HP notified Dell of its decision yesterday (Tuesday), saying that it would no longer sell printers, digital cameras, personal digital assistants (PDAs) and other items in its imaging business to Dell.
There has been widespread speculation that Dell could acquire HP's printer rival Lexmark or form a deal to sell Dell-branded printers, which prompted HP's decision, the company said.
"This is the cost of the merger," said Rob Enderle, a research fellow with analysts Giga Information Group.
Dell will continue to offer printers from Xerox and Lexmark, and if Dell customers demand HP printers, the company will work with channel partners to provide them.
A Dell spokesman said, "We are surprised that the mere possibility of Dell getting into the printer business would make them this nervous."
Roger Kay, an analyst with market research group IDC, said HP had probably gained most from the partnership with Dell, but had broken the partnership in a bid to be seen to act before Dell could announce its own printing and imaging deals.
Dell's distribution channel provides a massive potential outlet for any partner, said Kay, while customers looking for an HP printer to go with their Dell PC would have little trouble finding products elsewhere.
Giga's Enderle said Dell has been cutting back on its commitment to HP and switching over to Lexmark since the merger.
"Dell had targeted Compaq directly and now that it has become part of HP, it targets the new, larger HP. Dell is clearly gaining in market share, and this is business HP will have a hard time making up.
"If Dell is successful with its own printers, HP could find itself with a powerful competitor in this space that it did not have before."
HP is holding on to a small lead over Dell in the PC market, according to second-quarter numbers from IDC. The combined HP and Compaq claimed 15.1% of all units shipped worldwide in the quarter. Dell followed in second place with 14.8%.
HP, however, saw shipments decline 16.1% in the quarter, while Dell posted a 15.5% increase.