But HP warned suppliers that this was only the first step and pledged that it would be back for more savings, something Clarke said has now taken place. In some cases, Clarke said, suppliers came to HP on their own, seeking to offer even lower costs in exchange for a greater share of the business. In all, HP says it has saved $459m in direct procurement costs, which is the amount the company pays for items that go into HP products. But not all of the cost savings have come from narrowing the supplier base, Clarke said. In some cases, HP actually opened up its design, seeking to have more suppliers for particular components, ensuring continued price competition over time. HP is also turning increasingly to electronic auctions, forcing suppliers to bid in real-time for its business. HP is currently purchasing around $1bn in orders a year through auctions, Winkler said in an interview, an amount that will grow "substantially" over time. "We've saved, on average, 15 percent on everything we've bought" through auctions, Winkler said. Although HP has been very public about the amount of savings it is getting, the company has said less about the specifics of where it is saving the most. In some cases, such as components, it clearly doesn't want to tip its hand to competitors. But in other areas, it is the suppliers that HP is trying to protect. Often, HP's suppliers are some of its biggest customers. In markets such as telecommunications, for example, HP splits its business across many companies because all of the major players are HP customers and buy far more HP gear than what the company purchases from them, Clarke said. Beyond just extracting concessions from existing suppliers, HP is also redesigning its products to incorporate cheaper components. Such moves have added another $230m in annual savings. The redesign effort is not limited to just HP gear. HP has been able to shave $4 off the cost of making its PCs by changing the packaging that the machines ship in. "That's $80m to $100m just out of redesigning our boxes," Winkler said at the meeting. While such moves have earned praise from analysts, scepticism remains about how HP stacks up against Dell Computer and others. Fiorina says that HP's money-losing PC business will be profitable by next quarter and promises that she won't use the company's profitable printing business to underwrite red ink from PCs. "We will not subsidise (our) businesses," Fiorina said. "Each of our businesses has to be profitable and cost competitive."
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