Hewlett-Packard (HPQ) recently said it would launch a new Print App and an App Studio portal for the holiday season to enhance web printing, helping consumers to print customized content without a PC.
The print App software is designed to work with HP’s high-end printers. To improve the speed and reduce cost of digital printing, the company had earlier unveiled graphic arts technologies and products to support its Print 2.0 strategy. HP’s Photosmart Premium with TouchSmart Web is already available in the market. The company is manufacturing commercial and specialty digital printers to work with the Photosmart and TouchSmart.
HP’s Photosmart Premium printer with TouchSmart Web will be available for $399. The new Photosmart printers feature touch technology that help users to display as well as edit and print photos and enable them to copy and scan documents. Other wireless printers are available within the range of $129 to $199 through Staples Inc. (SPLS), Best Buy (BBY), Office Depot (ODP), OfficeMax (OMX) and Amazon.com (AMZN) stores.
Hewlett-Packard also announced a host of partnerships with AOL to get Tabbloid publishing services to its sites. Moreover, it entered into an agreement with Yahoo’s (YHOO) Flickr to expand print services through Snapfish by HP.
HP’s most profitable business is the Imaging and Printing Group, which boosted revenue by 6.4%, resulting in an operating margin of 15.6% in fiscal 2008 — the highest across all segments. The company is also the largest seller of printers (31% of total sales), with a 41% share of the global market. HP’s new printing solution bolsters its efforts to target the estimated $663 billion print production page value opportunity projected for 2010.
While printing is a growth area for the company, we believe the significant pricing pressure on the hardware for printers may hurt its profitability in future. We thus remain concerned about the long-term growth prospects of the printing unit.
Moreover, HP faces intense competition in its printer business from Lexmark International Group (LXK), Epson and Canon (CAJ). It is also up against Kodak (EK), which plans to increase its share in the printer market with the launch of a new digital-inkjet printer, Stream, next year. Therefore, we maintain our Neutral rating on HP.
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