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HP subsidiary to make sub-$100 printers

HP bids to dominate the market's growing low end without risking its brand name.

In a bid to dominate the low end of the printer market without risking its brand name, Hewlett-Packard has announced Apollo, a new subsidiary charged with developing and marketing stylish and colorful peripherals for small office and home users.

The Palo Alto, California, company will launch its first sub-$100 color inkjet printers this spring in the United States and Europe, according to Antonio Perez, vice president and general manager of HP's Inkjet Products Group. Comprising ten employees based mainly in Southern California, the new company will keep costs down by outsourcing manufacturing and distribution, Perez said.

The new line will exploit two industry trends: rock-bottom prices and sleek, space age design. Sub-$150 printers doubled to account for 22 percent of the entire market in 1998, according to HP, which projects that the sub-$100 printers will account for 11 percent of the market by 2000.

Apollo solves several problems for HP, which has struggled to compete against Lexmark and Canon, analysts say. By forming a separate company dedicated to the low end of the market, HP can move aggressively without eroding its reputation for high-quality, high-end products.

But Apollo printers will display a "Powered by HP Inkjet technology" logo.

"This is extremely significant," said Gary Peterson, an analyst with ARS. "HP wasn't able to address the ultra low-end inkjet market because they couldn't generate profitability, and because it would smear their brand name. By delivering the Apollo brand name they've eliminated that."

The low-cost printers are targeted at sub-$1,000 PC buyers, including students, first-time PC buyers, and families, Perez said.

"People are paying $799, $699 for a PC, and they want to buy a printer," Peterson noted, pointing out that even printers costing $200 are too pricey for many PC buyers. "People don't want to pay half the cost of the whole PC."

Apollo products will emphasize style over substance, offering basic performance in an eye-catching package. Perez compared the evolution of the printer to the telephone, which first was only available in utilitarian styles, but now comes in a variety of looks and colors.

"As printers become appliances we have to offer great value," Perez said in a conference call. Like the early days of the phone industry, however, HP is still evolving the decorator look of its new devices.

The company has shown off one Apollo prototype. It is black.

"These are definitely not products for the PC savvy," Peterson said. "At that kind of level, you're not talking about things like resolution and print speed. The only differentiating thing will be the style."

Apollo printers will be available at traditional computer retailers, as well as discount retailers like Target and Walmart. The company will actively pursue bundling deals with PC makers as well.

Apollo may also move into other low-cost peripherals and devices in the future, Perez said, but declined to comment on specific product plans.