Who’s Winning, Who’s Losing as Demand For Color Keeps Growing?

by Charles Brewer, Actionable Intelligence

Ask a printer-industry geek “What’s hot right now?” and the answer will be “Color.” Or, at least it should be. After all, the low-hanging fruit for MPS practitioners is now as abundant as water in a California reservoir and the 3D market is as far away from maturation as I am. But while growth in 3D and MPS rises and falls, respectively, the market for color devices is looking pretty good at present. Listening to the OEMs’ earning calls this summer and reading their quarterly financial results for the past couple of years, it’s clear that hardware manufacturers are experiencing some level of revenue growth from the sales of color hardware and supplies. While some have been more successful than others, in general, the OEMs have reported that they’ve been selling more color devices over the past couple of years.

As of this writing, all of the hardware vendors had reported their earnings through July. So, at the mid-point of the year, it seems that color is maintaining the head of steam it’s been building since the economy started to improve. While color remains in demand, things have changed a little over time. Japanese firms continue to report that their revenue is growing as the value of the yen tumbles to its lowest point in years. As the yen weakens and the dollar strengthens, signs are emerging that U.S. OEMs may be facing a competitive disadvantage. Hewlett-Packard and Lexmark have recently begun to clam up about sales of their respective color product lines and news from Xerox about its color business in the last quarter was somewhat discouraging.

I hasten to add, however, that it’s way too early to suggest that the market is moving away from hardware marketed by U.S.-based OEMs. One quarter does not a trend make. It could simply be that Japanese companies have had more color hardware introductions over the past year and a half, so they would have had stronger color sales than U.S. firms regardless of the exchange rate. However, the situation bears watching, especially since it seems the yen will likely get only weaker over the next year or so.

The year thus far

While OEMs love to crow to their investors about the growing high-end color market and all the expensive Big Iron they sell, the lower-market segments continue to see a lot of activity. Everyone seems to want a piece of the low-end market, presumably because the supplies annuities are so profitable. Competition in the mid-market space is also tough, as copier companies appear to be taking some A4 market share from the printer manufacturers. Printer OEMs aren’t taking the incursion into their turf laying down and, despite predictions that the A3 market is dead, they’ve launched a bevy of groundbreaking new A3 color units to take on the copier manufacturers. Well, at least some have.

Throughout the year, Konica Minolta and Ricoh have been reporting that sales of their respective color office and production machines are up. Looking back, one sees that both of these companies also did pretty well in the color markets during 2013. In my estimation, Konica Minolta and Ricoh are currently making the most headway in various segments of the color space. Oki also reported during the summer that sales of its higher-end color LED printers and MFPs were up, which must be welcome news for nervous stakeholders. Oki’s gains suggest that it may finally be getting past the adverse effects of the scandal that has dogged the firm since 2012. Canon seemed to be keeping pace with its compatriots in the first three months of the year when it reported strong sales of its color hardware including A3 and A4 printers and multifunction machines. Things were not so good in Canon’s second quarter, however, when color copier revenue dropped a couple of points relative to the same period last year and color printer sales were essentially flat.

As noted earlier, hardware vendors on this side of the Pacific did not experience the gains that most of their Japanese rivals enjoyed this summer. Xerox’s color business slumped in the period between April 1 and June 30 with placements down in all of its color-equipment categories except one. Unit placements of A3 and A4 color multifunction devices dropped and revenue from color production machines in Q3 of this year did not keep pace with the year-prior period. The only bright spot in Xerox’s color business was the growing number of installations of entry-level color A4 printers. News of declining sales and placements of Xerox’s color machines was surprising. Its color business had been growing earlier this year following similar growth throughout 2013.

HP’s color business may also be showing signs of being under pressure. No one from the firm mentioned its color business during the mid-summer earnings call, which seems to me to be rather telling. Earlier this year, HP president and CEO Meg Whitman had boasted that sales of color laser MFPs were up last fall and the growth continued into 2014. Since then, she hasn’t spoken a mumbling word about HP’s Color LaserJet business. Whitman has, on the other hand, said on many occasions that HP’s business-class inkjet machines have done very well since their introduction last year. Perhaps Color LaserJet sales are suffering as a result of the success of the Officejet Pro X and Officejet Enterprise X lines. As the supplier of HP’s Color LaserJet print engines, this may also explain why Canon’s color business was off during the quarter, at least in terms of desktop color units.

Like HP, Lexmark executives didn’t mention sales of the firm’s color devices during their earnings call in July. As it has in the past, during the first quarter, the Lexmark executive team reported that sales of the firm’s higher-end color machines saw healthy gains so the silence on the Q2 call was a bit conspicuous.

I understand that one quarter without a peep about color may not be a harbinger of disaster, but it will be interesting to see what HP and Lexmark share about demand for their respective color devices during the second half of the year. Not mentioning color seems odd given all the attention the companies have lavished on it in the past.

Low-end color hardware

Today, competition is fierce at the low-end of the color market. In the past year and a half, Brother, Canon, Dell, HP, Ricoh, and Samsung have all unveiled new low-end color single-function and MFP units. With print speeds ranging from 14 to 21 pages per minute for black-and-white and color jobs, these machines are admittedly somewhat slow but the price points are very reasonable. Single-function color printers start around $250 and the machines come loaded with a variety of connectivity options as well as support for mobile printing. With prices starting around the $350 mark, low-end color MFPs are also inexpensive and most have rich feature sets too.

Of course, the old razor-and-blade model is alive and well at the low end of the market. OEMs are looking to rake in as much as they can from consumables sales for entry-level devices. Most of the low-end color laser devices released since the start of last year are expensive to operate. Costing almost a nickel to print a black-and-white page and 24 cents for color output, Samsung offers color printers and MFPs that have the dubious distinction of being the most expensive to operate. Canon, Dell, HP, and Xerox are also marketing low-cost color laser hardware with high per-page costs.

Not all low-end machines have such high per-page costs, however. Brother, which has been taking share from various competitors at the low end of the market, seems to be willing to compete more on operating costs than most other vendors hawking low-end color gear. While the firm’s lowest-priced machines are expensive to operate, moving up market just a little in Brother’s portfolio provides a nice break in printing costs. For example, it costs 4.4 cents to print a black-only page and almost 18 cents to print a color page with Brother’s fully loaded HL-3170CDW, which debuted last year for about $280. For about $120 more, you can purchase the HL-L8250CDWT color printer, which prints a black-and-white page at 2.7 cents and a color page for 13.4 cents.

It’s interesting to note that Ricoh is now marketing a full line of low-end devices — monochrome and color — and these machines typically have operating costs lower than any machines in their class. For example, selling for about $600, the Ricoh SP C250SF, a 21-ppm print, copy, scan and fax device, is a bit pricy. It costs only 1.8 cents, however, to print a black-and-white page with the machine and 8.9 cents for a color page.

Got A4?

As Ricoh has expanded its range of entry-level A4 products, it also recently refreshed its mid-tier MP C401 and MP C401SR, which Ricoh bills as less expensive and more compact alternatives to traditional A3 color MFPs for offices with limited space. The new A4 units are direct replacements for the Aficio MP C400 and MP C400SR, which Ricoh discontinued along with the Aficio MP C300 and C300SR. Like some of the firm’s recent A3 MFPs, the C401 and C401SR feature what Ricoh refers to as its “services-led” controller platform, which is designed to allow greater compatibility with new workflow solutions and services across various Ricoh devices.

Ricoh is not alone in its pursuit of the A4 space with technologies similar to those typically found on A3 units. In March of this year, Konica Minolta released the color bizhub C3350 and C3850, followed by the unveiling of the bizhub C3100P printer and the bizhub C3110 all-in-one in July. With these new machines, Konica Minolta boosts its A4 line’s print speeds and continues to enhance the feature sets. Like other recently released Konica Minolta A4 color machines, these latest bizhub offerings emulate the OEM’s A3 bizhub products in terms of setup and management, remote support and device management, and user interface. The new A4 units come with technologies such as an Emperon print controller and PageScope software, which debuted on higher-end A3 devices.

Sharp is also growing more active in the A4 color space. Since December, Sharp Imaging and Information Company of America has released three desktop A4 color MFPs including the MX-C250W, MX-C300W and MX-C301W, as well as the single-function MX-C300P color laser printer. All four of the new machines are based on the same new color laser engine, which Sharp developed in-house. They offer many of the same tools that ship with Sharp’s A3 units including Sharpdesk and Sharpdesk Mobile. The fully loaded MX-C301W supports Sharp’s Open Source Architecture (OSA) development platform, which allows for faster interaction with network applications from the display panel, as well as the Sharp Cloud Portal office document storage/sharing service. The device can support up to 1,000 user accounts, compared to 30 with the MX-C300W.

Oh yeah?!

As the copier folks are elbowing their way into various markets for A4 color devices, printer manufacturers are countering by attempting to further penetrate the A3 space with their machines.

The always-formidable HP became particularly aggressive at the end of last year in the A3 color market. In November, the company deployed its Color LaserJet Enterprise M855 printer family along with the Color LaserJet Enterprise Flow M880 MFP line. The M855 A3 color laser printers replaced the aging Color LaserJet CP6015 family, which was introduced in 2008. In addition to being 5 ppm faster than its predecessor, the M855 family offers assorted mobile printing technologies on certain models such as ePrint, Apple AirPrint, wireless direct, and NFC tap-to-print capabilities. The Color LaserJet Enterprise Flow M880 series replaces both the Color LaserJet CM6040 family and the CM6030f. The line features HP’s Flow document management technology, which HP says is designed to streamline business processes and help boost productivity, down from enterprise-class machines to departmental devices.

Just weeks after unveiling its latest A3 Color LaserJet printers and MFPs, HP grabbed headlines in December when it named Sharp as its supplier of three color MFPs, the HP Color MFP S951dn, the HP Color MFP S962dn, and the HP Color MFP S970dn, as well as the HP MFP S956dn A3 monochrome MFP. The new machines, according to HP, will allow its “MPS customers to solve their need for higher-volume devices with a unified, single-vendor HP fleet.” The firm said its new Sharp-manufactured, HP-branded MFPs will be sold exclusively through HP Managed Print Service and HP’s Partner MPS agreements.

The HP-Sharp alliance, of course, got chins wagging about the future of HP’s partnership with Canon. Although HP is upbeat about its 30-year relationship with Canon, it would seem, at the very least, these days the partnership is under more pressure than it has been in years. As noted earlier, for over a year, HP executives have been singing the praises of their business-class ink machines to all who will listen. These machines are bound to erode the LaserJet installed base, which cannot be welcome news for Canon. Then HP forms an alliance with Sharp, which, if successful, will eventually take even more business from Canon.

Although we didn’t see any color A3 machines from HP’s archrival Lexmark in the past 12 months, Oki is another printer manufacturer that is expanding its selection of A3 devices. In September 2013, the firm released a unique A3 color LED printer based on a new engine with five color imaging stations, which enable the use of either clear or white toners in addition to black, cyan, yellow, and magenta. The C941dn was released along with the C931dn and C911dn, which feature a traditional CMYK toner set. In June, Oki released two new A3 color LED multifunction devices that will be available exclusively through the office-equipment dealer channel. The ES9465 and ES9475 are part of the OKI Executive Series. The new machines are the latest products from a joint Oki-Toshiba Tec agreement penned in 2012, and replace the CX3535 and CX4545, which were among the first machines to be launched after the partnership was announced.

Color me happy

Regardless of any summertime slump certain OEMs may have endured, hardware manufacturers as a whole will obviously continue to bet big on color for the foreseeable future. One trend that is bound to continue — if the economy remains on track — is lots more new color devices will hit the market during the second half of this year and during 2015.

As we move through the remainder of 2014, it will be interesting to see what steps, if any, U.S. OEMs will take if they continue to experience flagging demand for their color units and feel the need to respond.  HP, Lexmark, and Xerox all reported decent profits this summer so they could give up a bit of margin if they’re inclined to spark sales by lowering prices. On the other hand, the Japanese firms also seem to have a bit of room to trim pricing so the potential for less expensive hardware exists during H2.

Another thing to watch as we move through the next few quarters is how successful the various copier firms are in their attempts to take share in the A4 color market. Obviously, the battle for the space is on, and I’d say that right now the copier folks are gaining. You can bet, however, that printer manufacturers will not yield share easily. So far, I don’t think the printer firms have been overly successful in their effort to take share in the A3 space so perhaps they’ll double-down on A3 in reply to the bets copier companies are making on A4.

One thing is for certain, there is a lot of activity in the color markets these days — and that’s a good thing! While the industry is not what it once was, plenty of life remains in that old market and currently color is the liveliest all.  

This article originally appeared in the October 2014 issue of The Imaging Channel