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Inkjet Prospects Look Bleak With PC Sales Hurting

New York — The slow pace of PC sales tied to waning consumer interest in upgrading are leading inkjet printer vendors and industry analysts to say 2001 will not be a stellar sales year for this peripheral product category.

While some of the manufacturer woes can be blamed on the economy, other problems are homegrown. Vendors are starting to pay the price for driving printer prices down well below the $99 mark last year, a point where profits are impossible to generate. The industry also has not given consumers a compelling reason to buy a new printer, said Gary Peterson, a senior analyst with ARS, La Jolla, Calif. “Our prediction is 2001 will be flat,” he said.

However, lagging PC sales were named the primary culprit. This hit the printer industry particularly hard because so many printers were sold as part of PC bundles.

“The PC slowdown has had an immediate impact on printer sales,” said Ned Bunnel, Canon’s director of product management, “and we are concerned that printer sales will struggle the rest of the year.”

Bunnel cited the meager 5 percent growth the category posted in year over year sales for January as proof those consumers are simply uninterested in the category.

“Printers and peripherals did great until the back to school season last year, but after that printers got hit the worst. Scanners and digital cameras did better because of people’s interest in digital photography,” Peterson said.

The maturity of the printer market is also a negative. With printers having about the same home penetration rate of PCs, around 55 percent, there are fewer first time buyers. Add in the fact that a printer’s life cycle can last five years and the current models are more than adequate for the average consumer’s need, and you end up with a low sales rate, Bunnel said.

Hewlett-Packard’s outlook is not as dismal. Lisa Dowling, HP’s product manager for consumer inkjets, said there is a strong upgrade and replacement market. However, Dowling couched this statement by saying most of HP’s growth is happening with its photo printer models and not the DeskJet consumer models. The photo printers have photographic functions that are bringing in digital camera and photo buffs, she said.

Whether the overall inkjet market will rebound as the year goes on depends on the economies performance, Dowling said.

Canon’s Bunnel agreed that digital imaging is the one area where replacement sales have some potential this year.

“People are still spending their dollars, but mainly on digital cameras. As digital camera sales grow, it will give customers a reason to want a better printer to print their photos,” he said.

To this end, Canon this week is shipping the S600. At $199 the printer is part of the company’s effort to shift its emphasis away from the entry-level printers to those with more profit potential, Bunnel said. The S600 can print an 8×10-inch photo in about 90 seconds at 2400x1200dpi. Regular color printing takes place at 12 pages per minute and text is 15ppm.

Canon will embark on a $20 million advertising and in-store promotion campaign, said a company spokeswoman. Canon has not taken aim at the mid-range price point market for a couple of years, instead concentrating attracting the budget-conscious with $99 models, she said.

HP’s new DeskWriter 995 is also upscale featuring Bluetooth wireless technology. It is shipping later this summer, said Dowling, and the price has not been set.

Getting price points well above the $100 level is a goal for Canon, and to a lesser extent HP. Bunnel said the printers being sold for $49 are not cost effective for vendors. The original thought was that enough of these would be sold so the profit would be made on replacement inkjet cartridges, but the company’s discovered, to it’s dismay, that people buying low-end printers hardly use them.

“The razor blade logic did not work in the entry-level product area,” Bunnel said.

Peterson agreed, adding that ARS data has shown a steady increase in the average selling price of printers for the past several months. In June and July of 2000 more than 50 percent of all printers cost less than $99, but this dropped to the 30 percent to 35 percent range for the fourth quarter. The most recent data has prices again dropping, but this can be attributed to retailers and vendors trying to interest customers with cheap deals during the normal poor sales period that starts off every year.

HP will not be giving up its efforts at the low end, Dowling said. It is now offering a model priced at $49, after rebate.