large internal research program, Dell says,
is actually an advantage. "Your reach can be extended enormously if you
reach beyond your own backyard," said Tim Peters, vice president and general
manager of Dell's imaging and printing business. Dell's first partner was
Lexmark, the third-largest maker of inkjet printers after Hewlett-Packard
and Epson. Earlier this year, Dell announced three more partners: Samsung,
Fuji Xerox and Kodak. Analysts say Samsung and Fuji Xerox are strong in
office laser printers, while Kodak has some intriguing digital photo
printing technology.
Hewlett-Packard is in theory most vulnerable in laser
printers, the workhorse of office printing, because it
relies on an outside technology provider. Canon supplies
the mechanical engine for Hewlett-Packard laser printers
and the toner cartridges.
The technology inside a laser printer - durable, high-speed machines
typically used in offices - is very different from that of inkjet printing.
In laser printing, a tiny laser, making 3,000 rotations a second, zaps
electrical charges on a photo-conducting roller. The toner - finely crushed
bits of plastic; five equal the width of a human hair - is then picked up by
the charged portions of the roller and deposited on a sheet of paper.
Finally, a second, heated roller irons the toner onto the paper.
Hewlett-Packard designs the microprocessor that controls
the laser's minute, manic dance, and it also develops
software and handles testing and industrial design for its laser printers.
Laser machines and cartridges represent about a third of the profits from
the company's printing business, analysts estimate.
There is also the rising challenge of the remanufacturers,
who collect used printer cartridges that they then clean, refurbish and
refill. The remanufacturers sell cartridges for roughly 25 percent less than
new ones from Hewlett-Packard. The quality of remanufactured cartridges,
analysts say, has improved in recent years.
Four years ago a trade association, the International
Imaging Technology Council, was established to develop standards for the
remanufacturers. The refurbishers now account for nearly 30 percent of the
laser toner cartridge market.
Dell has turned heads with the brisk sales of its printers
- rebranded Lexmark machines with a few clever features,
like the equivalent of an ink-cartridge gas gauge that
alerts the user when ink is running low and links to the
Dell Web site for reordering.
But it has not yet changed the economics of the printing business. In fact,
according to Jim Forrester, managing editor of The Hard Copy Supplies
Journal, Hewlett-Packard's cost per page is less than Dell's.
Things are just beginning, Mr. Dell replies. "Stay tuned; there's a lot we
can and will do," he said. A better business model, he explains, will beat a
better technology, and he insists the odds are on his side in the printing
business over the long run.
"The days of engineering-led technology companies are
coming to an end," Mr. Dell declared.
For her part, Ms. Fiorina will take that bet. "We're the biggest,'' she
said. "We're the best, and we're getting better in a growing market."
http://www.nytimes.com/2004/05/24/business/24print.html?ex=1086420593&ei=1&e
n=4a426c8d57741d6a
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