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
Add your own comment

29 Comments on HP Rejects Acquisition Offer from Xerox

#2
agatong55
lexluthermiester
I predict they will regret this...
I second this or in like 6 months they will try to get the offer back and xerox will give less money and they will take it.
Posted on Reply
#3
DeathtoGnomes
in pre-market trading this morning,both stocks dropped considerably but still opened with only a very minor drop. However the build upHYPE up to this announcement benefited by all.
Posted on Reply
#4
eidairaman1
The Exiled Airman
lexluthermiester
I predict they will regret this...
I dont like replacing printers or being forced into expensive ink carts either, that is across all output device companies
Posted on Reply
#5
lexluthermiester
eidairaman1
I dont like replacing printers or being forced into expensive ink carts either, that is across all output device companies
Color laser. Expensive upfront, but far more durable and long lasting. Quality is greatly better as well.
Posted on Reply
#6
Chrispy_
Of the two companies, Xerox is the one to be worried about for the future.

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.
Posted on Reply
#7
Easo
lexluthermiester
I predict they will regret this...
Wanna tell us why you think so? HP is number 1 PC manufacturer, a giant compared to Xerox (which is not small, to be fair).
Posted on Reply
#8
lexluthermiester
Easo
Wanna tell us why you think so? HP is number 1 PC manufacturer, a giant compared to Xerox (which is not small, to be fair).
Xerox is the larger company, has a ton of diversty and HP would benefit greatly from the purchase.
Posted on Reply
#9
skizzo
lexluthermiester
Xerox is the larger company, has a ton of diversty and HP would benefit greatly from the purchase.
what, are you smoking?

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
Posted on Reply
#10
lexluthermiester
skizzo
what, are you smoking?
Some of that burning bush? Seriously though, Xerox made an offer to purchase HP outright. Companies can not lawfully make such an offer unless they can follow through.

skizzo
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
Research is a good thing though.
Posted on Reply
#11
DeathtoGnomes
skizzo
what, are you smoking?

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
Xerox Holdings Corp NYSE: XRX closed 39.30 up 0.36
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.
Posted on Reply
#13
DeathtoGnomes
NYTimes.... LOL and where do they their numbers? from some intern....
Posted on Reply
#16
Camm
Probably the correct move from HP, a merger from Xerox would only result in a cash infusion into HP's businesses so the larger combined company could move itself from print (and for Xerox, consolidate whats left of the print market until that time).
Posted on Reply
#17
lexluthermiester
DeathtoGnomes
When was that Fuji merger?

I always question the facts from NYtimes, they have a long history of creating facts out of thin air. Aka interns?
Last year, 2018. It went final this year.
Posted on Reply
#18
gamefoo21
Guess my extended warranties will still be through HP afterall... lol
Posted on Reply
#19
cdawall
where the hell are my stars
Chrispy_
Of the two companies, Xerox is the one to be worried about for the future.

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.
Xerox does more than just printers. Remember this is the company that invented the GUI and mouse.
Posted on Reply
#20
Easo
lexluthermiester
Xerox is the larger company, has a ton of diversty and HP would benefit greatly from the purchase.
Man, are you sure you got that right? Because Xerox is most definitely not the larger of both.
P.S.
HP also makes more than just PC's.
Posted on Reply
#21
voltage
lexluthermiester
I predict they will regret this...
I agree, was thinking the same thing.
Posted on Reply
#22
LFaWolf
lexluthermiester
Wrong. As of 12-31-2017, the value of Xerox alone was 16billion;
https://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.
Wrong. First, when it comes to merger and acquisition, the measuring stick of the company size is market cap, and in this case, HP market cap is $29.6B, compared to Xerox market cap, which is $8.5B
https://finance.yahoo.com/quote/HPQ?p=HPQ
https://finance.yahoo.com/quote/XRX?p=XRX

If you want to compare asset value, HP is still larger. Last year filing was $34.6B.
https://www.sec.gov/Archives/edgar/data/47217/000004721718000052/hp-103118x10k.htm

Current balance sheets indicate as such, HP is the larger company -
https://finance.yahoo.com/quote/HPQ/balance-sheet?p=HPQ
https://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.

DeathtoGnomes
Xerox Holdings Corp NYSE: XRX closed 39.30 up 0.36
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.
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.
https://finance.yahoo.com/quote/HPQ/key-statistics?p=HPQ
https://finance.yahoo.com/quote/XRX/key-statistics?p=XRX
Posted on Reply
#23
Chrispy_
cdawall
Xerox does more than just printers. Remember this is the company that invented the GUI and mouse.
Two things:

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.
Posted on Reply
#24
JAB Creations
Market independence is the way of capitalism.

Market consolidation is the way of cronyism.
Posted on Reply
#25
cdawall
where the hell are my stars
Chrispy_
Two things:

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.
Xerox still completely owns PARC...

https://en.wikipedia.org/wiki/PARC_(company)
Posted on Reply
Add your own comment