HP’s ILLICIT PROFIT MOTIVE
Post on 07-Feb-2016
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HP’s ILLICITHP’s ILLICITPROFIT MOTIVEPROFIT MOTIVE
HP’s Documents suggest the “smart HP’s Documents suggest the “smart chip” and SureSupply implementation chip” and SureSupply implementation
were based on the desire to increase ink were based on the desire to increase ink sales.sales.
HP00058758
“Vendors sell consumer printers at cost, or even sometimes at a 20 percent loss, say financial analysts at Bear Stearns who track Epson and HP. But on the flip side, both firms earn a 60 percent gross margin on ink jet and toner cartridges, says Bill Hand, financial analyst with Bear Stearns.”
– Why Do Ink Cartridges Cost So Much? Tom Spring, 9/28/03
4.6 + 5.8 = 10.4 Cartridges Over Life of Printer
Speed of OrderingSpeed of Ordering
Nearly two-thirds of surveyed consumers Nearly two-thirds of surveyed consumers place an order immediately or shortly place an order immediately or shortly after they are alerted that a supply is low:after they are alerted that a supply is low:
32% 32% 31% 30% 27%
38%
5% 4% 7% 5% 4% 7%
28%32%
17%
0%
20%
40%
60%
80%
100%
Order with a few days ofreceiving alert
Order immediately Wait longer than a weekto order
Wait until cartridge runsout
It depends / Not sure
Total (n=100) Direct Connect (n=71) a Networked (n=29) b
HP00000738?
Amount OrderedAmount Ordered
Half of surveyed consumers buy what Half of surveyed consumers buy what SureSupply suggests or more.SureSupply suggests or more.
31%27%
41%
22% 21%24%
2% 1% 3%
45%
51%
31%
0%
20%
40%
60%
80%
100%
Buy exactly what SureSupplysuggests
Buy more than suggested tostock up
Buy less than suggested It depends / Not sure
Total (n=100) Direct Connect (n=71) a Networked (n=29) b HP00000738?
DAMAGE MODELDAMAGE MODEL
Damage ModelDamage Model
Per HP’s Mediation BriefPer HP’s Mediation Brief 2 Million Subject Printers2 Million Subject Printers
3% of total inkjet 3% of total inkjet printersprinters
10.4 Cartridges over 10.4 Cartridges over printer lifeprinter life
20.8 Million Subject 20.8 Million Subject CartridgesCartridges
$16.8 Average Profit per $16.8 Average Profit per CartridgeCartridge
Total = $350 MillionTotal = $350 Million
Independently Verifiable Independently Verifiable AnalysisAnalysis
62 Million Subject Printers62 Million Subject Printers 100% of total inkjet 100% of total inkjet
printersprinters 10.4 Cartridges over printer 10.4 Cartridges over printer
lifelife 645 Million Subject 645 Million Subject
CartridgesCartridges $16.8 Average Profit per $16.8 Average Profit per
CartridgeCartridge Total = $10.8 BillionTotal = $10.8 Billion
Damage ModelDamage Model Household Ink Jet Printer Installations by Household Ink Jet Printer Installations by
BrandBrand
Source: Lyra Research, Inc.,2005 U.S. Ink Jet Supplies Survey
N = 977
Damage ModelDamage Model
HP’s Ink Jet Cartridges and RevenueHP’s Ink Jet Cartridges and Revenue
2002-2005 $20,134,000,000
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