Excess Enterprise Printers: Good and Bad News For Lexmark, HP (LXK, HPQ)

Includes: HPQ, LXK
by: William Trent, CFA

We recently wrote how declining hardware prices are disrupting the business model for printer manufacturers such as Lexmark (NYSE:LXK), Hewlett Packard (NYSE:HPQ) and others. Now we get this report, which indicates that many businesses already have far more printers than they realize:

Midsize enterprises are undercounting their inventory of multifunction devices, with direct-connect printers, scanners, faxes, and copiers accounting for much of the missing gear. The number of undercounted printers varies from company to company, but Netaphor site surveys show an average of 2 to 3.5 printers per employee, with 35 percent to 50 percent of a company’s printers direct-connect devices, Anderson said.

Vijay Anand, IT director at Wonderware, a business unit of Invensys PLC, said SiteAudit found 70 previously unknown printers on his company’s network — a 23 percent boost to the 300 printers the company was aware of.

We can only wonder whether companies that suddenly find an extra few printers on hand will be in a hurry to add new ones.

But for the printer makers, this isn’t entirely bad news. Remember, the manufacturers subsidize the cost of hardware, hoping to make up the difference with high-margin supplies. If these previously hidden printers are put to use, it will reduce money-losing hardware sales and increase profitable supplies revenue.