HP Rejects Acquisition Offer from Xerox

[AleksandarK]

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.


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[lexluthermiester]

I predict they will regret this...

 

[agatong55]

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.

 

[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.

 

[eidairaman1]

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

 

[lexluthermiester]

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.

 

[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.

 

[Easo]

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).

 

[lexluthermiester]

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.

 

[skizzo]

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

 

[lexluthermiester]

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.

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.

 

[DeathtoGnomes]

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.

 

[skizzo]

"HP has a market value of $27 billion, more than three times that of Xerox. "

-NY Times

Xerox Makes Takeover Offer for HP (Published 2019)

A merger would combine two once-formidable, print-focused companies as demand for printed documents and ink has waned.

www.nytimes.com

suck on that research

 

[DeathtoGnomes]

NYTimes.... LOL and where do they their numbers? from some intern....

 

[lexluthermiester]

"HP has a market value of $27 billion, more than three times that of Xerox. "

-NY Times

Xerox Makes Takeover Offer for HP (Published 2019)

A merger would combine two once-formidable, print-focused companies as demand for printed documents and ink has waned.

www.nytimes.com

suck on that research

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.

 

[DeathtoGnomes]

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.

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?

 

[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).

 

[lexluthermiester]

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.

 

[gamefoo21]

Guess my extended warranties will still be through HP afterall... lol

 

[cdawall]

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.

 

[Easo]

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.

 

[voltage]

I predict they will regret this...

I agree, was thinking the same thing.

 

[LFaWolf]

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.

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

 

[Chrispy_]

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.

 

[JAB Creations]

Market independence is the way of capitalism.

Market consolidation is the way of cronyism.