New Web-based Printers Could Boost HP’s Profits

by Trefis Team
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HP (NYSE:HPQ), the leading player in the global printer market, is simplifying the printing process via innovative web-based printers that are scheduled for launch on a large scale later this year.

Priced from $99, HP’s ePrint devices are recognized over a network and assigned unique email addresses. Users print by sending email to the printer.  Additionally, printing can be done remotely using hand-held devices like smartphones and tablets, without having to install drivers or be connected to a PC. HP plans to support its web printing applications by selling digital print ads against them.

These web-based printers should enhance HP’s reach among smartphone users by providing them with easy access to printing. We believe this new approach can help HP counter the growing threat to its ink cartridge sales.

Ink Cartridges Sales Important to HP’s Overall Profitability

HP dominates the worldwide printer market with a share of around 40% in total printer units shipped. However, the company’s profits come mainly from sales of high margin printer ink rather than printer hardware.

The ink cartridge business generates one-third of HP’s profits.  In 2009, we estimate, HP sold 7 ink cartridges per printer shipped. Any decline in cartridge sales will put pressure on HP’s printer revenues and margins.

Growing Trend of Web Access Through Smartphones, Tablets and Similar Devices

Growing consumer adoption of hand-held devices such as smartphones and tablets has caused a marked increase in Internet access and consumption levels. With analysts projecting unit sales of such devices to outpace PC sales in the next four to five years, it becomes vital for HP to provide handheld printing connectivity in order to keep its customers engaged in printing.

Web-Based Printer Features

HP expects to sell around 15 million web-based printers next year. The company is touting the following key features of its new web printer family:

1. Unique email address: Customers can email work to the unique email address assigned to each printer. This avoids the hassle of installing printer drivers for the user, and makes it easier to print from anywhere using a connected device. For example, you can take a picture from your iPhone and email it to your web-based printer back home.

2. Dedicated App store: HP is working to develop a printing app store, similar to Apple and Google’s app stores for smartphones. So far HP has lined up 40 content providers for this store, including Facebook, Thomson Reuters (NYSE:TRO) and Yahoo (NASDAQ:YHOO).

3. Interactive touch-screen based user interface, which can be used to directly print from web such as Google docs and maps.

4. Personalized features: The ePrint devices will come with dedicated web hosting space where customers can store their documents for later printing, pre-scheduled delivery of content over Internet etc.

HP expects that the ability to print anytime through an email using a range of handheld devices will encourage consumers to print more, thus protecting HP’s margins.

You can see the complete $54 Trefis Price estimate for HP’s stock here.

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