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Research and Markets: The Generation-To-Generation Margin for HP Workgroup Mono and Colour Lasers Has Declined 19% - Margintrak Report - HP's Declining Hardware MarginsDUBLIN, Ireland --(Business Wire)-- Research and Markets (http://www.researchandmarkets.com/reports/c50292) has announced the addition of MarginTrak Report - HP's Declining Hardware Margins to their offering. The laser printer market continues to have aggressive pricing declines from generation to generation. The cost of the machines is not declining at the same rate. There is no better example of studying this dynamic than the industry leader, Hewlett Packard. HP and its competitors are dealing with pricing and cost pressures as well as a shift in the market from mono laser printers to colour laser printers. The colour laser printers are adding more functionality at a worse margin then the mono laser segment. Using HP as an example, the following report will go into detail about the margin degradation and the impacts to the industry. Key Findings The generation-to-generation margin for HP workgroup mono and colour lasers has declined 19%. The impact of this decline represents a $201M reduction in margins in this workgroup laser segment. The main driver of this decline is that prices are falling faster than the cost of printers. Prices for colour lasers have declined 20% from generation to generation while cost has only declined 10%. Mono lasers printers have seen a 21% decline in prices and only a 17% decline in cost. The colour laser market continues to grow as the workgroup mono laser market has matured. A customer who chooses to buy a HP workgroup colour laser printer is getting a printer that has a negative 4% decline in manufacturer margin compared to a workgroup mono laser printer of negative 2%. The changing dynamic of the market is having a direct impact on operating margins for each manufacturer. The more profitable workgroup mono segment is declining and the model mix shift to colour will continue to pull down the hardware margin of the market. Another driver of the hardware margin decline is the increase of the entry laser segment (which can generally be described as monochrome lasers priced below $200 and colour lasers priced below $500). The entry segment margins for both colour and mono lasers are now negative. As the functionality of these printers has improved, the need for higher PPM workgroup printers has declined. A shift to the entry segment has a significant impact on the overall margin of the hardware laser business. These printers now have a margin model, which is remarkably similar to the inkjet margin model. Assessment and Implications The future will continue to be tough on hardware margins from generation to generation. The pricing pressures will continue in all channels and the cost that can be removed from the products will not be able to keep up with the pricing declines. Some manufacturers will begin to pick and choose what segments they will compete in as well as what channels they will want to sell those printers. If competitors choose to increase supplies pricing in order to offset the losses in hardware, this will open the door to more remanufactured supplies. Once the customer has become accustomed to purchasing an item for a certain price, it is very difficult to raise the price. Especially in a competitive market that also has other options such as remanufactured cartridges. Manufacturers need to use non-price differentiators, such as expanding, and improving their services and solutions. Offering items such as warranty or supplies programs to instill customer loyalty. There will have to be hard choices made regarding which channels the manufacturers want to use to sell their products. Research must be conducted to understand who is buying printers and where. Supplies usage at the end of the day is the key. While the inkjet business model has continued to erode, creating significant drains on many companies' balance sheets, the laser market has historically been a bastion of profitability. However, this is rapidly changing as the hardware margin model begins to look more and more like the inkjet model. In addition, the mix shift to colour is actually accelerating this trend. Unless manufacturers identify ways to sell value, as opposed to simply price, this market segment will ultimately have the same fate as the inkjet market. Content Outline: ABOUT THIS REPORT EXECUTIVE SUMMARY METHODOLOGY Cost Analysis Retail / Street Pricing Market Modelling INTRODUCTION "GENERATIONAL" MARGIN DECLINES Work Group Laser's Declining Margins Prices Are Falling Faster than Costs ENTRY LASER PRINTER MARGIN PRESSURE COLOR MARGIN PRESSURE PRICING PRESSURE DRIVERS ASSESSMENT Implication 1: Reduced Industry Hardware Margins Implication 2: Forcing Vendors to Increase Supplies Pricing Projections for the Future RECOMMENDATIONS Manufacturers Investors[FEE For more information visit http://www.researchandmarkets.com/reports/c50292 |
