IE11 Not Supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.

HP Looks to Disrupt Outdated Market for Copiers

HP Inc. said Monday it will acquire the printing business of Samsung Electronics for $1.05 billion in a deal the tech giant said will help it “disrupt” what has become an outdated market for copiers.

By Rex Crum, The Mercury News

HP Inc. said Monday it will acquire the printing business of Samsung Electronics for $1.05 billion in a deal the tech giant said will help it “disrupt” what has become an outdated market for copiers.

HP said the acquisition is also the largest-ever related to print technology in the company’s history, and is meant to give it a boost as it moves into multi-function printers and away from old-school copy machines, and improve its place in the market for laser printers.

“With this acquisition, we are investing for our future,” said HP Chief Executive Dion Weisler, on a conference call to discuss the deal. “We’ll have the portfolio to really address the opportunities in the business printing market (and) we can truly reinvent printing on a much greater scale.”

Part of that reinvention involves incorporating Samsung’s multi-function printers that produced A3-size prints, which are close to legal-sized copies, into the HP product line. HP said one of the benefits of those printers is that many of Samsung’s offerings come with as few as seven replaceable parts, making the devices easier and less expensive to service. HP will also get about 6,500 Samsung patents with the acquisition, and 6,000 Samsung employees will join HP upon the deal’s completion, which is expected to occur within 12 months.

Samsung will also make an investment of $100 million to $300 million in HP through “open market purchases” of the company’s stock.

Steven Milunovich, an analyst with UBS, said that buying Samsung’s printing business was a move that “seemed inevitable for some time” for HP, and the company has wanted to move toward printing technology and services other than traditional copiers.

“HP has said it does not want to acquire “me-too” technology to consolidate but to acquire disruptive technologies to bring innovation into the copier market,” Milunovich said. “This looks like some of both to us.” Milunovich has a neutral rating and $14-a-share price target on HP’s stock.

HP took over the running of Hewlett-Packard’s printing and PC businesses 10 months ago when Hewlett-Packard split into two companies: HP Inc., and Hewlett Packard Enterprise, which took over the old H-P’s data center, networking, server and high-end business computing.

Printing remains a key driver of HP’s overall business, but it has shown some signs of weakness as the industry is dealing with consumers doing less printing at home, in particular. According to technology research firm Gartner, in 2015 HP was the No.1 company in worldwide printer market share with $39.7 billion in revenue, but that was an 8.4 percent decline from the $43.3 billion in printer sales HP had in 2014.

When HP delivered its fiscal third-quarter results in August, the company reported printing revenue of $4.4 billion, down from $5.2 billion in the same period a year ago. However, the business remains HP’s top generator of earnings, and had an operating profit of $903 million during the quarter, up slightly from last year’s earnings of $896 million.

Market reaction to HP’s acquisition was mostly positive, as investors on Monday sent the company’s stock price up by almost 4 percent, to close at $14.49 a share, after the deal was announced. For the year, HP shares have risen almost 23 percent.

 

©2016 The Mercury News (San Jose, Calif.) Distributed by Tribune Content Agency, LLC.