Monday, August 17, 2009

Anticipating HP (NYSE HPQ) Q3 numbers, a look at another print volume indicator

With the HP (NYSE HPQ) third-quarter earnings announcement set to come after tomorrow's closing bell (see "Hewlett Packard Likely to see Strength in Services, PCs"), an intriguing view of the industry comes from colleague Tom Ashley at Pivotal Resources. In a new white paper, "Does Digital Printing Have a Future?" (free registration required), Ashley reports some very revealing results from the paper side of the printing equation, pointing to longer-term trend line declines in printing going back ten years.

US consumption of Printing and Writing papers (as defined
by the paper industry) provides another measure of printing
activity. After growing at 3.0% per annum from 1991 to 2000
to peak at 31.3 million tons, US consumption has fallen at
a rate of 1.7% from 2000 through 2008. Consumption has
fallen by 23% through the first six months of 2009 (month/

The report goes on to detail further industry metrics, including those for "uncoated freesheet paper", the subset of printing paper most relevant to digital printing, and similar numbers noting declines in Europe.

Ashley's premise includes the need for the industry's own acceptance of printing's decline, that goes beyond seeking correlation of recent shortfalls (like HP's recent quarterly supplies declines) with decreases in business activity and economic factors. Rather, the shifts need to be understood more for "changes in business processes and worker habits" to include even recently touted duplex printing, and that have made for longer-term, fundamental declines, exacerbated but not caused by macroeconomic factors such as lower employment.

His antidote? As expressed in the white paper and in follow-up conversations, Ashley sees the industry at a crossroads, needing to accept changes with a healthy perspective, and begin to more actively seek out related printing opportunities. Some of these are quite familiar, like short-run digital replacing traditional commmercial print jobs (which, he acknowledges, are already contributing to the paper usage decline), transpromotional printing, and some not now as visible on the horizon, but coming fast, for example decorative printing.

A highly recommended read, once again at the Pivotal Resources web site, "Does Digital Printing Have a Future?"

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