HP Exec: Supplies and Services to Boost Printing Revenues

As printer prices decline, consumers will continue to pay for supplies like cartridges and services like digital photo prints, which will ultimately generate larger revenues than units shipped, a Hewlett-Packard executive said on Monday.

"It's about the end, which is the print, not the means, which is the printer," said Vyomesh Joshi, executive vice president of HP's Imaging and Printing Group, during a speech at the Morgan Stanley Technology Conference in Dana Point, California.

HP is going after high-usage customers, those who not only buy printers, but buy ink, toner and media, Joshi said. HP generated revenue of US$28 billion from its imaging and printing business in fiscal 2007, and the supplies and services revenues are increasing, Joshi said. "We are moving from printer to printing and moving from units to pages," Joshi said.

HP ships 45 million printers a year, but around 49.3 trillion pages are printed each year by consumers, small and medium-sized businesses and enterprises, Joshi said. HP has about a 1.8 percent share in the pages printed segment, and doubling that will double HP's printing revenue, Joshi said.

Of the trillions of pages printed, about 9 percent are digital and 91 percent are analog, Joshi said. The first thing HP wants to do is move more pages to digital, which expands printing opportunities for different business segments. For example, by capturing pages in a digital format, users will be able to print images at home, over the Internet or direct from retailers, Joshi said.

To illustrate the point, HP has introduced an inkjet mini-lab that can rapidly print tens of thousands of digital images in just an hour, Joshi said. Instead of printing a simple 4-inch-by-6-inch photo print or a shoebox of photos, users will be able to create a photobook, Joshi said. That will happen in the next five years, Joshi said.

HP is also trying to take the cost out of declining product segments like mono laser printers and applying it to products like color laserjets and multifunction printers that deliver better revenue and profitability, Joshi said.

The company is also trying to improve its logistics for better profitability in the printer segment, Joshi said. HP currently sells products in 179 countries, he said.

The company has acquired multiple companies to promote its Print 2.0 strategy, aimed at boosting HP's print management services, online photo services and tools for digital content creation. HP in January acquired Exstream Software, a company that manages the creation and delivery of communication materials. The company in 2005 acquired Snapfish, an online photo services provider.

Last year it abandoned the digital camera business to reinvest in the Print 2.0 strategy. The camera business wasn't profitable enough for HP, Joshi said, saying the strategy shift allows HP to focus on its printing and digital imaging business. HP didn't have a chance to reach the top position so it exited the camera business, he said.