HP puts Dell printer deal on ice

Hewlett-Packard Co. (HP) has stopped selling its printing and digital imaging products to Dell Computer Corp., as the two companies jockey for position in a move one analyst likened to "marital jealousy" played out through largely symbolic, though still irksome, behavior.

As can be the case in such squabbles, however, HP's move could wind up forcing it to pay a much higher price than might now be imagined, suggested another analyst. The back-and-forth between HP and Dell has emerged as a consequence of HP acquiring Compaq Computer Corp., a top Dell rival, setting off a series of maneuvers from each side that, while seemingly minor at the time, might add up to something much larger as the new rivalry plays out.

"This is the cost of the merger," said Rob Enderle, a research fellow with Giga Information Group Inc.

HP notified Dell of its decision Tuesday, saying that it would no longer sell printers, digital cameras, PDAs (personal digital assistants) and other items in its imaging business to Dell. This move was a result of HP's expectation that Dell will enter the printer business and possibly the PDA market on its own, said Diane Roncal, a spokeswoman at HP.

Dell will continue to offer printers from Xerox Corp., Lexmark International Inc. and others, said Mike Maher, a Dell spokesman. In addition, if Dell customers demand HP printers, the company will work with channel partners to provide them.

"It's not going to have any material impact on Dell or cause an interruption of service to customers," he said.

Rumors of Dell's entry into the printing and imaging space have heated up, following the merger of HP and Compaq Computer Corp. There has been wide speculation that Dell could acquire HP rival Lexmark for printers or form a deal to sell Dell-branded printers.

In addition, HP's decision to go with Compaq's iPaq line instead of the HP Jornada brand has also triggered reports that Dell will market its own line of handheld products.

Dell's Maher said he questioned HP's quick reaction to such rumors.

"We are surprised that the mere possibility of Dell getting into the printer business would make them this nervous," he said.

HP's move to cut Dell off from its printing and imaging products is just a continuation of this maneuvering and not based on possible revenue gains or losses on either side, said one analyst.

"This is more of a symbolic gesture than anything else," said Roger Kay, an analyst with IDC. "It's a little like marital jealousy."

The partnership with Dell was probably more beneficial for HP than its rival, Kay said. Dell's distribution channel provides a massive potential outlet for any partner. In addition, customers looking for an HP printer to go with their Dell PC will have little trouble finding products elsewhere, which means the impact on Dell customers should be minimal, Kay said.

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