Ed Moltzen

The Chart

March 05, 2008

Executives at Staples say their new deal with Dell is already paying off, but their focus for Dell now might be considered something of an odd strategy. Mike Miles, Staples president and COO, said this to analysts during Staples' quarterly earnings conference call Tuesday:

We've seen a steady ramp up in sales since the product launch as customers have shown strong interest. The combination of hardware, ink, peripherals and extended services plans makes Dell a winner for both sales and operating income.

We've just started to shift the focus of our advertising and promotion to ink and toner consumables and expect these higher margin skus to continue their strong sales ramp throughout 2008. As the only retailer offering a full line of Dell ink we have an opportunity to drive substantial new customer traffic. Sales in other brands have not seen a material negative impact due to the successful Dell launch and we have planned a number of marketing initiatives to drive continues sales of Dell and believe this product line will be a big win for us in 2008.

(Emphasis added.)

Printer ink hasn't exactly been a product in Dell's wheelhouse. In fact, judging by OEM numbers over the past 18 months from Lexmark - - which has listed Dell as one of its biggest OEM customers - - printers in general have been closer to a bust for Dell. The brick-and-mortar retail segment is a different animal for Dell, so maybe Staples' strategy will work. But of all the areas for Dell to compete with rival Hewlett-Packard, whether retail or commercial, printers and consumables would appear to be much less favorable than other areas.