Faced with a fast-growing but low-priced market for color printers, Hewlett-Packard Co. is creating a wholly owned subsidiary with its own brand name to sell ink-jet printers costing less than $100.
The new "Apollo" printers, due out in the spring, will be made by Apollo Consumer Products Inc., marking the first time H-P has sold its products under a trademark not its own. H-P's name will appear on the printers only through a special logo that says the machines are "Powered by Hewlett-Packard Inkjet Technology."
Even though sub-$100 printers operate at less than half the speeds of $250 models, they have become an important part of the printer market. That is because they appeal to the bargain-conscious shoppers who have flooded into computer stores with the advent of the sub-$1,000 personal computer. Computer retailers use the machines extensively in preparing low-cost "bundles" of PCs, monitors and printers.
Until now, though, H-P has been reluctant to participate in the market, in large part because it feared that discounting and low prices would harm the status of the H-P brand. Most of the sub-$100 printers sold to date have been made by H-P competitors Lexmark International Group Inc. and Japan's NEC Corp. and Canon Inc.
The new H-P division will be run by a staff of only 10 people, and the operation will make extensive use of outsourcing and subcontractors in everything from manufacturing to sales. That low-overhead approach will help H-P overcome the other objection it had to the low-end market: a fear it could never be profitable. While H-P's ink-jet division makes most of its profit from sales of ink cartridges, Antonio M. Perez, an H-P vice president and general manager of the ink-jet products group, said the new cheaper printers will themselves make money, rather than just be a loss leader for cartridge sales.
H-P currently controls about half the overall ink-jet printer market, and Mr. Perez said the company hoped that the Apollo brand would have roughly the same percentage of the sub-$100 category. Market researchers predict that next year roughly 10% of the 52 million ink-jet printers sold will cost less than $100.
John Lister, a Lister Butler Consulting Inc. branding consultant in New York, said H-P's strategy was a sound one, but that it faced a balancing act in pulling it off. "They need to have sufficient references to H-P for the product's technological credibility, but not so much as to damage the brand's overall reputation," he said.
Separately, H-P said it had settled a trademark-infringement suit against Xerox Corp. in connection with toner cartridges that Xerox was selling for H-P laser printers. The settlement allows Xerox to continue selling the toners, but in a redesigned package.