Xerox launched a new printer platform today that promises to cut the cost of colour printing for high-volume enterprise users, albeit with higher initial acquisition costs for the hardware.
Xerox has introduced five printers, including the Phaser 8860 which features new solid-ink technology, saying the system puts the cost of colour pages on par with that of black-and-white, putting Xerox into direct competition with HP, which has also been launching business printers with lower colour production costs.
Solid ink uses wax ink sticks rather than the cartridges of powdered toner found in laser printers. The process works like that of a high-end offset press to create richer colours, the company says, and has significantly fewer disposable parts, which leads to lower maintenance costs.
"If you compare HP colour toner to what our inks will be, we will be one-fifth the price. We think it's going to help us grow our market share and attract a lot of customers who maybe don't consider Xerox today," claimed Jim Rise, a Xerox vice president.
Experts say colour documents are seen as more effective in communications, but the cost of buying new colour printers, supplies and service contracts has been a barrier to adoption in the enterprise.
Xerox says the printers cut the cost of printing a colour page to about 2.5p per page, a fraction of rival systems, which analysts peg at between 4p and 7p per page.
Yet to stay profitable, the Xerox printers are priced higher. The strategy is similar to Kodak's consumer inkjet printers unveiled this year. Both represent a shift from the so-called razor/razor blade model - selling hardware at little or no profit to encourage sales of more profitable replacement ink and toner.
At $2,500 (1,250) to $4,000 (2,000), the Phaser 8860 is roughly $1,000 (500) more than other Xerox products with similar functions, said analyst Angela Boyd of research firm IDC. That may lead some potential buyers to think twice.
"It's targeted at the person who has made up their mind they want colour. It's not for the person who is happy with their black-and-white laser machine," she says. "Eighty percent of the world is still buying black-and-white laser machines."
Xerox said its new solid-ink system, five years in the making, uses long-lasting crayon-like ink sticks. By increasing the total number of colour pages the ink sticks produce, Xerox says it has reduced the price of colour printing.
Printer makers for years have been promoting the move to colour printers, mostly by cutting prices. That has prompted printer makers to battle on the idea of lower cost-per-page, which would most benefit high-volume users.
Xerox's new systems are aimed at customers that print 2,000 to 10,000 pages a month, such as estate agents or departments inside big enterprises. They come at a time when investors are looking for a spark from Xerox.
Experts credit the company with impressive additions to its office line, solid profitability and improved market share. But analysts have been disappointed by tepid sales gains - Xerox's revenue ended 2006 at $15.9 billion, up only about three per cent from 2003. Analysts, on average, expect a seven per cent rise in 2007 annual revenue from 2006.
The new system will not shift the balance of power, IDC's Boyd says. HP dominates the global office laser printer market with a 40 per cent share, with Xerox at 10 per cent, and Japan's Canon at about seven per cent, she says.
"It puts Xerox in a good competitive situation among all the others chasing that juggernaut (HP)," she says. I don't think this is going to change things dramatically for Xerox. Xerox has been able to remain in the top tier of vendors and it will help them sustain behind HP."
