HP’s many paths to profit

HP printer sales are dropping, but high-profit ink sales remain strong. Image: HP

Where’s the most expensive popcorn in the universe? At the movie theater, of course. Theaters know you’ll pay because you’re a captive audience. That explains how Hewlett-Packard (HPQ) made so much money from ink sales last quarter, even though printer sales are slipping: by raising ink prices.

HP printer owners, after all, are themselves a captive audience; they’ll probably pay a little more for ink rather than ceasing to print altogether, or shelling out cash for a whole new printer. Partly because of their willingness to play along, HP offset printer sales that dropped 8% last quarter by boosting its extra-profitable ink sales by 9% over a year ago. (Not all of the increase came from higher ink prices, of course – but it sure helped.)