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HP beats up Epson – will it affect financials?

As Epson prepares to unveil its financial results, KitGuru takes a look at the printer market and wonders if the beating being handed out by HP in the print space will affect anything.

Can Epson still thrive in the face of competitors that can easily out muscle it and earthquakes that threaten production?
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Going back to the 90s and early 2000s, printer prices dropped faster than hot potatoes from heat-sensitive hands and we all rushed out to buy more printers.

In the mid 2000s, there was a huge push on ‘photo quality printing’ with high street stores of all shapes and sizes being packed full of photo printers of all shapes and sizes. In the 4th quarter of 2007 [Xmas to normal people – Ed], the market peaked. What happened next wasn’t pretty for companies involved in this area.

What happened next was Facebook. In a big way. And people just stopped printing photos – choosing instead to share them instantaneously over the interwibble.

In the dip that followed, the quality of printing increased while – at the same time – prices plummeted to the point where its touch and go whether replacement cartridges or a new printer is the cheaper option. The price of laser printer came down fastest of all and you can now pick up HP colour laser printers around £100 from stores like Amazon.

Globally, Q4 2010 [Can’t we just say ‘Last Xmas’ ? – Ed] was a huge turning point. For the first time since 2007, printer sales peaked again and millions of extra units shipped.

OK, that’s the background – so what kind of black eye is Epson sporting and why do we think it’s been handed out by HP?

In all of that year’s growth, HP managed to grow 10% while Epson only went up 2%.

Significance? Simples. When representing this difference in the ‘We are better than them’ PowerPoint presentation, it will be shown as HP managing to increase sales 500% bigger than Epson.

On Thursday 28th April, Epson’s senior executives will have to present the company’s annual financial reports and – alongside the problems presented by the terrible tragedy of the Tohoku earthquake in Japan (which negatively impacted production at several of the organisation’s plants) – they will also be required to tell shareholders why HP is pulling ahead so quickly.

To make matters worse, Canon achieved growth of 5% – which is 250% better than Epson.

Right now, in the printer market, Epson’s biggest efforts seem to be focused litigious ways of preventing 3rd party companies from making compatible ink cartridges – rather than positive campaigns aimed at taking share from competitors. They are also doing well in ‘large format printing’, but that’s a minor part of the market.

Looking at a 5 year chart of Epson’s financials on Yahoo, seems to show a drop from 24th April 2006 to 2011 – of almost 60%. The board must be hoping for a miracle from the home projector team.

It goes without saying that KitGuru is totally unqualified to give any kind of investment advice

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KitGuru says: Epson’s slogan is ‘Exceed your vision’, but it’s hard to see how they are delivering on this. Surely revenues will be down. Looking at the way that company has been trading in recent years, it wouldn’t surprise KitGuru if there wasn’t a signficant shake-up at Epson. New blood might not be the whole answer – but it has to be worth a try.

Comments below or in the KitGuru forum.

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