Silicon Valley giant, HP, today announced that it is to purchase the ‘printer arm’ of Samsung in a deal worth $1.05 Billion.
HP Aims to Take on Multi-Billion Dollar Copier Business
Most of HP’s business is focused on selling personal computers, it is the market leader in desktop printers for both business and personal use. This is where HP obtains much of its profit. However, in recent years, the sale of printers and accessories have fallen. Xerox, the other big name in the printer business, reported a drop of 4%. Last month, HP reported that their sales for the third fiscal quarter were down 18% on the sale of ink and toner, while the sale of hardware had fallen 10%. The acquisition of Samsung’s printer business is an effort to reverse this damage.
One market which is on the up, according to Dion Wisler, the Chief Executive of HP, is the A3 printer markets. These are top business markets. Rather than try to set themselves up in business in these markets, they decided to purchase Samsung’s business. They are already well-established in these markets, which means that HP is going to have an instant foot in the door. This market is believed to have $55 billion in potential revenue. Samsung want a slice of this pie.
Deal includes patents
The deal not only involves the purchase of Samsung’s printing business, but it also includes over six thousand patents. This is incredibly valuable to Samsung. While they produce printers, they use external suppliers for their components. This adds a considerable sum of cash onto its price. Samsung, on the other hand, have the ability to manufacture their own components. This brings down the cost of manufacture. Since HP will now have far more control over the manufacture of their products, it should make it easier to produce high quality goods at a lower price point. This should make it easy to break into the market.
New Products Announced
Within hours of the announcement that a deal had been struck, HP announced the latest HP printers in their range. These printers, according to HP, are designed to ‘disrupt’ the $55 billion A3 copying business.
New products include 16 HP PageWide and LaserJet platforms. HP claim that these printers will be some of the most economical that they have ever produced on an ink purchasing level. This is going to be incredibly important as much of the copier market is driven by the cost of consumables. If HP manages to keep the price point low, they will generate a significant amount of cash.
Deal is subject to approval
The deal has not received instant approval. It will be up to regulators to approve the deal between Samsung and HP. The deal is expected to be finalized within 12 months. Upon completion of the deal, Samsung will be required to purchase somewhere between $100 million and $300 million of HP’s shares at the open-market price on the day.