HP's plans for its printing empire

August 28, 2007: 10:43 AM ET

Hewlett-Packard's (HPQ) new "Print 2.0" vision for its most profit-rich business unit is pretty confusing, until you consider this: If HP can get us to make more stuff using its inks, printers and software, HP wins.

To that end, the largest company in Silicon Valley today is launching its most ambitious marketing effort ever, a $300 million global campaign called "What Do You Have to Say?" Most of the money will go toward TV and Internet ads.

The goal is straightforward. HP wants to tap into the Internet to make complicated printing projects come to life faster, cheaper and more professionally. Easier printing equals more printing, the idea goes, and more printing equals more profit.

For this to work, HP hopes to empower consumers and small business owners to complete print jobs that in the past would have required a visit to a craft store or the help of a design consultant. To demonstrate how the Internet can make those jobs easier, the company has enlisted the help of pop music star Gwen Stefani, snowboarding magnate Jake Burton Carpenter, and design consultant Paula Scher.

Each celebrity offers basic templates on HP's website, to help consumers or businesses get projects off the ground. For example, Stefani offers a photo book that you can customize with your own creative flourish; the finished product combines Stefani's photos and yours, and you can have it shipped to you. Carpenter and Scher offer tips and templates for creating your business's identity through logos and color schemes; business owners can tinker on the site and then print real business cards and other materials based on the results.

Printing from websites is typically unpleasant, but with technology it acquired when it bought Tabblo earlier this year, HP hopes these experiences will be smoother. HP is also teaming up with Yahoo (YHOO) and Microsoft (MSFT) to get its vision for easier printing spread across the Internet.

HP's printing group does more than $25 billion in annual sales, and has successfully fended off challenges from the likes of Dell (DELL), Canon (CAJ) and Lexmark (LXK). But when a business gets that large, it gets more difficult to grow quarter after quarter, and year after year – at this point, if the printing unit were to add $1 billion in sales for a year, that would be just 4 percent growth. In the most recent quarter, revenue grew 8 percent over the year before.

A NECESSARY LEAP

This effort is the first part of an ambitious but necessary leap for HP. The company has done well selling printers that customers use to print traditional office documents, home photos, and the like. But to keep the whole copmany's growth going, HP now wants to pull more of the analog printing business into the digital world that it dominates.

The list of projects that HP is targeting includes complicated printing jobs like books and storefront signs. But it also includes

jobs that aren't traditionally considered printing projects – for example, its new NextDayTV service, also announced today, uses a remote facility to burn a DVD of something on TV tonight. A courier could potentially deliver it to you a day or so later.

The father of this printing mega-strategy is Vyomesh Joshi, executive vice president of HP's Imaging and Printing Group – the company's most profit-rich unit. Joshi isn't placing small bets. HP's printing operation does more than $26 billion in revenue annually,generating better than $2 billion in profit – and it's his job to keep the unit growing. Considering HP is already the dominant printing company on the planet, Joshi won't be able to get the growth he needs by stealing customers from competitors. He'll have to create entirely new markets.

That's why he's looking at this opportunity in the broadest possible terms. Joshi notes research estimating that by the year 2010, there will be 53 trillion pages printed in the world. He wants the largest possible share of those pages to pass through HP products.

WILL IT WORK?

Still, HP's success, and Joshi's, are hardly assured. The scope of what he is trying to accomplish is staggering. Today's flurry of

announcements provides an example in itself. Besides the Internet printing campaign and the celebrity endorsements, Joshi is also rolling out a new line of printers and the NextDayTV service.

The way Joshi describes it, he knows the latest online printing concepts will take years to mature and become meaningful contributors to HP's bottom line; until then, he has to keep the ideas flowing.

But with so many ideas flowing, some are bound to miss the mark.

The most challenging piece of Joshi's Print 2.0 vision is probably working with all of the businesses that will have to buy into it if it's going to work smoothly. A recent example of how not to do it? Adobe Systems (ADBE). As part of the latest version of Acrobat, its digital document software, Adobe this year added a unique button on the screen that would allow people to send their print jobs to the nearest FedEx Kinko's. It wasn't long before local print shops were up in arms, accusing Adobe of funneling business to a big competitor. Adobe, chastened, backed down and promised to remove the button in its next

software release.

Like Adobe, HP is new to some of the difficulties that arise when a company tries to extend its business through the Internet without stepping on the toes of its partners. It's clearly a balancing act – and if HP wants its printing division to have healthy growth in another five years, it's one the company will have to master.

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