Is Kodak Starting an Inkjet War?

Kodak may have fired the first shot in the inkjet
wars. Analysts said the introduction of three printers that use much cheaper ink will pressure rivals to respond.

Unveiled in New York, the three All-in-One EasyShare printers boast
black and color ink cartridges priced $9.99 and $14.99, respectively.
Brand name inkjet cartridges usually cost around $30. The ink prices will allow consumers to produce 10-cent prints.

Kodak said the three printers, priced $149.99, $199.99 and $299.99,
will be offered in March first exclusively at BestBuy, then online.

But beyond the consumer impact, Kodak’s entry into the inkjet market
could reshape a high-profit industry analysts say is worth $32 billion
worldwide.

EasyShare

An EasyShare to launch an ink war.

Source: Kodak

“After today, the inkjet market will never be the same,” Kodak CEO
Antonio Perez said. The company believes the high cost of ink limited
more printing.

The announcement comes as a long-successful “razor and blades” sales
campaign is under increasing threat.

Like the companies that made more money selling replacement blades
than selling the razor, market-leading printer companies, including Hewlett-Packard , Epson and Canon , have
enjoyed up to a 70 percent profit selling ink.

HP was a “little perplexed” by Kodak’s “unproven” technology,
Tuan Tran, vice president of marketing for the printer maker’s
Imaging and Supplies division, told internetnews.com.

But that revenue is under threat by lower-cost, after-market ink.
Charles LeCompte, president of Lyra Research, said after-market ink
represents 30 percent to 40 percent of the market. In China, non-brand-name suppliers sell 90 percent of the ink.

For consumers, the Kodak announcement will result in
less hesitancy in printing digital pictures at home. The cost home
printing, which is now around 25 cents per photo, will equal that of online printing services, said LeCompte. Kodak’s entry into inkjet printing forces competitors to act, he added. “They can’t stand still,” he said. “We’ll likely see a price war.”

While we won’t likely see cheap inkjet printers jump $100, “they’ll
fade out lower-priced products over time,” said the analyst.

One result of the Kodak decision will be less bundling. Ian
Hamilton, printer analyst with Current Analysis, said 40 percent of
inkjet printers are now bundled with a computer or other device.
Kodak decided to forgo bundling, an area that rarely translates
in ink sales.

Other vendors have tried similar price cuts, but the cartridges
contained less ink, InfoTrends Director Bob Palmer told
internetnews.com.

Can Kodak gain market share? Palmer said Dell
bought its second-place status in the inkjet market by undercutting
competitors.

It’s “absolutely vital” Kodak succeed in its inkjet printer bid, said
Lecompte. Revenue from film for Kodak has shrunk to 25 percent.
Without digital SLRs — the only profitable segment in the digital
camera market — printers become increasingly important for Kodak.

“They’ve bet the ranch on this.”

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