Although HP remains on top of the market for home and office printers, the Palo Alto, Calif.-based company will now try to move deeply into the market for providing software, services and hardware to the industrial printing houses that churn out color brochures, annual reports, forms and other marketing materials.
"Only 4 percent of printed materials right now go through our printers. Ninety-six percent is the opportunity," said Vyomesh Joshi, president of HP Imaging and Printing Systems, in a conference call Monday. "Digital printing is the way to get access to that."
To that end, HP signed a deal to acquire Indigo, which specializes in high-resolution commercial printers, for $882 million last September. The deal closed Monday. These printers aren't like your typical laser jet. They measure more than 6 feet, can weigh a ton and cost anywhere from $200,000 to $400,000.
In April, HP will provide details on a contract with a "major financial company" under which HP has installed a printing system that will let the company send out customized materials to its customers. Through the Indigo acquisition, HP is also working on a multimillion-dollar contract with a Japanese company for printing customizable forms for a higher-education institution.
In an indirect jab at dissident HP director Walter Hewlett, Joshi also emphasized that this printing effort, to succeed, needs to be tightly integrated with the rest of HP. Most of these contracts require substantial amounts of consulting and technology from outside the printing realm. The Japanese project, for instance, mostly revolved around services and software.
HP executives have made the argument that it would be impractical to spin the printing business off into its own unit. By contrast, Hewlett said the company could benefit by spinning off printing and imaging.
Overall, the opportunity could be fairly large, HP and Indigo executives said. Approximately $300 billion of advertising collateral gets published every year and, although virtually all of these mailers get created digitally, commercial printing houses still rely on analog-era printers that aren't adequately linked into networks. By replacing these with digital printers, companies can not only cut costs but also customize brochures, Joshi said.