HP Printer Biz Hungry for Deal

A Compaq buyout would solve many problems for HP's Imaging and Printing Systems, as well as open new doors of opportunity, claims IPS President Vyomesh Joshi.

As Hewlett-Packard Co. prepares for the most important shareholder vote in company history next week, its largest business unit, Imaging and Printing Systems, will be at the edge of its seat.

A "yes" vote from the majority of the Palo Alto, Calif., companys shareholders on March 19 to approve the companys $22 billion acquisition of Compaq Computer Corp. would solve many problems for IPS, as well as open new doors of opportunity, according to Vyomesh Joshi, president of the $19.4 billion division. Foremost, Joshi said, Compaq will buttress HPs lagging commercial PC business, which in turn will aid sales of imaging and printer solutions.

"We need to get that [Computing Systems] business very healthy," Joshi said in an interview last week. "The last few years, the business was not performing. And we have all relied on IPS both on the revenue side and the profits side."

Joshi said rates of growth for IPS core InkJet and LaserJet business are estimated at between 4 percent and 6 percent. With Compaq and an increasing shift in focus from box-centric to solutions-centric offerings, IPS could reach double-digit growth next year, he said.

Considered by the HP board in mid-2000 as a possible candidate for a spinoff, IPS continues to be the companys crown jewel, routinely accounting for the bulk of the companys massive revenues.

Last year, the division raked in $19.4 billion of the companys $45.2 billion in overall revenue and $1.98 billion in earnings.

And though the idea of spinning off IPS was once again raised several weeks ago as an alternative strategy to a Compaq buyout by the chief opponent to the acquisition, board member Walter Hewlett, Joshi said it hasnt been a consideration since the company spun off its Agilent Technologies Inc. division in June 2000.

"Spinning off [IPS] would help short term, no question about it," Joshi said last week. "Because we have a tremendous business in terms of revenue and profits. But long term, can we really figure out how to do it alone?"

Also key to IPS growth are new products and services that extend functionality to the Web, including a line of multifunction printing devices, called the HP LaserJet mfp.

"Much of our growth now will come from this digital content transformation thats occurring," said Greg Wallace, marketing manager at IPS, in Vancouver, Wash. "We see that in the commercial printing, we see it in digital imaging, we see it in the digital convergence, which is in the [multifunction printing] space, and just rewiring printing and imaging to work around the Internet."

To some, however, IPS is late to the Internet party. "Xerox [Corp.] has believed for several years that Internet enablement for applications is critical to business productivity," said Art Smith, vice president of marketing and business strategy for Xerox Global Services, in Rochester, N.Y. "Thats why our investment in Internet enablement is in product but also in value-added applications."

"Im surprised its taken [HP] this long to figure it out," said Amy Wohl, editor of Amy Wohls Opinions at www.wohl.com and a printing and imaging analyst in Narberth, Pa. Wohl attributed HPs late embracing of the Web to the fact that the company simply hasnt focused on the high end of the market, where Xerox or Canon Inc. are prevalent.

HPs new mfp products are making life easier for one early adopter. Diane Stewart, network administrator at Balukoff Lindstrom & Co., a Boise, Idaho, accounting company, is helping to make the company as paperless as possible.

The company is testing HPs new LaserJet 4100 mfp for workgroups and the 9000 mfp for heavy-volume printing, scanning and copying.

One of the key features of the products making her job possible is HPs "digital send" technology, which enables users to send scanned images or documents directly to an e-mail address.

Stewart, whose company will be given the two machines at the end of the testing period, said the mfp machines are already reducing cost in the office.

For its part, Xerox began offering as an accessory to its own multifunction devices in 1999 a stand-alone application, DocuShare, that lets customers push scanned documents and images directly to a Web-based document repository, where anyone with a Web browser can go, securely, and view the material.

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