Fiorina To Dell: You Don’t Scare Me

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Hewlett-Packard CEO Carly Fiorina has only one thing to say to Michael Dell as his company eyes new opportunities in the printing and imaging business, long considered HP's most lucrative domain: Come on in, the water's fine.

Fiorina, speaking Tuesday morning during a keynote interview at the Gartner Symposium/ITxpo 2002 event in Orlando, said she's not concerned about the PC vendor making inroads into the printer business, which for HP has become its strongest driver of both revenue and earnings.

"The question seems to be that this a big, profitable, attractive business, and people are going to come after it. But people have been coming after it for the 20 years we have been in it," she said, in response to a question from Gartner analysts about how Dell's latest push may hurt HP's business. "HP has consistently demonstrated our ability to meet every competitive threat to our imaging business, over multiple years. We are in better position today in terms of our competitive positioning, our products, cost position, our marketing and distribution as we have ever been."

Dell made headlines last month when the company announced that it is officially entering into the printer business via a deal with HP rival Lexmark to license printers and supplies under the Dell brand. The Dell announcement came shortly after HP said it was cutting ties with Dell because it believed the company had intentions of starting its own printer business.

"I understand why Dell wants to be part of the market. I understand that they have to expand their portfolio for both growth and profitability. But 'Dude you're getting a Lexmark' just doesn't have the same ring," quipped Fiorina, inciting a round of laughter and applause from the audience. "Which is maybe why Michael Dell has decided now to privately label printers. My answer to Michael Dell is come on in, the water's fine."

The Dell announcement has caused many industry analysts and company watchers to question whether or not the company known for its direct sales model and uber-efficient supply chain can make the same steep inroads into the printer business as it has in PCs and entry-level servers.

But Fiorina said she thinks the challenge will ultimately be a non-issue, since Dell's model is based more on distributing other people's technology than becoming an innovative manufacturer and vendor. "I think it's interesting that Dell announces a strategy and everyone assumes that they will be successful," she said. "They've made an announcement, and frankly the announcement I think they made is to be a channel of distribution for somebody else's product. That's an interesting strategy but it's not one that produces real profitability."

Fiorina said the capital-intensive and intellectual property-intensive nature of the printer business will make it hard for a company like Dell to become a leader in the space. "Producing the next platform for a next-generation of supplies is for us a $900 million capital investment, and our low-end printers have 100 patents associated with them," she said. "Michael Dell can be a channel of distribution, but that's not the same as being a printer provider."

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