Even before announcing plans to launch its own brand of printers in a deal with Lexmark International Inc., Dell Computer Corp. resold about 2 million printers a year made by major printer manufacturers such as Hewlett-Packard Co. But Dell earned only a small percent from the sale of each HP printer and nothing on the lucrative ink cartridges.
HP regularly charges more than $40 per ink cartridge, a product containing only a few pennies worth of ink.
While declining to speak publicly, Dell executives privately predicted that their ink cartridges will cost half as much as HP products, a sizable difference not likely to go unnoticed by corporate customers.
While HP, of Palo Alto, Calif., publicly stated it welcomes the competition, it ended its reseller agreement with Dell in July.
"HPs quick reaction was probably flattering to Dell because it means that they consider them a serious threat," said Andy Neff, an analyst at Bear Stearns & Co., in New York.
Dells PDA (personal digital assistant) strategy, meanwhile, is harder to read. Less than a year ago, Chairman and CEO Michael Dell ridiculed the idea of his company entering the PDA market. Now, however, the Round Rock, Texas, company has declared its intention to launch a Pocket PC-compatible device next year.
The PDA, targeted to sell for $299, according to sources, will feature a color screen and a relatively powerful XScale processor from Intel Corp. running at more than 300MHz.
One analyst speculated that Dells printer and PDA decisions were aimed at hurting HP, whose product line includes the popular iPaq, which sells for $650 or more. Said Roger Kay, an analyst with International Data Corp., in Framingham, Mass., "It may be just Dells way of hurting them a little bit by undermining one of their last remaining profitable businesses."
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