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November 7, 2019
According to CNBC, Xerox is offering HP $22 a share in its takeover bid, and the offer is comprised of 77% cash and 23% stock.
Xerox spokeswoman Caroline Gransee-Linsey, confirmed the takeover bid and provided the following statement:
“Our industry is long overdue for consolidation, and those who move first will have a distinct advantage. We look forward to expeditiously moving this process forward and creating additional value for shareholders.”
HP provided us with the following statement:
“As reviewed at HP’s most recent securities analyst meeting, we have great confidence in our multi-year strategy and our ability to position the company for continued success in an evolving industry, particularly given the multiple levers available to drive value creation. Against this backdrop, we have had conversations with [Xerox] from time to time about a potential business combination. We have considered, among other things, what would be required to merit a transaction. Most recently, we received a proposal transmitted yesterday. We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders.”
Amy DeCarlo, GlobalData’s principal analyst of security and data-center services, tells us HP is significantly larger than Xerox, roughly three times the size, but there seem to be some financials working to Xerox’s advantage that could make this deal happen.
“If that is the case, there is logic to this potential merger in that it represents consolidation in the printing industry where the business model of selling devices for a relatively low cost and then profiting from the sale of high-cost ink cartridges is evolving,” she said. “A push for more of a subscription-based model and growing demand for 3D printing are changing both go-to-market plans, and research and development.”
According to a Nasdaq report, Toni Sacconaghi, senior research technology analyst at Bernstein, said Xerox might be trying to goad HP to turn around and buy it, which he said would make “a lot more financial sense” given that HP’s market cap is more than 3.5 times as big, with $29 billion for HP versus $8.4 billion for Xerox.
For its third quarter, HP reported $14.6 billion in net revenue, up .1 percent from the year-ago quarter. It also reported $1.18 billion in profit, up from $782 million.
For its third quarter, Xerox reported $2.2 billion in revenue, down from $2.35 billion for the year ago quarter. Net income totaled $222 million, up from $93 million.
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