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8/2/2005
02:13 PM
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Printer Prices Tumble, But At A Cost

Printer prices are tumbling this summer, but weep not for the vendors. They have other ways of squeezing money from their customers. Buying a cheap printer now can cost more later.

Hot dog! Printer prices are dropping so low you might as well pick up a few dozen and give them out as party favors at your next cookout.

If you've seen the recent announcement of Dell's new $99 laser printer, you're probably thinking "Hey, I'm going to be saving a lot of money! Even if I don't want Dell's monochrome printer, all the other vendors are going to be lining up to drop their prices. This is going to be great!"

Think again. While it's likely that a price war is going to erupt among printer manufacturers, it's also likely that buyers won't profit much by it--at least, not in the long term.

In the short term, things do look like they're going to get interesting. According to a recent report by Goldman Sachs, competition and aggressive pricing among printer vendors is about to intensify, a trend signaled by Dell's announcement. Prices may drop so low that vendors could be selling machines for well under the cost of manufacture (if they're not already).

How can they do that? First, they can save costs in other ways. For example, on July 19th, Hewlett-Packard announced that it is going to lay off some 14,500 workers, about 10 percent of its staff, over the next 18 months. Most of the cuts will affect service sectors, such as IT. This doesn't come as a total shock--last month, HP's CEO, Mark V. Hurd, announced that part of his grand new plan for the floundering printer manufacturer was going to be a massive staff reduction.

"While Hurd is dispensing tough medicine, most employees realize it is needed," Business Week reported smugly. Easy to say when you're still employed.

How do you like that cheap printer now, with the image in your head of tens of thousands of laid off HP employees?

Don't answer yet. Printer manufacturers have an even better way of keeping the pennies coming in. Wait until you've replaced those snazzy color cartridges a few times.

Historically, printer vendors haven't earned their keep by selling printers. The big money has been in supplies: printer cartridges, toner cartridges, laser drums, and paper. In fact, the cost of using a desktop printer over the long haul will inevitably rise way over the initial cost of the device--and most printer users are getting those supplies from the same company that sold them the printer. You may have noted that if you've got, say, a Brother printer, there aren't a lot of alternatives at your local supplies store for anything but Brother printer cartridges.

Manufacturers have held on to this particular golden goose so tightly that they've been in danger of strangling it. They've told their consumers that buying a third-party cartridge could result in lower-quality output, ruined print heads, and the destruction of the American way of life. To make matters worse, they upgrade their cartridges nearly every time they upgrade their printers, making it nearly impossible to lay in a stock for future use and leaving a lot of consumers who have bought new printers with a pile of useless legacy cartridges. And they've taken third-party cartridge sellers and refillers to court for copyright infringement (Lexmark), patent infringement (Epson), and false advertising (HP).

Over the last year, vendors have released their grips ever-so-slightly, allowing companies such as Staples to offer a limited number of slightly discounted alternatives. It's not enough--price-conscious consumers continue to look for lower-cost alternatives, however. Unfortunately, these alternatives include a flock of fly-by-night companies that are willing to sell you cartridge-refilling kits and other solutions which will leave more ink on your hands than on the paper.

So don't shed a tear for the printer manufacturers who are about to go into a feeding frenzy for your dollar. As long as printers use something other than air to get an image onto a piece of paper, they'll do just fine.

Barbara Krasnoff is the TechWeb Pipelines' Reviews Editor.

The TechWeb Spin TechWeb's editors are busy assigning and editing and linking and otherwise creating the content you see on TechWeb.com and the Pipeline sites, but we wanted the chance to tell you what we see and what we think about it directly. So, each week, The TechWeb Spin will bring you the informed insight and unique perspective of a different TechWeb editor: Fredric Paul, Scot Finnie, Tim Moran, Stuart Glascock, Alexander Wolfe, Val Potter, Barbara Krasnoff, and Cora Nucci. We hope you like it, and even if you don't we hope you take the time to tell us what you think about it.

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