How HP’s Struggle Will Affect Consumers
“For decades, HP and Xerox ranked among the most powerful forces of invention in Silicon Valley. Now they’re arguing over who has the superior vision to acquire competitors, jettison workers, and jealously guard the tech specs of their aging intellectual property.”
This was the observation of Bloomberg Businessweek as Xerox tries to buy HP. However, HP is tripling its share buyback program to $15 billion in order to meet Wall Street’s expectations on HP’s quarterly income.
The Struggle to Stay on Top
From 2016 to 2018, the HP PC business increased by 26% and their print sales climbed 14%. This is due to their focus on cutting costs. Research and development went into preventing microscopic ink wasting and making printers less compatible with third party cartridges.
With these growth, HP has improved its core lines since 2018. They added more smartphone and cloud connectivity. Their subscription ink service called Instant Ink now has 6 million members. HP has been investing in 3D printing, trying to disrupt the $12 trillion manufacturing industry. With corporate customers such as GE Transportation, Volkswagen Group and BMW Group, they aim to “print” production-grade plastic and metal parts.
But still, HP has to lay off 16% of its workforce in 2019 in order to cut costs and boost sales growth.
This 2020, its reported revenue at the end of January 31 is $6.9 billion which is 8% less last year and is below the Street consensus of $7.2 billion.
Back in 1989, HP used to invest 10% of their revenue ($1.3 billion a year) on research and development. This year, HP only spends 2.6% on Research and Development, the equivalent of $1.5 billion. Which is comparably small compared to what Apple, Google and Amazon used to invest in their futures.
So what would this mean to customers of the paper and ink business?
4 Developments for the HP Experience
- Printing Security
HP aims to handle security issues without the users having to proactively take measures. The security on the printers will connect to the cloud, anticipate customer needs and resolve technical and security issues on its own, similar to Netflix.
- Cloud-based Instant Ink Subscription
A cloud-based ink subscription allows HP to monitor printer usage and send new cartridges when needed. It will also allow people to print anywhere with an active internet connection.
- HP Smart Printing App
This year, HP is improving mobile printing with the development of the HP Smart mobile printing app. People will no longer have to rely on third-party apps that result in compatibility or connectivity issues.
- Boost FSC-certified Recycled Fiber Sourcing
HP is working with groups such as the World Wildlife Fund and International Paper for the restoration, protection and conservation of 200,000 of Brazil’s Atlantic Forest. Using HP products reassures customers that they are contributing to the support of taking care of the environment.
The Catch
For these changes, there are concerns for their two developments.
- Printing Security Can Include Firmware “Updates”
As HP tries to grow its sales with a small amount of R&D investment, it will continue to pinch pennies in its printers and look for ways to make people buy their ink which can be expensive to customers.
When a printer is connected to the internet, firmware updates can happen in the background. Most printers have default “on” setting on updates without notifying consumers.
One of their updates is to change their “security” feature that controls how the printer communicates with cartridges. If the chip in the cartridge is designed for the earlier version of the firmware, the printer won’t be able to use it and it will report it as missing or damaged.
This happened in March 2016 when HP distributed a new firmware update, then in September 2017 and September 2018. Then again in July 2019 until they lost a class action lawsuit that cost them $1.5 million. This 2020, HP can prevent you from printing with third party ink cartridge legally unless you answer their firmware questions the “right” way.
- Company Control of Cartridges thru Cloud-Based Services
Through an internet connection, Instant Ink will monitor the following data on customer printers: ink levels, page counts, types files printed, cartridge data and other metrics. Instant Ink will also be able to control cartridges through internet connection.
According to their Terms of Service, Instant Ink Cartridges are activated only if the printer is connected online. If not, it will be disabled but you will still be charged for the subscription:
“If Your printer is not connected to the Internet, then the Instant Ink-activated Cartridges will be disabled and You will not be able to use them to print; however, You will continue to be charged for the Instant Ink Service…”
Instant Ink will also temporarily deactivate your cartridges if you don’t pay on time:
“In the event that HP is unable to collect payment from Your Payment Method at the time payment becomes due, HP may temporarily cease your access to the Instant Ink Service, and the Instant Ink–activated Cartridges will stop functioning, until payment can be collected…”
The Fight for the Right of HP Consumers
HP can no longer use firmware to trick consumers into printer errors whenever they use third party cartridges. So they will legally try to make it harder to use refilled or third party cartridges.
HP may state that they printer warranty will be voided IF there are damages DUE TO USE of non-HP cartridge or ink. But quality third party ink cartridges do not cause printer damage.
As HP struggles to maintain their sales growth, it should not be at the cost or exploitation of their customers. If Instant Ink subscription suits the customers’ needs, then they are free to subscribe. However, for those who choose to use third party ink cartridges, they have the right to use what they want with their printers.
