This Month's Spectrum Summary:

(The following is an excerpt from the August 2005 issue of Spectrum, a proprietary monthly briefing published exclusively for the clients of I.T. Strategies, Inc. © 2005)

COLOR ELECTROPHOTOGRAPHY-
Desktop Color Wars Predicted;
Distribution is Key, New Vendors Emerge

In the face of a maturing market, it is now becoming generally accepted that overall growth for the digital printing industry has pretty much leveled off. Except for one product segment: desktop color laser. It looks like over the next five years this sector could grow at over 25% per year while most other industry segments remain mired well below 10%.

To realize this growth the key is converting users from monochrome to color. A lot of companies, seeing gold in the desktop laser market, are scrambling to become number one. HP LaserJets dominate the desktop monochrome market, but in color, this is expected to change. As with flat panel display, many new brands from less well-known vendors are expected to appear, among them OkiData, Brother, Epson, Dell and Samsung. In this new field of competition, cost and distribution will be more important than brand. Printing has come of age in that users don't feel they need a trusted brand or worry about the availability of consumables. There are just a few clouds in this bright picture. One is that users may increasingly select monochrome rather than color in order to minimize toner cost. Also, lower cost printers will accelerate a trend toward decentralization, so pages per printer are likely to go down. Toner cartridges are a lot more expensive than inkjet cartridges. Yield is much higher so the per page cost is lower, but users may find the up-front cost a negative. Finally, with the door opened to new players, it will be tougher for any one or two companies to capture a major market share.

The trend toward decentralization of office printing is expected to negatively impact prospects for the high-end production color segment.

On the upside, it is felt that once people get accustomed to more and more color, they will be hooked as creating color documents becomes easier and easier. Joining this gold rush looks like essential market strategy for appropriate vendors. In time major new markets are expected to develop beyond printing as discussed in our pages last month. But for the near term getting a share of the desktop color laser boom looks like the best pathway to profitable growth for a good number of vendors. New brands will become important, but at this point it is tough to predict which will dominate.