Wednesday, October 31, 2007

Print 2.0 Interview

Patrick Scaglia over at the HP Print 2.0 blog has an interesting recap and link to an interview between HP's print leader, Vyomesh Joshi, and John Battelle, that was recorded at the Web 2.0 conference a couple of weeks ago. Nothing really new here but good to hear it all in one place -- recommended!

And hats off to the newly-named "Print 2.0" blog, too! I feel a bit like Stephen Colbert, taking credit whether it's due or not, but I suggested the simplified (sans HP acronym) blog name some time back, so glad to see they've done it!

Tuesday, October 30, 2007

Where do those online product reviews come from?


In doing a little research for an upcoming "Observations" column, I've done a "light-touch" review of an interesting all-in-one product from a well-known vendor. (I'll save my specific thunder for the actual piece, coming up in about a week.)

But a sidebar worth noting -- as part of my product evaluation, and following my hands-on work, I went out to several popular online vendors and read what their customers were saying. (I have learned it's best to do your own evaluations first, rather than be colored by the experience of others.)

Both vendors' customer review sections for this unnamed product summarized their customer reviews with less-than-perfect ratings between three and four stars. (I'll disclose the resellers' names -- they're Best Buy and Amazon.) In both cases, as the product in question is rather new and not necessarily a category leader, there were not a large number of customer reviews, 12 and 2 respectively. So with these low numbers of responses, one negative review really tends to skew the average (especially in the case of the two!). And that's what happened. BUT...in this case, the negative reviews were from the same customer! I noticed this from the wording (and misspellings), for example:

The bundled software was not user friendly, very slow and you must be a computer wiz to hook it to your wireless router- you should have knowledge of `bridging', `ad hocking', `setting up ip address' etc etc. With the help of my `computer wiz' teen son I finally able to run the printer. But it did not last long, in about two weeks printer refused to communicate with router or computer. Called tech support, which is a joke- I fall in sleep waiting and listening their music.


While the reviewer (identified by different names at the different sites) didn't go totally harsh on the star review with two out of five stars, the body text of the reviews is identical and INCLUDES A RECOMMENDATION FOR A COMPETITIVE PRODUCT at the end of the review. (They carry the same post date -- October 24 2007 -- but different post titles and different poster names.)

I've always assumed the customer reviews were specific to customers of the product and reseller in questions. Apparently not. This deserves some follow up.

Friday, October 26, 2007

More 'How Big is Big?'

I encountered an interesting blog post over at Applied Disruption that expands on similar themes I was getting at in my October "Observations" print column. (see the October 2007 edition of The Hard Copy Observer or my blog posting of the column.)

In "HP steals from government playbook..or..How to get impressive sounding market size" blogger Jeffrey Stewart makes points about the "game" of estimating a new company's market size in the most positive light, sometimes to extremes. He's used HP's recent "53 trillion pages" stat as an example. I know Jeff from his days at Mimeo.com, but even if I didn't I'd recommend his blog. Worthwhile reading.

In a related tangent, I was interested to read Chris Shipley's Demo Letter this week, "DEMO is about product innovation, not just about start-ups", which furthers the point that the title does nicely, or in my words, don't assume it takes a start-up to innovate!

Tuesday, October 23, 2007

Lexmark can't match Apple results

Monday's post-market story was Apple (NASDAQ AAPL) and its blow-out quarter. Printer maker Lexmark (NYSE LXK) has its quarterly results available as of this morning and the numbers are NOT good. Their year-over-year earnings declined 47%, revenues were off 3%, with business sector business up a bit but consumer business off more. LXK's stock, after meandering up with various takeover talk recently, is off about 9% and below $40/share after about an hour of market activity this morning.

Monday, October 22, 2007

Dell PCs ... and Printers ... coming to Staples

News this morning from Round Rock that Dell (NASDAQ DELL) will be expanding its retail distribution to office supply chain Staples (NASDAQ SPLS), in both their 1,400 retail stores as well as their online store, beginning November 11.

This follows Dell's move earlier this year into Wal-Mart. (See "Wal-Mart and Dell".) Of particular interest are these inclusions on the product list to be offered: "Dell 948 and 926 all-in-one inkjet printers, [and ] Dell 1320c laser printer...Staples will offer ink and toner for most Dell printers."

Friday, October 19, 2007

Still no LXK acquisition

Today's acquisition-related non-news, this from the Xerox (NYSE XRX) earnings announcement, was CEO Anne Mulcahy's negative assessment of the likelihood of their acquisition of Lexmark (NYSE LXK). (See "Xerox CEO says acquisition of Lexmark unlikely".)

Regular industry followers need no reminding the the Lexmark acquisition rumor has been circulating regularly, albeit with a revolving list of speculated suitors. (See "No Lexmark Deal...Yet" for a recent example.)

A look at today's market activity would lead one to conclude there's still some wind in the sails of the story though -- on this ugly day for the stock markets, with most indexes off 2% to 3% (on the 20th anniversary of Wall Street's Black Monday, no less), LXK went the other direction, with a gain of $0.33 to $42.35.

Quilting books from blogs

As my regular readers know by now, I cover the printer industry with a marketing view, which means I like to tune in to user (customer) needs and how their needs are satisfied by hard copy solutions. One site that's come to my attention, as it relates to my interest in the "blogs to books" arena, is the Serendipity Patchwork and Quilting blog. Brenda Gael Smith, owner of the blog, found my references to printing books from blogs (e.g. "My Blog2Print Book is in!") and linked to them from a post that included all the "usual subjects" in this area -- Blurb, SharedBook, Lulu, blogprint.com, and of course HP's efforts in blog printing -- most of whom I've covered here at one point or another, and I'll send you their way for the company links. (see "Blog to Book Options".)

While one might argue this is only a tiny slice of the overall pie of blog-printing demand, that's kind of my point! I think it's critical to understand individual market segments and their needs -- in this case, a handsome book printed from the online visuals of creative and beautiful quilt designs that satisfies the quilt fan's "user needs" of permanence and sharing that only a book can offer. (Effective printing of individual blog posts might be critical for the purposes of hands-on quilting, where the post includes instructions and other ideas.) In my mind, this understanding of user needs is equally or more important in assessing market demand than the "how many blogs are there and let's assume x percent want to print them" approach! (Actually they're not mutually exclusive -- both approaches are important.)

Thursday, October 18, 2007

Printing talk at the Web 2.0 Summit

Another Web 2.0 event is going on this week, sponsored by O'Reilly Media, fitting in that the company's founder, Tim O'Reilly, is credited with defining the term Web 2.0.

In our business, HP (NYSE HPQ) has been the leader in applying printing ideas to this arena (dubbing their broad initiative with the handle "Print 2.0"). They have their executives at the conference this week, taking their story from HP-sponsored, print-industry events (see my recaps of their end-of-May and end-of-August events) to the bigger, broader world.

This bigger picture approach is critical in communicating HP's vision of printing from the Web (as is the acceptance that the message may need to be reinforced again and again). As I personally found out more than a dozen years ago, while working on this idea in its embryonic stages, most of the Internet's concepts and designs center around the display aspect of the human interface, but when it comes to real users, hard copy "takeaway" is also part of the solution. In the simplest sense, this might be printing driving directions from a mapping site. On the other end of the continuum, an example is the preservation and ability to display or pass along the artwork passionately created (see example image above) on a Facebook wall via Graffiti, one of HP's recent printing partnerships.

Further info on all the partnerships (Disney, Flickr, Graffiti and Microsoft Live Spaces) can be found in HP's release and elsewhere in the news. A good read, too, is the blog entry from one of O'Reilly's own, Sarah Milstein, at the O'Reilly Radar blog with "Better Printing from the Web (Way Better)". I had the chance to chat briefly with HP exec (via Tabblo) Antonio Rodriguez following the seminar covered by Milstein, and he was very enthusiastic about his presentation and the response to it. Continuing to go beyond the printing industry is exactly the kind of pioneering that HP needs to keep doing to make their story really go somewhere!

Wednesday, October 17, 2007

Not quite a printer acquisition

Today's stock market was boosted by tech stock gains, and one substantial acquisition. It was not the printer-industry-direct-hit that might have been anticipated after last week's reports about Lexmark/Dell and HP/Kodak rumors, but there is at least a footnote's worth of relevance to this one. Beaverton OR-based Tektronix is being purchased by Danaher for $2.8 Billion.

Tektronix is a test and measurement company that ventured into printers not so long ago, and did quite well with a line of solid inkjet products. The division was sold to Xerox for a little less than $1 Billion in 2000. The further development of those products under Xerox management has led to many new printer and all-in-one products over the years and the company's recent "color at black-and-white prices" marketing push.

Word for the Day -- "Transpromotional"

While this blog's coverage focuses on the workgroup/desktop printer market, the world of the digital press occasionally sneaks in, if for nothing more than the fact that the major players are pretty much the same, or at least a subset.

A piece by Christopher Lawton in yesterday's Wall Street Journal entitled "Bills Make Room for Advertising -- Printing Promotions Right on Statements May Get More Notice" caught my attention and is worth noting. He reviews the growth of printing personalized advertising offers directly on billing statements, and the enabling technology including, of course, digital presses from Xerox (NYSE XRX), HP (NYSE HPQ) and Eastman Kodak Company (NYSE EK).

It's a good piece, and especially interesting to me in that it focuses on the APPLICATION and thus the "why" behind the unit sales growth in this category, which is illustrated with a nice chart from InfoTrends, showing placements of 60+ppm color printing systems going from under 2,000 annual placements in 2006 to about 7,500 units in 2011.

A question I have about this "transpromotional marketing" trend, with InfoTrends quoting "roughly 95% of people open and look at their bills and statements"? I may be an early adopter but I'm moving as fast as I can AWAY from receiving paper bills. The era of simplified electronic bill presentment, promised for so long, seems to be upon us, and the last thing I want to be doing is handling a bunch of paper just to keep on top of my monthly bills. Oh well, time will tell...

Friday, October 12, 2007

A big week for P&I M&A speculation

With the week's earlier story of a possible Dell (NASDAQ DELL) acquisition of Lexmark (NYSE LXK) already stirring the pot, add the possible combination of HP (NYSE HPQ) and Eastman Kodak Company (NYSE HPQ). The Financial Times' David Zielenziger has a piece out today entitled "Hewlett-Packard perennial bid speculation for Kodak resurfacing, industry sources say".

I would think Kodak's attractiveness to HP has to be enhanced by the market success with their recent photo inkjet printers and all-in-ones. The company's recent expansion into WalMart and international markets (see "Meet Me at the WalMart".) My hands-on experience with a Kodak EasyShare 5300 all-in-one has been very positive, and in full reviews, the product has fared well against comparable HP models. (For an example, see USA Today for Ed Baig's review, "Almost a photo-finish...".)

Observations: How Big is Big?

How Big is Big?

The inspiration for this month's column comes from a like-minded friend and industry colleague who enjoys questioning basic concepts that most of us take for granted. In this case, the question centers on industry numbers that get bandied about all the time and, more often than not, with little thought about what they really mean.

In general, the same cannot be said for our personal lives. For example, $2 is a high price to pay for a basic cup of coffee, and at $3 a gallon, the price of gasoline is sky high. But what about on the business side? The world of ink jet supplies, where consumers and business purchasers blend, is a plausible bridge to that question.

While attending the Lyra World Expo preshow conference in August (see the October 2007 Hard Copy Observer for further coverage), I observed that much of the discussion on trends in supplies pricing involved the purchase price of cartridges, with sub-$20 price points becoming popular among OEMs and third-party companies. Even with a reduced quantity of ink, the broader view of cost per page (CPP) seems to be taking a back seat to the lower entry price. I maintain that this phenomenon is because people can relate to the out-of-pocket cost much more easily.

That example grounds us on prices, which we can begin to relate to our personal cash flow. Then we can blow up some of these numbers to see how they fit with the very most macro of numbers in our business. At the Lyra preshow conference (see "Lyra Industry Experts Speak"), analysts presented that the crossover point between hardware revenue and supplies revenue (ink and toner) occurred in 2005, when revenue from each group was just below $60 billion. Using that as a starting point, assuming that half the supplies revenue is from sales of ink jet cartridges, and estimating a weighted average selling price of $20 a cartridge, we get a unit total of 1.5 billion cartridges shipped in 2005. In terms of toner, $30 billion in toner cartridges, at $100 each, infers 300 million units shipped annually.

It is tempting to want to go on and extrapolate using an active installed base of 500 million ink jet printers (1 printer for every 12 individuals on the planet) and an installed base of 200 million laser printers (which I got from knowing HP (NYSE HPQ) just shipped its 100 millionth unit more than a year ago). But we had better stop right there. At this point, a number of issues, such as how many cartridges per ink jet device and color versus monochrome laser machines, really need to be modeled separately. This is a good example of why the spreadsheet was invented. As we leave the back of the envelope, we start to add necessary richness and complexity.

I have not validated the numbers that go into my assumptions with "official" sources like Lyra Research, the publisher of this newsletter, but they seem to make sense. One danger, of course, is piling bad assumptions on top of more bad assumptions and ending up an order of magnitude or two off from the "real" number but, more often than not, the assumptions tend to balance each other out.

Printers and cartridges inevitably lead to pages, and that topic is really for another column. But just to put a toe into the water, HP has been making hay with its "paper pie" for a long time. In October 1997, the firm’s entire annual pie for the United States totaled 12 trillion pages, and pages produced on digital printers accounted for 3 percent. Fast forward to more recent years, when HP executives have talked about a worldwide annual page count of 46 trillion pages in 2006, growing to 54 trillion pages in 2010 (Observer, 9/05). These numbers seem a lot more enticing. Taking the $60 billion supplies revenue number and dividing by 3 cents per page give us 1.8 trillion pages. (These are from products that Lyra categorizes from sub-$100 ink jet printers to low-end typesetters and copiers.) If we accept HP's current page estimates, that puts digital pages at just under 4 percent of the market. While 3 cents per page may be woefully inadequate as an average, that figure gets us in the ballpark.

We can use this same type of analysis to look at big numbers that are not related to products. For example, in my September column, I commented on HP's $300 million marketing campaign touting its "Print 2.0" message. While that figure seems large, if we compare it to the approximately $30 billion in annual revenue from HP's Imaging and Printing Group, $300 million is "only" 1 percent of the unit's top line. The most talked-about metric in television advertising, at least among laypeople, is the cost of an advertisement spot during the Super Bowl. The price has recently passed $2.5 million for a 30-second spot, so picture this: at that price, HP's $300 million budget would buy one full hour of Super Bowl advertising (120 spots).

We have only scratched the surface on this topic, so I would like to revisit here from time to time. I am a big proponent of "back of the envelope" figuring and knowing some key benchmark numbers can really be a big assist. Some of those I would suggest include the one-million-a-week printer shipment level that HP reached a couple of years back, the aforementioned 100 million LaserJet installed base, the 50:50 split reached a couple of years ago between hardware and supplies, HP's just-under $30 billion in revenues, and likewise, HP's 50-percent share position in many of its markets.

Creating easily-visualized images is of great help, too. I remember that when the HP LaserJet hit sales of one million units in the late 1980s, a very creative management colleague chose to make it real by expressing that milestone to the local media as follows: take your local 25,000-seat football stadium, and put a LaserJet printer in each and every seat. Now stack 39 more of those printers on each seat, and you have 1 million printers. When HP hit its 100-millionth LaserJet shipped in 2006, one could expand the visual by imagining 99 more of those stadiums.

As much as I enjoy this kind of mental exercise and am a proponent of its usefulness in business, things can change, just like in everything else. In a recent class I was teaching, I described a hypothetical analytical problem to my graduate marketing students, and asked how they would solve it. Without hesitating, one of my eager students raised a hand and shouted out "Google!"

Thursday, October 11, 2007

No Lexmark deal...yet?

In the recurring rumor mill, Lexmark (NYSE LXK) was reputed to be back in play this week, at least per a number of sources, as summarized by Reuters and Seeking Alpha. But enthusiasm for the the stock waned today, as the shares fell back (early on, well ahead of the rest of the market's late fade), and closed at $41.06, well below the heady $43.80 Wednesday close. (At $41.06 though, LXK is still almost a buck over the Tuesday close.)

And unlike the swirl of the late Spring/early Summer (see "Lexmark Buy-out Drumbeat", when Lenovo and private equity firms were considered possible buyers, the Fall's likely candidate for acquiring Lexmark is none other than Dell. The former do-nothing-wrong company that has struggled in the last couple of years seems to have regained some of its footing, with its stock up 30% from its 52-week low. My speculation about Dell's potentially exiting the printer biz as a part of their re-focusing appears to have been just that, speculation, at least if they're thinking of buying their biggest supplier in the category.

Lexmark's market cap is at $4 Billion, and while they'll be fortunate to reach the $5 Billion mark in revenues for 2007, Lyra estimates the value of just their supplies market, at retail, at about $6 Billion annually. Again, that's at retail, and includes both OEM (branded) and 3rd Party ink and toner.

Wednesday, October 10, 2007

Autumn "Clip Show"

At the risk of getting away from my normal Printing-and-Imaging-News-and-Analysis beat I'll combine these three recent tidbits that have come my way. (See my July 2007 "Summer Clip Show" for the title reference.)

First, my friends over at the Databazaar blog tracked down an interesting photo frame/printer concept. See "Off-The-Wall Printers". Interesting post with some great links!

Second, another group of friends behind one of the growing list of HP (NYSE: HPQ) Printing Blogs (this one humbly titled HP Experts Talk about All Things Inkjet) feature a recent post highlighting a commissioned research study that concludes "HP Photosmart Photo Printers are the easiest and fastest...". Like I've previously commented about vendor-commissioned research (e.g. "Research on Economics of Small Business Printing"), the final results aren't the story -- but looking at how (and why) the research was commissioned, where it's executed, what competitors are compared, etc., leads to some potentially interesting insights.

And lastly, and least directly relevant, is the post from people I don't know and have never met, over at ZDNet's blog, The Apple Core. The post from earlier in the week covers the XO computer, one of my personal interests but least relevant from this blog's perspective, but I like the approach -- looking at a new development and adding historical perspective, in this case the "$100 laptop" and Apple's long-ago effort with the eMate. Here's the link and accompanying quote using the Apple Core's "blog this" feature.

The low-cost laptop that Apple should have built (and sort-of once did) by ZDNet's David Morgenstern -- The buzz around the XO Laptop, aka the One Laptop Per Child group’s “$100 laptop” is growing, with an innovative donation program coming in time for the holidays. But this colorful, rugged computer could have come from Apple, and in another time, it did. The One Laptop Per Child organization recently announced a [...]

Samsung investing more in Color Laser Printers

In today's Wall Street Journal Evan Ramstad pens a piece entitled "Samsung Feels Pinch as Pace In Sector Eases" (sorry, that link is a summary only, full text for subscribers only, for now anyway! See "Murdoch makes mark at The Wall Street Journal").

Most of the article covers Korean industrial giant Samsung's category leaders like TVs and mobile phones, as well as their huge components businesses, but notes a change in investment strategy that will direct more funding into the growing color laser printer category.

Other steps also pose risks. Its push on printers, for instance, puts it more squarely into competition with Hewlett-Packard Co. (NYSE HPQ), one of its biggest customers for memory chips and computer-screen components. Samsung is focusing on the changeover in laser printing to color technology from black-and-white for consumers. It is expanding its line of advanced corporate printers to eight models by the holiday season, up from three at midyear.

Tuesday, October 09, 2007

Xerox Management Succession

In the latest Fortune magazine (cover date Oct 15) it's time again for the annual profile of the 50 most powerful women in business. Of special interest for our industry this year is the lengthy story on Xerox's (NYSE XRX) Anne Mulcahy and Ursula Burns and their relationship, entitled "Xerox's Dynamic Duo".

Long ago, I remember hearing the big business magazines were known for "corporate hero worship" and while I believe that has changed considerably in the last 30 years, this piece by Betsy Morris is long on admiration. But still interesting and very much worth reading. I couldn't help note the paragraph that brought home the little HP (NYSE HPQ)/Xerox skirmish I've been covering the last few weeks. (see below -- my highlights.)

While the team has achieved a minor miracle in the past five years, more than halving the company's debt to $7 billion, boosting net earnings 13-fold to $1.2 billion, and producing breakthrough products like the brand-new, solid-ink printer that can make color copies for the cost of black-and-white - despite all that, revenue has been flat for five years now.

Thursday, October 04, 2007

Shipping as a profit center

Herb Greenberg's Market Blog has a post with a link to his interesting Wall Street Journal/Marketwatch piece about Shutterfly (NASDAQ: SFLY) entitled "Why Shutterfly may not be picture-perfect". The article highlights the company's transition from a technology to a manufacturing concern, at least in the eyes of former board chair, Silicon Valley legend Jim Clark. One of Greenberg's "aha's" is the old "shipping-and-handling" charges and their role in driving the bottom line. Worth reading.

BTW here's the link to the PC Magazine story that references Shutterfly's competitor MyPublisher.