September 12, 2016
This is a big change in the market and potentially bad news for Canon.
When HP split last autumn, HP Inc had the printing and PC business, a lot of debt and not too much else going for it, if you follow their financials of year-on-year decline. The market is changing as people print less and use the cloud more, and there are price-competitive alternatives in the market like there never was before.
HP Inc has a problem that it owns its own inkjet IP and buys in laser technology from Canon. The SoHo inkjet market has been declining for several years, and the inkjet business market doesn’t have the traction yet, and at the same time. At the same time it is an open secret that HP Inc was not happy with the way Canon responded to the clone market, and all-in-all there’s been a big challenge for the new HP Inc team and a veritable supertanker to turn around, but it is turning.
Turn one – earlier this summer HP Inc announced it was changing the way it managed the supply chain, and was spending $450 million (€399 million) to buy back stock from the channel to create a shorter and more agile channel, where the SKU turns ration increases from two for older SKUs that support 10+ year-old technology to around six to eight turns on newer technology. The more you turn your stock, the more you turn your money and increase your profitability.
Turn two – it is now confirmed that HP Inc will buy the Samsung printer business, and it will now have its own laser business and will be able to reduce its dependency on Canon – and you can expect HP Inc to begin to replace Canon engine printers with Samsung lasers and/or HP Inc inkjet printers. An added bonus with such an acquisition would be that HP Inc would acquire Samsung’s Wi-Fi technology, which in the author’s opinion is significantly better than HP Inc’s.
These changes will bring an end to the Mark Hurd era of stuffing the channel and selling boxes (printers) at little or no profit, especially in a market that will see less printing being done. All printer brands need to own their IP so that they can control the market and focus on the brand value and profitability, and keep away from the Hurd channel stuffing, box-shifting strategy and the quarterly discounted suicide sales drives to get dealers to buy more stock. HP Inc’s focus will be on selling printers and consumables sales through a highly-managed channel that is profitable and rewarding.
Where does that leave everyone else? At $1.05 billion the deal is well-valued and now makes the Apex-Lexmark deal looks expensive, but still worth doing as the Lexmark brand has sales traction in Asian markets. Epson and Brother? Who knows, but there could be a synergy.
Canon looks to be the big loser and can expect declining sales of printers and consumables to HP Inc over the coming years. The big question is what will it do? Nothing in the short term, but it will need to reinvent itself and its market approach.
The mainstay of the aftermarket has been and is Canon-based HP Inc cartridges. Nothing will change in the short term, but the HP Inc market share will increase and include Canon and Samsung cartridges. If prices on OEM consumables increase, then aftermarket margins can increase as well.
One thing is sure though – the market is changing and cartridge volumes are declining, and there is still too much capacity across all aspects of the channel.
Categories : Davids Blog