Monday, November 18th 2019
HP Rejects Acquisition Offer from Xerox
On Sunday, HP Inc. released a letter from its board of directors stating that it rejects acquisition offer from Xerox Corporation pointing out that: "We have great confidence in our strategy and our ability to execute to continue driving sustainable long-term value at HP. In addition, the Board and management team continue to take actions to enhance shareholder value including the deployment of our strong balance sheet for increased repurchases of our significantly undervalued stock and for value-creating M&A."
This decision shows a strong will from the folks over at HP to continue their business in the way they usually done for many years. Additionally, HP stated the following: "We recognize the potential benefits of consolidation, and we are open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox. However, as we have previously shared in connection with our prior requests for diligence, we have fundamental questions that need to be addressed in our diligence of Xerox. We note the decline of Xerox's revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects.", showing the downsides of the potential merger and questioning abilities of Xerox to manage two companies.
Source:
ComputerBase
This decision shows a strong will from the folks over at HP to continue their business in the way they usually done for many years. Additionally, HP stated the following: "We recognize the potential benefits of consolidation, and we are open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox. However, as we have previously shared in connection with our prior requests for diligence, we have fundamental questions that need to be addressed in our diligence of Xerox. We note the decline of Xerox's revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects.", showing the downsides of the potential merger and questioning abilities of Xerox to manage two companies.
29 Comments on HP Rejects Acquisition Offer from Xerox
build upHYPE up to this announcement benefited by all.A huge slice of HP's revenue is in consumer tech and enterprise hardware - two areas they do pretty well in. You may not love HP products, but they are big player in a market that is still growing.
Xerox on the other hand have all of their eggs in the "we put ink on dead trees" basket; Something that is rapidly becoming obsolete with paperless offices and digital media. In five years, I suspect Xerox will be in a much weaker position. To be honest with you, I'm a little surprised that so much of Xerox's business model is still in physical printing. For the last decade, there has been a thriving and rapidly growing market in large-scale bulk OCR business. Tens or even hundreds of thousands of global companies are scanning paper document archives to digital formats as they transition to fully paperless offices and move to fully-searchable databases of digital records that are vastly easier to manage, store, and use than the dated racks of filing cabinets.
By contrast, photocopier sales have slumped in the last decade with a quick Google image search bringing up plenty of graphs showing variations of a 4% decline year-on-year for about the last 20 years. The trend is certainly that photocopiers are dying and their being replaced by exactly what HP makes; Digital creation tools and digital storage.
HP were wise to snub Xerox and their response was far more polite than I would have expected. Xerox IMO are dead, they should have seen the writing on the wall at least a decade ago but they are a lumbering cash-cow that I suspect will eventually turn into a patent-troll because the shrinking print media market won't be big enough or profitable enough for huge enterprises like Xerox.
HP is literally 3 times the size in terms of sales and market share, this is fact. I'll make a guess at HP likely also has 3 times as many employees too. HP is bigger than Xerox no matter how you slice that pie
HP Inc NYSE: HPQ closed 20.01 down 0.17
(Hewlett Packard Enterprise Co NYSE: HPE closed 17.28 up 0.05 )
yes do your research.
-NY Times
www.nytimes.com/2019/11/07/technology/xerox-hp-takeover-offer.html
suck on that research
www.sec.gov/Archives/edgar/data/108772/000010877218000012/xrx-123117x10xk.htm
Post Fuji merger, the value is upwards of 24 billion assets and 4 times that in capital.
I always question the facts from NYtimes, they have a long history of creating facts out of thin air. Aka interns?
P.S.
HP also makes more than just PC's.
finance.yahoo.com/quote/HPQ?p=HPQ
finance.yahoo.com/quote/XRX?p=XRX
If you want to compare asset value, HP is still larger. Last year filing was $34.6B.
www.sec.gov/Archives/edgar/data/47217/000004721718000052/hp-103118x10k.htm
Current balance sheets indicate as such, HP is the larger company -
finance.yahoo.com/quote/HPQ/balance-sheet?p=HPQ
finance.yahoo.com/quote/XRX/balance-sheet?p=XRX
How can Xerox buy HP? Through leverage, i.e., borrowing money or financing, most likely from banks. Large banks would provide the financing, if Xerox can present the proper plan to reduce cost through re-structuring of the combined company.Share price alone does not determine the size of the company. You need to multiply the current share price by the number of outstanding shares in the market, which then will give you the market cap of the respective company. HP has $1.4B shares outstanding, whereas Xerox only has $216M shares outstanding. Do the math, and you will see the numbers will match the market cap I listed above.
finance.yahoo.com/quote/HPQ/key-statistics?p=HPQ
finance.yahoo.com/quote/XRX/key-statistics?p=XRX
1) "I'm a little surprised that so much of Xerox's business model is still in physical printing" cleary states I'm aware of this fact; Most is not the same as all.
2) Name something major Xerox does that isn't printing-related. The GUI and the mouse inventions were squandered opportunities.
Market consolidation is the way of cronyism.
en.wikipedia.org/wiki/PARC_(company)