HP Pulls the Plug on Printer Deal With Dell

Having confirmed that Dell will launch its own brand of printers, HP closes printer deal with its PC rival.

Hewlett-Packard Co., having confirmed that Dell Computer Corp. plans to launch its own brand of printers, on Tuesday notified the company that it is canceling its reseller agreement and planning to stop selling printers, scanners, handhelds and other supplies to its PC rival.

HPs action follows months of speculation that Dell is planning to market its own printers. Dell has acknowledged its interested in tapping potential income from the sales of printing supplies, which traditionally offer a much higher profit margin than the companys computer products.

While Dell has not publicly disclosed details of its plans, HP said it nevertheless expects the Round Rock, Texas, company will soon emerge as a competitor in the printing and imaging market, where HP reigns as the undisputed world leader in sales.

"We notified Dell today that we are canceling our reseller agreement," said Diane Roncal, a spokeswoman for HP, based in Palo Alto, Calif. "The reseller agreement covers Laserjet and Inkjet printers, photo printers, digital cameras and scanners, as well as other categories like handhelds."

Dell spokesman Mike Mahrer said he was taken aback by HPs decision.

"Whats interesting, and frankly surprising to us, is that the mere possibility of us getting into that business would bring this kind of reaction from HP," said Mahrer, who did not confirm rumors that Dell was getting into the printer business. "Theres a lot of discussion out there about if we would, how we would or why we would (sell our own brand of printers). I dont think its a secret that weve been evaluating that market and a variety of other markets that are contiguous to the products we currently sell."

He said the move will hurt both HP and HPs customers.

"I think its counterintuitive to make it harder for customers to buy your products," Mahrer said. "Regardless, if our customers want HP products we will find a way to provide them."

"The important point to remember is that this is still a war on paper only at this point. Dell does not have printers yet, and it needs to detail its plans and execute those plans," said market analyst Andy Neff of Bear Stearns & Co. in New York. "There are important issues to address, including how to get ink cartridges to customers."

HP expects the canceling of the reseller agreement will have an "insignificant" impact on its sales, Roncal said, adding that the company is already seeking out new suppliers for its printing and imaging products.

"HP is starting to contact channel partners regarding the news and we fully expect to have commitments from other resellers to take on the volume originally intended for Dell," she said.

Specific terms of the agreement between HP and Dell were not revealed, nor the time frame when the cancellation would take effect.

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