Dell, Lexmark Ink Printer Deal

Ending months of speculation, Dell confirmed Tuesday that it has reached an agreement with Lexmark.

Ending months of speculation, Dell Computer Corp. confirmed Tuesday that it has reached an agreement with Lexmark International Inc. to produce Dell-branded printers and supplies.

The two companies didnt disclose financial terms of the partnership nor specify when the first Dell-branded printers would hit the market, other than noting it would be some time in 2003. However, under the agreement, Dell, of Round Rock, Texas, said it will tout Lexmark as its preferred printing supplier during the upcoming holiday season, when combination PC and printing packages sales are particularly strong.

While Dell has previously said it expects its printer business to make a profit even in its first year, analysts expect such sales will have little impact on the computer makers overall earnings for at least two years.

"The announcement is a positive for Dell," said Andrew Neff, an analyst for Bear Stearns & Co. in New York, although he added the new products will arrive later than previously expected. "Dell executives had talked about launching Dell-branded printers by the end of the year."

As far as boosting the bottom line for earnings, Neff said Dells entry into the printer market "will not be material until 2004 or 2005, with 2003 being the seeding year."

Aside from the potential to tap new markets for income, the computer maker said it decided to make the move at the behest of consumers.

"Our customers are asking Dell to improve the customer experience for printers," said Tim Peters, vice president and general manager of imaging and printing at Dell, who is overseeing the development of the companys new branded products. "We are confident our printers and ink and toner cartridge replacement experience will be no exception to what customers expect from Dell."

After Dell executives earlier this year first disclosed their interest in getting into the printer market, rumors quickly surfaced that the giant computer maker would buy a printing company, specifically Lexmark, which spurred Lexmark executives, in Lexington, Ky., to repeatedly deny such talk.

In July, Hewlett-Packard Co. declared it was canceling a reseller agreement with Dell because of the computer makers intention to market its own branded printers, creating a potentially potent new challenger to HP, currently the worlds top selling printing and imaging company. Despite the move, Dell continues to sell HP printers acquired from resellers.

(Editors Note: This story has been updated since its original posting to include reactions from Dell and analyst Andrew Neff.)