The following article was contributed by Jake Wang, a senior analyst of multifunction printers at Current Analysis, a competitive market intelligence service in La Jolla, Calif.
Dell's launch of a new mono laser based MFP will add a new competitive market segment against HP; the coveted SMB and corporate markets. Today's war of words between Michael Dell and Carly Fiorina highlight the growing tension between the two companies, and rightfully so. Dell's comments are markedly aggressive in that Dell has no history in laser or inkjet printer R&D, patent portfolio or process engineering experience. HP's arguments have merit in that innovation in the marketplace requires large R&D budgets with years of experience. Or does it?
Dell's strategy of driving large volumes of low cost MFPs and printers in order to quickly grow installed bases is working remarkably well. It is the fastest growing printer maker ever and has quickly eclipsed the $1 billion dollar mark in revenue despite little IP, process or manufacturing engineering experience in printers. How did Dell do this? Dell did it by creating successful partnerships with HP's competition. Dell printer strategy began with a partnership with Lexmark--a leader in low cost inkjet and laser printer hardware--and earlier this year announced additional partnerships with Samsung, Kodak and Fuji Xerox. HP's arguments, while true, miss one very big critical issue: Dell doesn't need printer IP if it can source it from someone else!
The current laser and inkjet market is diverse, and supports many players; if those players are interested in gaining market share from the market leader they will partner with Dell, a distribution and marketing giant. Dell's strategic goal of undermining HP's profit stream of inkjet and laser consumables can be achieved without a single dollar of investment as long as Dell can create profitable partnerships for printer technology.
The truth today is that almost all companies OEM products from partners and competitors in order to complete product breadth. The relationships exist because individual companies can't compete in all market segments due to gaps in IP portfolios. In fact, even HP OEMs its laser engines from another manufacturer--Canon. This creates a market of consensus where hardware feature sets are equivalent and the determinants of success are the result of applications, branding and price. Global markets have created a highly competitive environment in which innovation rewards both the manufacturer and the distributor. It doesn't matter that Dell is merely a distributor as Carly stated. If Dell can move enough printers for its OEM partners it will succeed in the only goal that should concern HP: the erosion and reduction of HP's profit center!
The upcoming Dell Mono Laser MFP 1600 N will be capable of copying, printing, scanning and faxing. The MFP will offer 22-ppm print and copy speeds. Details on the new MFP are limited and the source of the new model is unknown. Initial reports suggested that the MFP would be a Samsung powered model sharing the print engine with the SCX-4000 series, however, after additional research, Current Analysis now expects that the new model will be based on a new higher speed print engine from Samsung priced at $399. If the 1600 N is sourced from Samsung, it will be the first new printer launched by Dell this year not sourced from its existing printer partner (Lexmark). The launch of an alternately sourced mono laser MFP may signal the start of competition and possible cannibalization of existing Lexmark-sourced mono laser printer sales.
The 1600 N will include networking as a standard feature and is equipped with a 10/100baseTX Ethernet card and USB 2.0 connectivity. The 1600 N will come with 32MB of standard memory with a single expansion slot capable of accepting up to 128 MB of additional memory. Both the 1600 N's standard and its optional RAM capabilities are surprisingly high relative to the standard for this class of product. The top of the line HP LaserJet 3380 comes with 32 MB standard memory and a maximum of 96MB, while lower priced models such as the Lexmark X215 come with 16MB standard and no option of increasing memory size.
This is a significant addition to Dell's existing printer lineup because it will enable Dell to move upmarket, providing new solutions to the SMB and corporate space. Dell's current lineup of inkjet MFPs are better suited to home offices and less so to small businesses. Dell's ambitions to grow SMB and corporate market share requires additions to its product breadth, including midrange and low end mono laser MFPs as well color laser products. The 1600 N will help to improve Dell's product positioning, providing a high volume mono laser MFP capable of serving small workgroups.
At 22-ppm the Dell 1600 N will be faster than the closest competitors in its speed class: the Canon ImageCLASS MF5550 which prints at up to 19-ppm, is priced at $499, and is currently promoted with a $100 manufacturer's mail-in rebate; and HP's LaserJet 3380 priced at the top of the price band at $699 which offers 20-ppm capabilities. If Dell can hit a price point of $399 the 1600 N will be very competitive. It will be faster and better equipped then all other products in the class including products priced $300 above it.
The sub $499 mono laser MFP segment has become very crowded with numerous entries from Brother, HP, Samsung, Lexmark, and Canon. As printer manufacturers push upmarket, traditional copier manufacturers are pushing downmarket. For example, Ricoh recently announced the Ricoh AC104, a mono laser based 17-ppm MFP priced near $499. The AC104 will only be available through its dealer channel; however Ricoh's entry into the SMB space is a sign of its growing importance.
Dell also plans to launch two low-end mono laser printers the 1700 ($199) and the 1700N ($299) both with print speeds of 25-ppm. The 1700N will include networking and target the SMB and small workgroup market.
Dell's continued success in the printer category will require continued expansion in both offerings and markets. Dell plans to continue international expansion from the last two quarters, during which it expanded sales in Europe and Australia, and later this year it will begin selling in Japan and China. Dell's current strategy for the printing market is to offer value pricing on laser printer and inkjet MFP hardware, targeting high unit volume segments, and quickly drive up installed bases to gain annuity consumables revenues. Continued expansion into new markets such as the SMB and corporate space will enable Dell to broaden its attack on HP's most profitable business. Carly is right; Dell doesn't have IP or experience, but the problem is that Dell may not need it!