Dell considering printer business

Caroline Humer

NEW YORK: No. 2 personal computer maker Dell Computer Corp. is considering

getting into the printer business, a Wall Street analyst said on Thursday.

Bear Stearns analyst Andrew Neff, who met with Dell founder and chief

executive Michael Dell on Wednesday in Austin, Texas, said Dell wasn't specific

but noted that the company wants to capture the recurring revenue from ink

cartridges.

Neff said Round Rock, Texas-based Dell could acquire a company, although

that's not really its style. More likely, it could develop a relationship with

another vendor to allow it to put Dell's name on a printer it makes or make a

deal so it can get a share of ink revenue, he said.

"There's nothing new to announce," Dell spokesman Mike Maher said,

noting that Dell is evaluating products all the time.

Dell lost its spot as the No. 1 PC maker earlier this month when computer and

printer maker Hewlett-Packard Co. bought competitor Compaq Computer Corp. Dell

isn't making much of its No. 2 status and said it still has the lowest-cost

business model in which it sells directly to customers.

One investor said getting into the printer business could be a good long-term

move for the company, enabling it to expand its reach into the profitable

corporate market. "It makes sense," said Alan Loewenstein,

co-portfolio manager of the John Hancock Technology Fund. "If you are

ordering a PC then you also are probably ordering a printer, and if they can

control that they can increase margins.

"They wouldn't be manufacturing. They would be outsourcing probably, so

they should be able to reduce costs on them," he said. Talk about Dell

getting into the printer business, which is dominated in the United States by

Hewlett-Packard Co., Lexmark International Inc., Xerox Corp. and Epson America,

has surfaced before.

Robertson Stephens analyst Eric Rothdeutsch in early April said he believed

Dell was working on a deal with Lexmark. Dell President Kevin Rollins responded

by saying that nothing was imminent and that Dell was talking to lots of printer

companies.

Dell, which is known for low-priced commodity computers, resells Lexmark,

Epson and HP printers. It has recently expanded into selling networking

switches, digital projectors and data storage machines. Neff said that if Dell

enters the printer business and does things right, it could hurt HP, whose

profits come mainly from printers. Neff has a "buy" rating on Dell.