Is Facebook killing HP’s printer business?

Hewlett-Packard chief executive Meg Whitman said today that consumers are printing fewer photos. That’s why the company’s Imaging and Printing division saw sales drop 10 percent in the quarter.

The reason for that shift is interesting, and it may underscore the changing of the guard in Silicon Valley. Consumers are flocking to Facebook and are uploading billions of photos to the social networking service, where they can share digital images of their lives with their friends. That may mean that users don’t need to print photos and send those copies to their loved ones as often.

It’s ironic since HP is laying off 27,000 employees, while Facebook was able to go public in a $100 billion-plus initial public offering. That means the very first company of Silicon Valley is now being made obsolete in some ways by its latest nouveau riche company.

HP said today that its Imaging and Printing Group (IPG) revenue declined 10 percent from a year ago and operating profit margin was 13 percent. Commercial hardware revenue was down 4 percent and commercial printer unit sales were down 7 percent. Consumer hardware revenue was down 15 percent from a year ago and units sales were down 13 percent.

Predictions of a “paperless office” in the age of digital imaging have never come true. People still print, but the decline was evident enough this quarter for Whitman to mention it in a conference call with analysts. Ink has always been the cash cow of HP’s imaging business, since it sells printers for lower prices and charges a lot of money for ink. Many people don’t like to print because of the high cost of color ink. If people stop printing, then HP’s ink income could be in further trouble.

There are other reasons that HP’s printer business was weak. HP missed a cycle on producing multifunction color laser printers for the enterprise.

To deal with the decline, HP is experimenting. In emerging markets, the company is pricing printers higher and charging less for ink. That is generating more repeat sales of ink. Facebook has more than 900 million users on its social network. Whitman might want to visit Facebook chief executive Mark Zuckerberg and ask him to slow that growth down a little.

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