Xerox considers $27B acquisition of HP
Xerox, the name synonymous with copiers with a market cap of $8.05 billion, has been reported by The Wall Street Journal to be planning on making a cash-and-stock offer to take over HP, the second largest maker of personal computers and printers after China’s Lenovo.
While this may seem like a small shark going after the big one — a rare sighting on the wall street — it is possible; in part due to the dwindling market of HP (and Xerox) with the advent of the cloud and other technologies.
The market for personal computers is also facing harsh market conditions in light of faster smartphones and tablets that can perform at par with many laptops today. HP has announced that it will be restructuring to save $1 billion a year through cutting 7000-9000 jobs by the end of 2022 fiscal year. According to FactSet, this would account for almost 16% of its 55,000 employees across the globe.
On the pure financial side, unnamed sources told the Journal that Xerox has secured informal funding commitment from a major bank. Besides, there have also been reports of Xerox exiting the Fujifilm joint venture in which it had a 25% stake, walking away with $2.3 billion.
While Xerox and HP are huge players in the market, they are both facing the challenges of the ever-changing market needs. Their core business not only needs to adapt to the market but they need strong innovations and perhaps even change in strategies to stay ahead in the game.
Lessons can be learnt from how Kodak — once a market leader — was too slow to adapt when smartphones came around. The sad decline of the point-and-shoot cameras could have been avoided in hindsight. That’s the challenge that most companies who have seen their peak fail to acknowledge. Sometimes the core business model to go through a complete overhaul to see the future of the company stay relevant in the market and experience another rise.
Just look at Apple, they were way behind in the game of personal computers compared to HP. They are now one of the most revered brands in computing and smartphone technology. In fact, their core business has long since moved away from computers. Their biggest revenue stream was their iPhone — but only until recently. They are now concentrating on providing services in a world that is crowded with technology, to be able to keep their market lead and rise even further.
Having said that, just by the number of office computers and printers sold, Xerox and HP together — through acquisition or merger — could signal the next big office tech giant, which will undoubtedly give strong competition to Lenovo that currently enjoys top spot in many economies. But, that’ll only be for a short while unless they focus on innovating for the future.