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HP Expanding Into Copier Business

November 19, 2003|Terril Yue Jones | Times Staff Writer

Printing giant Hewlett-Packard Co. said Tuesday that it would get into the $24-billion copying business in a bid to extend the reach of its most profitable unit.

The three black-and-white office copiers HP unveiled at the Comdex trade show in Las Vegas were expected to boost the company's revenue by more than $2 billion over three years, the company said.

The copiers could help the Palo Alto-based company weather a slump in its core computer business, which has had an operating loss of $866 million in the last three years. But to succeed, HP will have to make significant inroads against entrenched competitors such as Xerox Corp., Canon Inc. and Ricoh Co.

HP is the world's largest manufacturer of computer printers, and it holds 1.5% of the desktop copier market through its all-in-one products that print, copy and scan documents. The company hopes to expand on that base by offering industrial-strength machines that are the size of a small car and can copy up to 85 pages a minute.

Two of the copiers are available now; a third will go on sale early next year. They carry price tags of $18,000 to $37,000.

HP supplies computer hardware and services to companies around the world for PCs, printers, server computers and storage systems. Copiers will help fill a conspicuous gap in HP's lineup, said Tim Bajarin, president of Creative Strategies, a technology consulting firm in Campbell, Calif.

"Their hole was in this area of document copying," Bajarin said. "Ultimately, if you want this business and want to make significant money off of services, it's better to own all the pieces yourself."

The copiers have the potential to save companies 30% on copying and printing costs and boost worker productivity by 30%, said Vyomesh Joshi, executive vice president of HP's Imaging and Printing Group.

"The approach we want to take is to go after that total cost of operations," Joshi said.

Xerox, the Stamford, Conn.-based company whose name is synonymous with copying, dismissed the threat from HP.

"Probably HP's biggest weakness in this is their lack of a distribution network, especially when you're trying to get into large global companies," said Xerox spokeswoman Christa Carone in Rochester, N.Y.

Although HP has close ties to information technology managers who control spending on PCs and printers, copiers are typically purchased by firms' facilities or operations departments, noted Angele Boyd, head of imaging and printer research at technology market research firm IDC in Framingham, Mass.

"HP doesn't have much experience with these people, and these are the people who control the leases of copiers in their organizations," Boyd said.

To that end, HP said it would work with IKON Office Solutions Inc., a Malvern, Pa., firm that serves as a middleman for corporate copier sales and has a sales and service staff of 12,000.

But it will take several years for HP to become a threat to the entrenched market leaders, Boyd said.

HP shares Tuesday lost 35 cents to $21.65 on the New York Stock Exchange.

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