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Technology Stocks : Hewlett-Packard (HPQ) -- Ignore unavailable to you. Want to Upgrade?

To: Dave B who wrote (1791)	9/25/2002 3:21:43 PM
From: kaka	Respond to of 4345

Another view on the Dell/Lexmar deal: 09/25/02 Brokers see threat to H-P in Dell's Lexmar deal (HPQ, DELL) By Emily Church Dell Corp.'s (DELL) production deal with Lexmark could represent a risk to Hewlett-Packard (HPQ) over the long-term, two brokers cautioned on Wednesday. "Over the near term, we believe the agreement will be a neutral for Dell, as well as for industry leader Hewlett-Packard. We believe the product rollout will occur gradually, and, in our view, preliminary market share gains will come from smaller players in the industry," JP Morgan said. "But longer term, we believe this may represent a risk to H-P's primary source of cash flow." Credit Suisse First Boston told clients that "Since consumables will be sourced from Lexmark, Dell's profit on consumables will likely be lower than that for H-P... Since HP makes 55-60 percent gross profit on its consumables and uses those profits to fund an unprofitable computer business, Dell's entry into the printing business could be troubling for HP over the longer term."

To: Dave B who wrote (1791)	9/25/2002 5:50:33 PM
From: BelowTheCrowd	Respond to of 4345

> They estimate Dell will have a 6.6% share in inkjets next year alone! That probably already puts them somewhere in the # 7 to #10 slot (just my guess) in overall printer market share. The interesting question is where Dell would pull their share from? The odds are that they would pull most of their share in the first years from the 2nd tier players and have little effect on HP's share. HP has a very good name in the printer business with a very loyal following. I'd guess that they'd take it from the bottom of the chain and move up. Another guess, though. It'll be a number of years before they have a significant effect on HP's share. But just as many thought CPQ would be #1 in PCs forever (and were wrong), I suspect that those who think HP will be #1 forever could also be wrong. The good news is that HP has some time to figure out how to change their business model to fight the good fight. < One obvious place that they would take share immediately, is in all the printers they are currently selling on their own site, or packaging with new computers. Historically (as recently as early this year) they were pushing HP stuff. Now they're pushing LXK and next year they'll be pushing their own versions. I suspect that Dell and LXK have some sort of revenue-sharing arrangement for cartridges. Most likely we'll see a new printer/cartridge design (LXK needs to do this anyway to counter the latest HPQ products) which will be sold under both brand names, and where there is a defined revenue share from cartridges. Most likely they base the rev share on the number of printers sold under each brand name. It's not all that uncommon to do something like that. mg