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There is no doubt that Hewlett-Packard (NYSE: HPQ) looks like a value stock. The company expects an adjusted profit per share this year to be approximately $2.17, and a price-to-earnings ratio of only 9. HP is valued at approximately US$30 billion, which is only eight times its full-year free cash flow guidance. Such low valuations usually arouse my interest.

But I am not interested in investing in HP. The question is not how much money the company makes; this is how the company makes money. HP sells PCs, printers, and supplies for these printers. Personal computers account for most of the revenue, but the printing business accounts for most of the profits.

In the printing field, consumables account for about two-thirds of total revenue. HP's printing business follows the razor and blade model. It sells low-margin hardware and then needs to continue to supply high-margin supplies. It is safe to say that most of HP's printing profits, and most of its overall profits, come from the sale of printing supplies.

This model has been running for a long time. It’s not that people don’t know that printer ink is expensive-being annoyed at the high cost of printer ink is part of the human condition. More importantly, there are limited options for purchasing supplies from anyone other than HP, brick-and-mortar retailers or HP resellers, especially in business.

It took a while, but e-commerce now seems to be seriously disrupting HP's cash cow for printing supplies. HP reported that its first-quarter sales of printing supplies fell 3% year-on-year. The company blames commercial customers for increasingly shifting purchases online, and HP has a low market share in this area. Customers have also become more price sensitive, which puts pressure on supply pricing.

Third-party ink cartridges are not new, but HP is finding it increasingly difficult to compete. CEO Dion Weisler explained in the first quarter earnings conference call that the growth of e-commerce has enabled aftermarket manufacturers to invest in better technologies faster than in the past. This has led to "our aftermarket on some new platforms. The rate of decline in share is faster than in the past. We expect."

If HP's pricing is only slightly higher than aftermarket alternatives, I wouldn't worry that much. If the savings are small, commercial customers will not switch from HP to consumables, especially considering that the quality of after-sales consumables may be the same or different. But the money saved is not small. HP has suffered heavy losses in terms of pricing.

How bad is it? Below is the current price list of some ink and toner cartridges on HP.com and inkjets.com (third-party ink sellers). Third-party ink cartridges have been remanufactured but are compatible with the stated model:

Color LaserJet Enterprise M553dn

LaserJet Pro MFP M521DN

Data source: HP and inkjets.com.

Consumer pricing is similarly unbalanced. In fact, Costco offers cartridge refills in some locations, starting at $6.99. The 952 XL black ink cartridge in the table above can be refilled at Costco for $14.99.

In my opinion, this is not a sustainable situation for HP.

Check out the record of HP's latest earnings conference call.

To invest in HP today, you must be willing to bet that the status quo will remain largely unchanged for the foreseeable future. You must believe that HP will continue to be able to charge high prices for printing supplies without losing too much market share.

Given that HP now recognizes that online aftermarket sellers are a big problem, this is a leap of faith that I cannot achieve. Regaining market share will require lower prices, and lower prices will result in lower profit margins. Given HP's reliance on printing supplies, this may severely hit HP's bottom line.

Perhaps HP's high-margin consumables business is more sustainable than I look now. Perhaps, if it does decline, it will slowly decline enough to be offset by growth in other places, such as 3D printers.

Or maybe HP's supplies business has finally been disrupted. The razor blade business model does not seem to last forever. Ask Gillette.

HP was caught off guard in the online competition in the first quarter. If this is the beginning of the liquidation of the printer consumables business, then even the low valuation is not enough to make me want to buy the stock.

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