The printer, once an indispensible peripheral, has become so peripheral that sales are in decline. How did the printer business reach this sorry state of affairs? Blame it on the combination of mobile devices and cloud storage.
Printer manufacturers have been warning investors to watch out for slower sales. In February, HP CEO Meg Whitman said in a conference call with analysts that the company was suffering a loss in both printers and ink – a division she said “was always the go-to place for more money at HP.” Printers had long accounted for about 20% of HP’s revenue, but commercial printer sales fell 5% and consumer printer sales declined 15%.
In May, after another quarter of similar declines, Whitman went into more detail. “People who have home printers are printing less photos in their homes,” she said. And this month, Lexmark, which derives 93% of its revenue from laser and inkjet printers, said its revenue would fall 12% this quarter. Lexmark’s stock has fallen 30% since that announcement.
Printer makers aren’t suffering for lack of innovation. The advent of 3D printers promises a new horizon, provided the incumbent printer makers can adapt. But until 3D printing technology goes mainstream, they will be stuck wringing money from inkjets and dot-matrixes.
Lexmark blamed the decline on currency rates and a slow economy in Europe. But those are flimsy excuses. Large companies have long known how to hedge against currency fluctuations. And, while all multinationals are exposed to a weak Europe, few are being hit as hard as Lexmark. The real reason is closer to what Whitman said: The consumers who have turned mobile devices and cloud computing into galloping successes have little use for printers.
The printer business is especially vulnerable because the bulk of revenue comes from ink cartridges. Lexmark, which unlike HP or Xerox is a pure-play printer company, makes $3 in revenue from printer supplies like laser and inkjet cartridges for every $1 it makes on printing devices. At HP, the ratio is closer to $2 in supplies per $1 in equipment.
It’s the tech industry’s version of the Gilette business model. Or, as Lexmark put it in its annual report: “Supplies have been the primary profit engine of the business model.” Yet declining printer sales (down 7% last year at Lexmark) inevitably lead to declining printer-supply sales (flat last year). Meanwhile, even customers who own older printers are using fewer supplies.
Chalk it up to mobile devices and the cloud. Printers thrived in the 1990s and the early Aughts as people went from developing film at the local Fotomat to printing digital photos at home. But with tablets and smartphones that put high-resolution images at your fingertips, and cloud storage services that let you store album upon album to peruse wherever and whenever you want, who needs a printer?
Well, how about offices? Employees used to prepare for meetings by printing out multi-page documents as they contemplated the discussion to come. Now they collaborate on virtual documents in the cloud. Just as consumers are hosting in the cloud documents that they used to print out and put in a paper file. And companies and institutions are turning to tablets for functions that have traditionally been relegated to computer printouts: flight manuals, sports playbooks, federal legislation.
The world is quickly moving beyond printers. They won’t die. There will always be a place for them, a dusty corner in the office and the den, just as there still is for copiers and fax machines. But printers won’t be necessary – not if you have a smartphone or tablet and an Internet connection. They’ll be – well – peripheral.
