Question-and-Answer Session
Operator
Thank you. The floor is now open for questions. (Operator's Instructions) Your first question is coming from the line of Bill Shope of Credit Suisse.
Bill Shope – Credit Suisse
Okay, great. Thanks, guys. Can you comment on the supply chain and channel inventory dynamics from the recent inkjet refresh and how it may have impacted the quarter? And longer term, can you give us a sense on hardware profitability in light of the higher relative ASPs for the new products. And I understand this may be a qualitative answer.
Paul J. Curlander
As we look at the supply chain inventory dynamics, I would say that there really was not much impact of the changeover in inkjet. Basically as we look at our business, the sellout is about the same as our sell in, and we are not really seeing any inventory dynamics or impact relative to our revenue.
In terms of hardware profitability, clearly when you look at office superstores versus say a mass channel, it is more expensive to move hardware through there, and the issue though really is around pages. We get a significantly greater number of pages off the hardware sold through OSS. So as we look at total lifetime profitability, what we see is a much better result. So I think the way to think about hardware, clearly as you move between channels you see an impact, but long term we think it is going to be an overall benefit, and this is what we are counting on to really transition the supplies long term for the business.
Bill Shope – Credit Suisse
And then a similar question on the supplies side. Can you discuss the profit trends within laser and inkjet supplies for the quarter and how did currency impact that in the third quarter?
Paul J. Curlander
Well, as we take a look at supplies we saw improved performance in both divisions. Bulk laser inkjet supplies were still down year to year, but certainly better than what we had seen in the second quarter, and as John pointed out, the improvement really came in terms of sellout pages, which is good news to us.
From a currency perspective there has been a lot of dynamics over the last 12 months. Clearly we did a lot of price increases on harmonization, and we also did price increases separate from harmonization. On the inkjet side we have seen those price increases come through. On the laser side we have had much more of an issue because a significant percentage of the lasers are covered by contracts and are locked in at local currency prices. So we are seeing much less of any price increases come through and much less of the harmonization come through. Now, as currency has started to move back with the weaker dollar, we have seen some help from that. So certainly we got that in the third quarter, but still overall as I look at laser supplies, the overall currency price change, still a negative drag on a year to year basis in third quarter.
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