Dell Computer Corp. in September made official what the company has alluded to for months: The personal computer giant is getting into the printer business.
Round Rock, Texas-based Dell announced an agreement with Kentucky-based printer manufacturer Lexmark International Inc. to produce Dell inkjet and laser printers and cartridges that will be sold directly to customers.
Dell will offer special packages pushing Lexmark printers during the holiday shopping season. Dell-brand printers will be sold in the first half of next year, said Dell spokesman Jess Blackburn. The companies did not disclose terms or give specific product descriptions.
Dell’s step into the printer market comes two months after leading printer maker Hewlett-Packard Co. (HP) severed a partnership with the company, saying it believed Dell was planning to start selling its own printers.
Palo Alto, Calif.-based HP had let Dell buy printers directly from HP and resell them to Dell PC customers. Dell plans to continue similar agreements with Lexmark, Epson America Corp., Xerox Corp., Brother Industries Ltd., and Canon Inc.
But under that system, Dell misses out on recurring sales of ink refills, which ensure highly profitable and steady revenues for years.
“Dell can very efficiently assemble and distribute printers themselves. The key to the imaging business is not the printer; it’s the cartridges,” said Barry Jaruzelski, a management consultant with Booz Allen & Hamilton in New York. “The big question is, how will they decide to price the cartridges? Because that’s where all the profit is.”
Dell won’t yet reveal how much the printers or cartridges will cost, but promises the prices will be very competitive.
HP anticipates Dell will face challenges in the printer market that HP is an expert in, said HP spokeswoman Diane Roncal. HP has promised to grow its imaging business by 10 percent over the next year by focusing on growth areas such as digital imaging and publishing, Roncal said.
“We have strong strategies,'” she said. “We’re more convinced than ever that the strategy is dead-on.”
Analysts said if anyone could challenge HP in the imaging arena, it’s Dell.
“I think it is a challenge for HP at this point. Still, printers are a very big and profitable business for them as a company, and they’re challenged on so many other fronts now with the merger [with Compaq],” said Steve Kleynhans, a Dell analyst with Meta Group. “This is just another place where Dell is going to take a shot at them.”