Dell Computer Corp. and Lexmark International Inc. have agreed to an arrangement to sell laser and ink-jet printers through Dell's Web site in time for the fourth-quarter holiday selling season, the two companies announced Tuesday. Lexmark will become Dell's "preferred supplier" for non-Dell products in the initial stages of the agreement, financial terms of which were not disclosed. In the first half of 2003, the companies will work together to get Dell-branded printers on the market, they said in a release.
"We've had a long-standing relationship with Lexmark as one of our printer suppliers, and going forward, we'll lead with them as a printer offering," said Jess Blackburn, a Dell spokesman. This is not an exclusive agreement; Dell will continue to offer printers from other manufacturers, he said.
Lexmark, based in Lexington, Kentucky, will manufacture printers for Dell once the second part of the agreement starts to take shape, Blackburn said. Once Dell-branded printers are available, that will become the preferred printer option, but customers will still be able to select Lexmark printers, he said.
This means Lexmark and Dell printers will compete for business after Lexmark helps Dell get started in the printer market, said Tim King, a Lexmark spokesman. But Lexmark considers the printers it sells through original equipment manufacturers (OEMs) like Dell, IBM Corp., and Legend Group Ltd. in China small potatoes compared to its main retail and direct sales businesses, he said.
"All of our OEM business accounts for less than 10 percent of our total sales. We consider the Dell business to be a very desirable supplemental business," King said.
Dell's first branded products will be for consumers and small businesses, and it will work its way up to workgroup and departmental printers, Blackburn said.
There are currently no fixed volume-production requirements for either company under the agreement, according to the release. The companies will also produce ink cartridges for the printers they sell.
Dell, based in Round Rock, Texas, has created a great deal of speculation over its announcement during its second-quarter earnings conference call in August that it would enter the printer and personal digital assistant markets by the end of 2002. Prior to that announcement, Hewlett-Packard Co. said it would stop supplying Dell with its printers amid the companies' new rivalry in the PC market. Despite that announcement, enterprise customers can still get HP printers from Dell if they demand it, said Stephen Baker, director of research at NPD Techworld in Reston, Virginia.
"HP deauthorized Dell from buying directly from HP, Dell can still purchase (HP's) products through distribution (channels). If (Dell's) customers demand HP stuff, (Dell) will make it happen," he said. Despite Dell's position as a PC manufacturer, they are also a retailer, and part of being a retailer means Dell needs to stock the products their customers demand, he said.
The impact of the announcement on the printer market won't be known until next year, when Dell and Lexmark start rolling out Dell-branded products, Baker said "This is nothing really new for the holiday season. They've been doing a lot of business with Lexmark already, bundling a lot of stuff with their PCs. Dell will be more aggressive in making sure the customer chooses a Lexmark (printer) now," he said.
Dell currently offers a Lexmark ZB5 bundle on its Web site with the purchase of a Dimension 8200 for US$259, which includes both color and black ink cartridges and a printer cable. Three other printers are available from Lexmark, one from Seiko Epson Corp., and one from Canon Inc., all without the bundling package.
But Dell-branded printers will allow the company to continue down the path toward becoming a one-stop shopping center for PCs and peripherals.Dell's Blackburn declined to comment on the possibility that PDAs would be introduced around the same time as printers.
"That's the whole crux of this. Dell wants a piece of delivering a complete Dell-branded solution from their consumer customers up to their corporate customers. They want to sell as many things with the word 'Dell' on it to cement their relationship with their customers," Baker said.