Xerox aims to challenge HP with new colour printers

By Franklin Paul

NEW YORK (Reuters) - In a move aimed at chipping away at Hewlett-Packard Co's dominance, Xerox Corp on Monday launched a system promising to slash the cost of colour printing for high-volume users willing to pay more initially for machines.

Xerox introduced five printers, including the Phaser 8860 which features new solid-ink technology, saying the system puts the cost of colour pages on par with that of black-and-white.

Solid ink uses wax ink sticks rather than the cartridges of powdered toner found in laser printers. The process works like that of a high-end offset press to create richer colours, the company says, and has significantly fewer disposable parts, which leads to lower maintenance costs.

"If you compare HP colour toner to what our inks will be, we will be one-fifth the price. We think it's going to help us grow our market share and attract a lot of customers who maybe don't consider Xerox today," said Jim Rise, a Xerox vice president.

Experts say colour documents are seen as more effective in communications, but the cost of buying new colour printers, supplies and service contracts has been a barrier to adoption.

Xerox says the printers cut the cost of printing a colour page to about 5 cents a page, a fraction of rival systems, which analysts peg at between 8 cents and 13 cents a page.

Yet to stay profitable, the Xerox printers are priced higher. The strategy is similar to Eastman Kodak Co's consumer inkjet printers unveiled this year. Both represent a shift from the so-called razor/razor blade model -- selling hardware at little or no profit to encourage sales of more profitable replacement ink and toner.

At $2,500 to $4,000, the Phaser 8860 is roughly $1,000 more than other Xerox products with similar functions, said analyst Angela Boyd of research firm IDC. That may lead some potential buyers to think twice.