HP: Rival Printers Mean No More HPs Through Dell

blamanj writes: "Dell Computer seems to have pissed off HP, with their intent to sell their own printers. HP will apparently stop supplying printers to Dell, even though the new Dell products are not yet shipping."

Smart Move.

[AtariDatacenter]

You're only giving a long-term leg-up to your competition by allowing them to smoothly and easily transition to their own product line by continuing to sell them yours. You're giving up a short-term gain for a bit of long-term hurt. Exactly what I would have done.

This whole 'coopetition' thing is just like Microsoft tries to get competitors to do. "Let us use your product and embrace it until we're ready to demolish it."

How could they do it?

[af_robot]

I don't think HP legally can do it under antimonopoly laws: you can't sell your goods only to selected companies - you MUST sell it to everyone who will pay listed price.

Re:bad decision

[Sc00ter]

Well look at it this way.. HP Printers sell thru dell because they're part of a package deal. To buy just the printer alone from Dell is usually more expensive.

If Dell is selling their own printers, they're going to package their printers with their systems, not HPs. So since Dell selling them standalone isn't really worth it to HP, and they're not going to be part of the package deal, they're probably not going to sell many, if any, thru Dell. So what's the point?

Re:bad decision

[Telecommando]

It's probably not as simple as that. HP probably sells printers to Dell at a discount while selling them at full price elsewhere. Now that Dell is going to compete with them in the printer market, why would HP want to give them that discount only to have Dell undercut them on their own printers in the retail market?

Re:PC Competition

[hajibaba]

Err... wasn't HP already in direct competition with Dell before they bought Compaq?

Re:This is called good business

[Anonymous Coward]

Dell sells an incredible number of PCs.
People that buy a Dell would probably continue to
buy HP printers because its a known quantity.
Until people stop buying HP printers from dell it
would be wise for HP to continue selling their printers
through Dell.

prisoner's dilemma

[Knytefall]

This seems actually to be a very good prisoner's dilemma-style situation. And in this case, they both chose to screw each other. If you are familiar with prisoner's dilemma, you know that this is the worst possible option.

I think this is very bizarre... especially since it's really Dell that has the advantage since they possess the customer relationships (the most valuable asset). It seems that it would have been better for HP to hold off a bit and use the time to transition Dell's customers away from HP.

Why would Dell want to sell their own printers?

[origin2k]

The article states that printers are sold at a loss and that most consumers prefer to buy their ink cartridges at local retail stores (the profit maker). Because HP has presence in the retail arena this makes sense. However, Dell must believe that customers are willing to purchase supplies online for Dell branded printers, even knowing that most consumers prefer to do retail.

I don't know about everyone else, but I don't buy ink cartridges until I need them and when I do I run down to the store and pick one up because they are so freaking expensive. Unless you are monitoring your ink, you can't predict when you will need to order another one online and wait 3-5 days to get it.

As for HP cutting off sales to Dell? Seems par for the course for a company that hasn't made very many good decisions lately.

Re:No big loss

[silicon_synapse]

Everyone knows they make the momey from the cartrages, not the actual units. Kind of like the game console sales model

True, but fewer of their printers in people's homes means fewer cartridges will be needed. They're losing more than the profit directly from the printer.

Re:bad decision

[glrotate]

why would HP want to give them that discount only to have Dell undercut them on their own printers in the retail market?

You're assuming that if one can't buy the HP from dell that one will buy a HP retail.

I don't think you can assume this. A portion of customers buying HP from dell do so because of convenience. It's simply easier to buy a printer with your order of PC's. By eliminating the option to buy a HP, they may buy a Dell or an Epson. You can't assume they were determined to buy an HP.

KILL THE DELL KID

[Anonymous Coward]

The dell kid must die. He is the most god damned annoying pitchman since billy mays.

Re:bad decision

[Anonymous Coward]

And what qualifies you to make such a broad proclamation about the business world?

Did you once work at a hamburger stand? Maybe you can program in C++ AND Perl?

I consulted for a company once that wanted to just sell a bunch of their products, we'll call the widgets. They were selling widgets everywhere. In order to get some places to take them, we'll say Wal-Mart, they had to offer considerable discounts. Their smaller buyers got pissed off because Wal-Mart could sell widgets at a lower price, so they bought someone else's widgets. Wal-Mart, now being almost the only customer, had more leverage to force more discounts.

Essentially, the widget manufacturing company screwed themselves by getting themselves in bed with someone who didn't really fit with their makret. Given the reality that these things happen often, and in thousands of different variations, and your 'truly competitve market' exists only in your head, you can shove your advice up your ass.

Makes perfect sense - as fallout from the merger.

[Ungrounded Lightning]

Looks like one bad decision after the next. First that moronic Compaq-HP merger and then this.

Makes sense to me.

Why would Dell want to be dependent on Compaq for its printers?

Why would Compaq want to assist Dell's sales of computer systems by selling them printers.

I expect Compaq-HP would have cut Dell off eventually, or ramped up the printer prices to put them at a competitive disadvantage to Compaq's line and sucked out their market share in the PC business. (If nothing else, continuing the relationship would bring up anti-trust issues eventually.)

So Dell started cutting the apron strings, and Compaq used this as an excuse to do as much damage to them as possible in one hit.

It all makes sense, I think

[Sloppy]

Dunno why this story made Slashdot, but...

HP believes consumers prefer to buy ink from retailers rather than online

Heh, that's an interesting way to look at it. I think it's more like: "When someone needs ink, they need it now." Nobody buys a printer in a hurry, but they do buy ink that way. I recently helped my mom get an ink cartridge (she wanted me to make sure she didn't get the wrong type), and she was willing to get ripped off buying retail, even though she knew (and I reminded her) that she could get better price. Why? She wanted to print something that day. So she paid $30 for a fscking cartridge.

As for HP's decision, I can think of lots of reasons for HP to do this:

• Punative. If Dell has a printer supply crunch, it'll cost them money, delay 'em, etc. Dell has low margins and needs flow, so they can be hurt. Might as well make an example of them, especially if it won't cost you anything (HP claims that other resellers have already agreed to contracts to make up for Dell's volume).
• In the short term, it might cause Dell computer customers to go to a retail store and buy an HP printer, since Dell either won't be able to sell printers for a while, or will have to increase their printer prices.
• HP says they've already made deals to sell their printers to someone else. Maybe computer buyers will go to those other parties. Dells already have atrocious reputations for quality. (All the ones I've seen this year were junkers that came preloaded with XP: four out of four machines had reliability problems -- whether that was due to XP or Dell, I don't know or care. Yes, they're black. But black cases don't fool me anymore, thanks to Dell. ;-) If I were thinking of buying a Dell (I'm not) and I heard it would come with a Lexmark piece of crap (don't get me started on Lexmark..) instead of an HP, that might push me over.

Re:bad decision

[Myco]

That's the weird thing about warranties. If a manufacturer/retailer/whatever offers you an optional warranty, they're perceived as trying to milk the customer for more money. Whereas if they make it mandatory, customers for some reason think they're getting something for free. Woohoo, it comes with a free warranty! Yeah, and where do you think the money comes from to pay for the costs of that warranty? It all goes into the bottom line -- you're paying for it regardless.

Of course, one can still comparison-shop, so it is possible to get a better deal with a standard warranty included sometimes, but it's far from the free lunch that people seem to think.

Where it went wrong for HP

[joneshenry]

HP's problems began well before Carly Fiorina. The critical decision was made by 1993 when HP decided that it could not afford to manufacture the next generation of processors, choosing instead to partner with Intel to develop the Itanium processor. What HP refused to admit a decade ago was that in effect it was surrendering the high-end Unix business.

By telling the world that PA-RISC was going to be phased out, HP killed any chance of growth in the high-end business. No customer with any sense would believe that a transition from PA-RISC to Itanium would not be a monumental upheaval. And if a painful transition was a certainty, why not bite the bullet and go with either Sun or IBM? The decision could not have come at a worse time with the last boom for a while in business computing just about to start.

With growth flat in what should have been a boom time, HP desperately entered the lower margin consumer PC business in order to generate more cash flow, any kind of cash flow. Unfortunately HP entered the business just as it was about to crash in turn. What was supposed to at least generate some revenue now has the prospect of unending losses.

Anyone can see that the sensible approach for HP would be to save the last of the company's crown jewels, the printer business, by simply exiting the consumer and small business PC markets, both HP and Compaq brands. This would have eliminated competing head-to-head with Dell and probably avoided provoking Dell into trying to offer Dell's own brand of printers. The only problem would have been figuring out what was left for the company to do in the computing industry. Where can HP generate profit if on the high-end the product line is dependent on the Itanium processor, especially if Intel is now selling to anyone not just the processor but also the guts of entire systems? What exactly does HP own that is unique in the computing industry? Where's the beef?

Perhaps the decline was inevitable once HP ceased to be a company of engineers who got things done. The company had reached the limits of organization. To have preserved the "HP Way" the company by the 1980s would have had to have morphed into a high-tech holding company whose "business" would have been using connections to Stanford and Berkeley to finance upstarts such as Steven Wozniak.

HP's Logic is good

[Anonymous Coward]

Home users and small businesses like to buy computer systems that include a printer. HP's printer are known for high quality and ubiquitous support. They are a strong incentive for the actual system purchase. If people are trying to chose between a Dell or a Compaq/HP system, the printer could very possibly tilt the balance in favor the Compaq/HP solution. This is a very SMART business move by HP, not, as some knee jerk reactionaries chide, an emotional or bad business move.