HP A ‘Basket Case’ As PC Sales Slump 16% Xerox Deal Rejected
The Hewlett Packard PC and printer division is facing a torrid time with their PC sales slumping 16% and thousands of staff facing the real risk of being sacked either before or “straight after Xmas” as the #1 PC Company in Australia, struggles to find growth markets claims analysts, the Company has also rejected a potential takeover deal from Xerox.
Globally moral at the big US PC Company who 18 months ago split from the HP Enterprise business is “extremly low” according to insiders that ChannelNews has spoken to.
“Who wants to put any effort in for a Company who think employees are easily disposable” said one employee.
They added” PC sales are struggling across all brands and HP is a basket case that needs new management if they are to ever succeed”.
In Australia the US PC Company is losing share to Acer in the education and PC gaming market where capture market share with their Omen PC offering despite heavy online and social media marketing.
According to DigiTimes research Hewlett-Packard’s (HP) shipments plunged 16% on month in October due to its business restructuring and layoff.
Lenovo had an over 20% decline in the same month because of China’s weak domestic demand the research revealed.
Recently Xerox Holdings gave the PC and printer division four weeks to decide, as to whether they will accept a $27 billion-dollar takeover offer. over the weekend HP rejected the deal claiming the offer undervalued the Company.
HP Inc has rejected a proposed $33 billion merger offer from Xerox, with the board issuing a letter that suggests the deal is not the best thing for the company and its shareholders, though they remain open to a deal in the future.
‘Our Board of Directors has … unanimously concluded that it significantly undervalues HP and is not in the best interests of HP shareholders. In reaching this determination, the Board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock.’
Despite that, however, HP has ‘recognised 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.’
Furthermore, HP wants to know more about financial situation of Xerox, citing ‘the decline of Xerox’s revenue from US$10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018’ which according to Board chair Chip Bergh and CEO and President Enrique Lores, has raised ‘significant questions for [HP] regarding the trajectory of [Xerox] and future prospects’.
‘With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction.’
In what is clearly a first strike from HP Inc, the company said it is ‘ready to engage’ with Xerox.
Fortunately, despite HP’s concerns, both companies share prices have jumped since the offer became public, with HP rising by 10% and Xerox 7%.
After blocking Xerox’s planned merger with Fujifilm last year and taking control of its board, activist investor Carl Icahn who has a 10.6% shareholding in Xerox, as well as a 4.2% stake in HP, is now pushing for a merger with HP, arguing that a union could yield big profits for investors.
“I think a combination is a no-brainer,” Icahn told The Wall Street Journal.
“I’ve found over the years that these types of companies that are in shrinking industries tend to decline much more slowly than many markets participants may predict while continuing to generate substantial amounts of cash,” Icahn said.
In the Australian printer market, HP is still holding share.
The overall Australian printer market recorded 1.84 million-unit shipments in 2018, which was 2.2% less than that of 2017, according to IDC with sales falling even further in 2019.
Selling volume for both inkjet and laser devices continued to drop, reported at -1.8% and -3.0% year-over-year (YoY) respectively.
However, the shipment of colour laser multi-function products offered a slightly brighter spot in the shrinking market, with annual growth at 6.8%
Among the inkjet vendors, HP had strengthened its position by increasing the occupancy rate on entry-level printers while Canon’s market share slumped.
In the laser market, Brother and HP continued to be the leaders, Fuji Xerox decided to exit the lower-end A4 printer market due to decreasing demand.