HP overhauls consumer printer line

Hewlett-Packard, which relies heavily on profits derived from its printer business, announced Tuesday that it is revamping its entire line of consumer printers.

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HP said it would introduce 50 new imaging and printing products between now and early 2003, including three that were announced Tuesday.

Carly Fiorina, HP's CEO, said in a statement that the new product launch was a "defining moment in the evolution of HP's imaging and printing business."

The company said it invested a total of $1.2 billion for the printing overhaul, including $900 million in manufacturing, $125 million in research and development, and $200 million in marketing. The goal is to make "printing and sharing photos easier and more affordable for consumers," the company said.

The new printers will be capable of automatically tweaking photo images and detecting when the right paper is chosen. Many of the new models will have faster printing speeds and will range in price from $79 to $399.

Palo Alto, Calif.-based HP, which recently merged with Compaq Computer in a deal valued at $19 billion, depends heavily on its printing, scanning and digital camera products, which account for about $20 billion in annual revenue. The only other profitable HP unit is its information technology services unit.

In the first installment of the company's printing renewal, the company announced three new color inkjet devices: the HP Deskjet models 5550, 3820 and 3420.

The Deskjet 5550, priced at $149, will be able to produce "images that rival the quality of traditional photographs," the company said. The other two models target the low end of the market, with retail prices below $100.

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HP is counting on steady consumer demand for digital cameras and printers, despite overall economic conditions. U.S. sales of consumer electronics grew 2 percent to $93.2 billion in 2001, and should grow another 3 percent to reach $95.7 billion this year, according to a new report from the Consumer Electronics Association.

Chief Executive Fiorina said in February that the company is working on advancements in its printer business, including areas such as invisible document coding, identification cards and mailing addresses. Chief Financial Officer Bob Wayman said at the time that the company is "vigorously defending our intellectual property," meaning that HP is cracking down on sales of non-HP products such as replacement ink cartridges.

In a warning HP issued last month, Wayman said that profit margins in the printing business were good but not sustainable. Margins will be eroded by investment expenses from research and advertising on a new line of low-end printers, he said.

The release of a new line of printers is part of a product onslaught from HP at the TechXNY conference taking place in New York City this week. Along with the new line of printers, the company is also unveiling new Unix servers, a tablet PC, new notebooks and services for setting up wireless networks.

On the corporate side, HP intends to get into industrial printing, selling digital imaging equipment to publishers that produce mass mailers and stock prospectuses. In the consumer market, the company has pushed digital photography, which drives sales of color printers.

HP's strength in printing, though, has come under competitive pressure in recent years from Lexmark, Epson and Canon. As a result, prices fell almost 9.6 percent on inkjet printers at retail last December, according to data compiled from Salomon Smith Barney and NDP Intelect.

News.com's Steven Musil and Michael Kanellos contributed to this report.