By BEN WORTHENHewlett-Packard Co. HPQ -0.96% plans to unveil a new line of printers for businesses Tuesday, one of the first fruits of Chief Executive Meg Whitman's efforts to invest more in research and development as she tries to turn around the struggling technology company.
The printers, so-called multifunction machines that combine standard printers with scanners and software to manage electronic documents, are among the fastest-growing segment in the printing industry. But H-P, the world's largest printer maker by units, has just a middling share of the multifunction printer market—less than 12% of such laser color printers by its own estimate.
For Ms. Whitman, there is a clear cause: "We haven't had a new product lineup in seven years," she said. "It was very obvious that we had a product gap here."
The new printers are indicative of how Ms. Whitman plans to fix H-P. Since taking on the CEO job in September 2011, the 56-year-old has embarked on a strategy of controlling costs while still investing in new products.
Ms. Whitman has repeatedly blamed her predecessors for not investing in research and development as a reason for why H-P is now struggling. In May, she disclosed plans to cut 27,000 jobs, or 8% of H-P's workforce, by the end of 2014, partly in an effort to save money to develop new products.
At an event earlier this month, Ms. Whitman again warned the worst is yet to come for the company. H-P's stock is now trading near a 10-year low.
H-P's R&D spending has been limited among its tech industry peers. Between 2003 and 2010, H-P cut its R&D budget from $3.7 billion to $3 billion, even as revenue rose from $73 billion to $126 billion. In 2011, H-P spent 2.6% of revenue on R&D, while rival International Business Machines Corp. IBM +1.24% spent 5.8%.
More recently, H-P has increased R&D spending to $3.3 billion in 2011 and is on pace to do so again through the first three quarters of 2012. Ms. Whitman said some R&D priorities for H-P now include servers that consume less energy and new networking technology. She said H-P will eventually come out with a smartphone, but not in the next year.
Debuting new printers was a top priority for H-P. The printing business was once known as the crown jewel of the Palo Alto, Calif., company, given the highly profitable ink cartridges that H-P sells to support the printers. The printing unit brings in more than $25 billion in revenue a year and generates close to 30% of H-P's operating profit.
But H-P's printer business has lately struggled with declining revenue and earnings from operations as people print less and the company missed some markets. "We were not a part of the fastest-growing segment of the market," Ms. Whitman said.
Research firm IDC said companies sold about $45 billion of multifunction printers world-wide in 2011. Yet while competitors like Xerox Corp., XRX -1.16% Canon Inc. 7751.TO +1.50% and Ricoh Co. 7752.TO -3.05% Ltd. "all made strides in this market, H-P has held on to an existing portfolio that has aged over the years," said Keith Kmetz, an IDC analyst.
The new printers—priced around $2,500 to $3,000 each, though H-P hasn't disclosed pricing for all models—are primarily targeted at small businesses and teams at larger ones. Some models aim to replace more expensive laser printers with cheaper but equally robust ink-based ones.
Others combine several functions into one machine, letting someone print and scan. These multifunction machines also use software that H-P acquired along with Autonomy Corp. that helps businesses organize and search through documents once they are digitized.
Todd Bradley, who oversees H-P's printer and personal-computer businesses, called the lack of investment in the product a mistake that the company has worked hard to correct. He predicted that within a year, H-P would make progress selling the ink-based products to businesses with its multifunction line.