HP’s printer problem

The printer industry is experiencing a long, slow decline — and HP is doubling down. That may be a mistake.

FORTUNE – When Eastman Kodak filed for bankruptcy in January, no one was surprised. The 131-year-old company once controlled 90% of the U.S. film market in the 1970s, only to be displaced by the rise of digital cameras. It took decades for Kodak to fall.

Now a similar kind of long, slow decline may be afflicting printer industry. And Hewlett-Packard (HPQ), long the market’s giant with a market share above 40%, may be approaching its own Kodak moment.

Printers have long been a cash cow for HP, but they are losing popularity as people share pictures in the cloud, looking at them on tablets and smartphones. The decline has been increasingly evident. HP’s printer and imaging division has seen its revenue decline by 12% since its 2008 fiscal year. The group comprises a smaller portion of revenue – 20% last year, compared with 31% for PCs and 28% for IT services – but it’s historically had fatter profit margins.

But even those profit margins aren’t what they used to be. The printing division’s operating margin was 15% of its revenue in fiscal 2011, still much better than the PC division’s 6% margin. But it’s down from the 18% operating margin that printers saw only two years ago.

And if that’s not bad enough, the decline in HP’s printer business seems to be accelerating. In its most recent quarter, the company said printer revenue declined 7% from the same quarter a year earlier. Operating margin for the division dropped to 12%. Why the sudden decline? During the holiday season, fewer shoppers bought printers – consumer printer revenue slid 15% on year.

HP’s new CEO Meg Whitman, who calls the printing division “the lifeblood of HP,” responded to the decline by folding it into the PC division, which saw a 15% drop in revenue last quarter. That will solve one problem: concealing the extent of the decline in HP’s printer margins by blending it with lower-margin PCs. More practically, it could give HP greater leverage in negotiating prices with component suppliers.

HP made a similar move under Carly Fiorina years ago, but her successor Mark Hurd split up the two divisions again. Whitman is trying to do more than simply rearrange deck chairs, but investors want bolder action.

Small surprise, then, that Wall Street was hardly impressed by the move. Needham & Co. felt any gains would be “subtle” and slow to materialize. Morningstar found it sensible if “far from game-changing.” Goldman Sachs found it “modestly negative” because the two divisions had few strategic gains.

Most worrisome to some, was the retirement of Vyomesh Joshi, who led HP’s printers during three successful decades but was retiring at the moment secular changes are hitting. Then there was this historical tidbit an Evercore Partners report titled “Making Changes that Don’t Really Change Anything”: In 2005, then-CEO Carly Fiorina combined PC and printer businesses too, only to see the work undone by her successor, Mark Hurd, six months later.

The slowdown in printer sales is hitting HP at a tough time. Whitman is trying to do more than rearrange HP’s deck chairs, she’s trying to make bold moves to eliminate the company’s weaknesses and focus on its strengths. In an earnings call last month, Whitman noted that HP had been slow to respond to fundamental change in its core markets – from PCs to printers to services. Last week, she said that “everything is on the table” in the reand did little to dispel reports that significant layoffs are coming.

HP has been through six CEOs (including two interim chiefs) in the past seven years. Last week marked Whitman’s six month anniversary on the job – half the tenure of her predecessor, Léo Apotheker. Reviving HP is a tough task that would take years under the best of circumstances. Doing it while the cash cow is ailing is going to make the task that much harder.

HP P1606DN Laserjet Printer

HP Laserjet P1606DN Printer (Buy Now)

HP P1606DN Laserjet Printer

picture of HP ce278A

Toner Cartridge
Model CE278A (78A)
Page yield (A4, 5%) 2100 pages
Original Toner Price RM 233
Apple Toner Price RM130  Buy CE278A Toner


Print speed black (normal, A4) Up to 25 ppm
Print speed footnote Exact speed varies depending on the system configuration, software application, driver and document complexity.
First page out black (A4, ready) As fast as 7 sec
Print quality black (best) Up to 600 x 600 x 2 dpi (1200 dpi effective output)
Print technology Laser
Duty cycle (monthly, A4) Up to 8000 pages
Duty cycle note Duty cycle is defined as the maximum number of pages per month of imaged output.
Recommended monthly page volume 250 to 2000
Recommended monthly page volume note HP recommends that the number of printed pages per month be within the stated range for optimum device performance, based on factors including supplies replacement intervals and device life over an extended warranty period.
Memory, standard 32 MB
Memory, maximum 32 MB
Processor speed 400 MHz
Hard disk None
Print languages Host-based printing, HP PCL 5e
Paper handling
Paper trays, standard 1 plus 10-sheet priority input slot
Paper trays, maximum 1 plus 10-sheet priority input slot
Paper handling input, standard 10-sheet priority feed slot, 250-sheet input tray
Paper handling output, standard 150-sheet face-down bin
Duplex printing Automatic (standard)
Media sizes supported A4; A5; A6; B5; postcards; envelopes (C5, DL, B5)
Media sizes, custom 250-sheet input tray: 147 x 211 to 216 x 356 mm; priority feed slot: 76 x 127 to 216 x 356 mm
Media types Paper (laser, plain, photo, rough, vellum), envelopes, labels, cardstock, transparencies, postcards
Finished output handling Sheetfed
HP ePrint capability Yes
Mobile printing capability Apple AirPrint™
May require a firmware upgrade to be AirPrint™ compatible, download at http://www.hp.com/go/support
Wireless capability Optional, enabled with purchase of a hardware accessory
Connectivity, standard Hi-Speed USB 2.0 port, 10/100 Ethernet networking
Connectivity, optional HP Jetdirect ew2500 802.11g Print Server
Dimensions and Weight
Media weight, supported 60 to 163 g/m²
Dimensions (W x D x H) 387 x 284 x 246 mm
Maximum dimensions (W x D x H) 387 x 461 x 255 mm
Weight 7.0 kg
Power and operating requirements
Minimum system requirements Microsoft® Windows® 7 (32-bit/64-bit): 1 GB RAM; Windows Vista® (32-bit/64-bit), Windows® XP, Windows® Server 2008 (32-bit/64-bit), Windows® Server 2003: 512 MB RAM; all systems: 350 MB free hard disk space, CD-ROM drive, USB port
Minimum system requirements for Macintosh Mac OS X v 10.4, 10.5, 10.6; 256 MB RAM; 150 MB available hard disk space; CD-ROM drive; USB port
Compatible operating systems Microsoft® Windows® 7 (32-bit/64-bit), Windows Vista® (32-bit/64-bit), Windows® XP (32-bit/64-bit), Windows® Server 2008 (32-bit/64-bit), Windows® Server 2003 (32-bit/64-bit), Mac OS X v 10.4, v 10.5, v 10.6, Linux (see http://www.hplip.net for current), Unix (ready later and downloadable, see http://www.hp.com/go/support)
Mac compatible Yes
Power Input voltage 110 to 127 VAC (+/- 10%), 60 Hz (+/- 2 Hz), 7 amp; 220 to 240 VAC (+/- 10%), 50 Hz (+/- 2 Hz), 4.0 amp
Power consumption 440 watts (printing), 2.2 watts (ready), 1.6 watts (auto-off), 0.4 watts (manual-off)
Power consumption footnote Values subject to change. See http://www.hp.com/go/ljp1600_regulatory for current information. Power numbers are the highest values measured using all standard voltages.
Recommended operating temperature range 17.5 to 25º C
Operating humidity range 30 to 70% RH
ENERGY STAR® qualified Yes
What’s included
Warranty One-year, return to HP authorised service center; telephone and web support (varies according to region).
Cable included Yes, 1 USB cable.
What’s in the box HP LaserJet Pro P1606dn Printer, introductory HP LaserJet Black print cartridge, power cord, paper tray cover, CD(s) with printer software and documentation, Getting Started Guide, support flyer, Smart Install Flyer, USB cable.