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"The content that was once printed for distribution or portability is now simply being...

"The content that was once printed for distribution or portability is now simply being distributed or shared electronically," writes Deutsche's Chris Whitmore, summing up the long-term threat the printing industry is staring at. Whitmore estimates top vendors, including H-P (HPQ), Lexmark (LXK), and Xerox (XRX), have seen their sales fall at a 6% annual clip over the last 10 quarters. The depressed valuations assigned to the group show Whitmore is far from alone in being this pessimistic.
Comments (11)
  • Carlos Sanchez
    , contributor
    Comments (13) | Send Message
     
    Same as the photo printing industry (PPI) ; except that PPI started to decline 12 years ago.
    6 Aug 2012, 06:39 PM Reply Like
  • The Patriot
    , contributor
    Comments (325) | Send Message
     
    My line of work is tied closely to the paper industry. I can attest to
    the slow down. Exports have been the saving grace - so far. As the
    rest of the world catches up electronically the demand for paper will continue to fall.
    6 Aug 2012, 06:50 PM Reply Like
  • TippingPoint
    , contributor
    Comments (156) | Send Message
     
    I don't think you can lump HP in with Lexmark and Xerox. If people decide to print less stuff then they have to store images on servers and HP makes servers, so HP makes money either way. I'm sure printing has higher margins, but still HP makes money either way. BTW, I happen to like mature even slightly declining businesses like printing; you can milk these businesses for a lot of cash flow for long time. Just ask Altria.
    6 Aug 2012, 06:57 PM Reply Like
  • The Patriot
    , contributor
    Comments (325) | Send Message
     
    I agree, still think there is a fair amount of consolidation to occur. Dividends with a somewhat secure cash flow is the way to go.
    6 Aug 2012, 08:05 PM Reply Like
  • stankatz
    , contributor
    Comment (1) | Send Message
     
    GET WITH IT......XRX is another IBM story......They are a company with 51% service (13 billion) the division is growing 6% and technology is slipping 2%,(their concern is Europe) 2.6% dividend,2 billion of free cash flow and they are buying 7% of their stock back this year below book....7x earnings and getting better each year....

     

    Their service division is serving giants like Dept of Defense,Dept. of Justice,giants like Boeing,most of the major law firms of the nation and they are leasing the best color equipment in the industry......
    They perform multi support services to these clients.But the best story is their recent acquisition (ACS, 6 billion service company) serving Easypass for multi states and Department of Motor Vehicle for about 17 states, parking control in the UK and other states in this country...Payment and control of states health services...Imaging of medical records for rapid distribution to doctors and hospitals....These contracts are almost always renewed because XRX serves their customers very well...

     

    XRX is a BUY................
    7 Aug 2012, 06:25 AM Reply Like
  • Value_Analyst
    , contributor
    Comments (23) | Send Message
     
    Meg Whitman and Cathy Lesjak have been asked about the printing decline during the last several earnings calls. They state that there is a definite slowdown in certain areas such as photo printing at home, but other areas, such as enterprise and industrial printers should be OK.

     

    In addition, they disclosed that there was a higher than normal channel inventory of printing supplies about nine months ago, and that this channel inventory just recently got back to normal levels (implying at least some pick up of supplies revenue going forward). I will be very interested to see printing supplies revenues when they release earnings in a couple of weeks.

     

    Finally, as an anecdote, I recently went to Best Buy, and noticed a huge number of HP inkjet printers in stock. I didn't physically count them, but there must have been 300+ printers of various models (Officejets, etc.) in a single store. It would be hasty to jump to conclusions, but it kind of looked like channel stuffing to me (note the quarter just ended about a week ago). In any case, we'll see how this plays out over time.

     

    Long HPQ.
    7 Aug 2012, 09:09 PM Reply Like
  • TippingPoint
    , contributor
    Comments (156) | Send Message
     
    I really hope Whitman will dump Lesjak asap. She's the one who signed off on the crazy acquisitions under Apotheker and post Apotheker before Whitman came onboard. Lesjak is the reason that HPQ is loaded with debt and without much financial flexibility. Carol Tome at Home Depot would be a great hire for HPQ in the CFO Dept.
    8 Aug 2012, 01:24 AM Reply Like
  • Value_Analyst
    , contributor
    Comments (23) | Send Message
     
    I'm almost certain that Lesjak was against acquiring Autonomy b/c of the high price--this was in a Fortune article a few months ago if I remember correctly.
    8 Aug 2012, 02:22 PM Reply Like
  • TippingPoint
    , contributor
    Comments (156) | Send Message
     
    But they also got in bidding wars with Dell for some crappy little companies before Apotheker got to HP at a time when Lesjak was essentially running the company.

     

    I'm long HP since the beginning of the year, but there is a lot more housecleaning to be done at HP. I see the head of enterprise services is leaving for "other opportunities". Bout freakin time. Lesjak needs to go too. Company needs a whole new mindset in the Finance Dept.
    8 Aug 2012, 10:24 PM Reply Like
  • Marketmaster098
    , contributor
    Comments (22) | Send Message
     
    Stuffing the Channel is not a new practice. Has been used for years. Todd Bradley is just learning how to do it with printers.
    9 Aug 2012, 11:03 AM Reply Like
  • Value_Analyst
    , contributor
    Comments (23) | Send Message
     
    I haven't followed the company closely until relatively recently--started my position in March and have averaged down from there. Nevertheless, it's obvious that there's been poor capital allocation in recent years.

     

    MW has stated that there will be no more big M&A. Her strategy will be smaller tuck-ins combined with enhanced internal R&D (and also restructuring of their current operations of course).

     

    I don't normally invest in tech companies, but I like the diversity of their operations. Also, I like MW, and think she has a shot at doing something really special here.
    9 Aug 2012, 01:40 AM Reply Like
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