SMB Battle Brewing Between Dell, HP

ell Computer's entry into the printer market is setting up a classic confrontation with printer kingpin Hewlett-Packard in the small-business space.

Late last month, the Round Rock, Texas-based direct marketer unveiled four Dell-branded printers ranging in price from $139 to $839. The value-focused products include an all-in-one model, a personal laser printer and a workgroup laser printer, which comes in networked and non-networked versions.

To attack the HP juggernaut, Dell aims to leverage its direct-sales model. But HP has its own printer market plans. The vendor's Imaging and Printing Group, which had sales of $20 billion last year, is looking to boost revenue 10 percent this year.

About 97 percent of HP's printer business goes through the channel, and the vendor is counting on its army of solution partners to keep it on top. HP said it holds a 62 percent market share in the inkjet-printer space and a 66 percent share in the monochrome laser segment.

"We have tens of thousands of partners who do a wonderful job selling and supporting our product, and they will continue to be an important part of our business going forward," said Rich Raimondi, vice president and general manager of U.S. commercial business for HP's Imaging and Printing Group.

Several solution providers said HP's channel will be a big differentiator in its printer battle with Dell, whose printers are built by Lexmark.

"The fact that Dell has entered the low end of the hard-copy market reinforces the fact that the low end has become a commodity market," said David Hall, senior vice president and CTO at CompuCom Systems. The Dallas-based solution provider adds value to printer sales by offering customers imaging and printing consulting services, he said.

Dell's move to offer printers built by Lexmark could snarl Lexmark's channel ambitions, although HP wouldn't necessarily benefit from that situation, small-business solution providers said.

Lexmark already overdistributes its products, and the Dell OEM relationship will only make matters worse, said Lee Pearlmutter, president of Dataco DataRex, a solution provider in Kansas City, Mo.

Dataco DataRex has had better luck with smaller printer vendors, such as Genicom, Pearlmutter said. "They are trying to bring stuff to their distributors and not go around behind them and across them," he said. "I try to push the products where it's easiest to work with the vendors. The foremost thing is not going behind us and taking deals direct. We've definitely had that with Lexmark. As a result, we've pushed back from Lexmark."

Pearlmutter added that he's also authorized to resell printers from Kyocera Mita, a vendor with whom he's trying to cultivate business.

Despite the rough channel response to its relationship with Dell, Lexmark has been mum on the arrangement and how it plans to differentiate its own printers. During a recent New York press tour, executives at the Lexington, Ky.-based company declined to answer any questions involving Dell.

Nevertheless, Peggy Meader, president of Inland Associates, an Olathe, Kan.-based solution provider, said she thinks Lexmark is "a great company to work with" and that she hasn't seen channel conflict. Inland Associates also has strong relationships with Genicom, Printronix and other vendors in the competitive printer market, she added.

"As resellers, we like that [Genicom] has a small channel. We don't crossover with a lot of other resellers," Meader said.

Chris Froman, vice president of channel and alliance management at Lexmark, said the strength of his company's channel programs, which he called the most lucrative in the industry, will help Lexmark keep its momentum with partners. He declined to discuss the implications of Dell's printer foray or Lexmark's market position with respect to HP.

However, Froman said Lexmark will continue to differentiate itself by growing its brand, focusing on vertical markets and acting on feedback from regular meetings with channel advisory panels. For example, the vendor is working on pilot programs for solution providers based on partner input from the panels, he said, declining to provide further details.

On the channel front, HP executives said the vendor has a head start on Dell in the printer realm.

Vyomesh Joshi, executive vice president of HP's Imaging and Printing Group, said Dell announced its printer ambitions last June but didn't actually get things going until March. "That means they had trouble getting traction," Joshi said. "This has given us enough time to work with our channel partners to create a better experience. We are ready. They are going to take market share away from other competitors."