Fiorina Scoffs At Dell Printer Entry

Says HP is not shaking in its boots

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Hewlett-Packard CEO Carly Fiorina Tuesday derided rival Dell Computer's entry into the printer market as a "channel of distribution, but that is not the same as being a printer provider."

In a question-and-answer session before about 5,000 IT executives here at the Gartner Symposium ITxpo, Fiorina lampooned Dell's plan to private-label printers from Lexmark with the Dell brand. " 'Dude, you're getting a Lexmark,' just doesn't have the same ring," she said, referring to the Dell-Lexmark deal--a remark that drew boisterous laughter from IT executives. "Which is maybe why [Dell CEO Michael Dell now has decided to private-label printers. My answer to Michael Dell is, 'Come on in, the water is fine.' "

"The fact that Dell makes an announcement doesn't send us shaking in our boots," said Fiorina, noting that HP is the low-cost producer and has withstood low-end competitive threats in the past. "We need to pay attention to that [printer profit pool, and we are."

Hewlett-Packard recently ended its HP printer reselling agreement with Dell after top HP executives learned that Dell was poised to ink a deal to private-label Lexmark printers. A number of solution providers, many of which are loyal Lexmark partners, have said they aren't thrilled by the Lexmark's agreement with Dell. Nevertheless, they have said they understand that it is a business decision that Lexmark had to make.

"I think it is interesting that Dell announces a strategy and everyone assumes they will be successful," asserted Fiorina. "They have made an announcement. As I say, I think, frankly, the announcement they have actually made is to be a channel of distribution for somebody else's product. That is an interesting strategy, but it is not one that produces real profitability."

Responding to a question on whether the Dell move into inkjet cartridges and printer consumables could compromise HP's biggest profit center, Fiorina said that HP is the low-cost producer in both printer consumables and printers. "We study our competitors on a regular basis, both in terms of the system and in terms of supplies," she said. "And we are quite confident that we are the low-cost producer. We were not the low-cost producer two-and-a-half years ago. We are today."

When a Gartner analyst raised the issue of the high price of HP cartridges compared with what it cost to manufacture them, and whether Dell could seriously impact the high HP profit margins on such cartridges, Fiorina said, "You can't be a market leader in a profitable category without having to pay attention, real attention, to every competitive threat that comes along. That means your value proposition has to make sense for customers always. It means your cost structure has to be competitive always. It means you have to be innovating generation after generation after generation always. Those are facts."

Fiorina stressed that HP has "consistently demonstrated our ability to meet every competitive threat to our imaging and printing business over multiple years."

"We are in a better position today in terms of our competitive positioning, our products, our cost position, our marketing and our distribution than we have ever been in the history of this business," she said.

Fiorina also pointed out that "imaging and printing is a capital-intensive business--an intellectual, property-intensive business."

"Just to give you a sense, producing the next platform for the next generation of supplies is for us a $900 million capital investment," she said. "Just as an example, our low-end printers, sub-$49.99, have 100 patents associated with them."

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