Xerox Considers Takeover Offer for HP

https://www.wsj.com/articles/xerox-considers-takeover-offer-for-hp-11573012201?mod=rsswn

by big_chungus • 7 years ago

80 84 7 years ago

vit05• 7 years ago

Xerox Holdings Corporation (XRX) =Market Cap 8.071B HP Inc. (HPQ) = Market Cap 26.638B Xerox ended Fujifilm joint venture today and is already trying a new multibillion-dollar business. I had no idea they still had some relevant product in the global market. But it is very likely that these advances are more about a financial game of activist investors than a long-term plan.

Aloha2• 7 years ago

Xerox is huge in the services business, that's why HP looks good to them, they also still make tons and tons of printers, from big to small

perl4ever2• 7 years ago

Xerox spun off their services business as Conduent, which was basically ACS that they acquired previously.

paxys• 7 years ago

What services business? Xerox makes almost all of its revenue from selling or renting printers/copiers. HP itself spun off its services business a little while ago (HPE is a completely different company now).

This is essentially a move for two companies in similar segments that see a slow death on the horizon to combine to cut costs and hope for a successful pivot. It makes sense as well, since the market for printers is already too small for two major players and is just shrinking every year.

tonyedgecombe5• 7 years ago

This consolidation of printer companies has been going on for a long time now. When I started working in the field it seemed every large corporation had a printer division.

ChuckMcM3• 7 years ago

In the words of Scott McNealy, "Everyone likes to hold hands while circling the drain." (I believe he made that comment when SGI agreed to acquire Cray.)

It is interesting to me as a technologist to remember these companies as both powerhouses in their domains and failing enterprises. What I don't know is what allows a company to successfully 're-invent' itself or to recover its core values and return to a previously powerful position. IBM did that once transitioning from PCs, Microsoft seems to have done it, and Apple pulled it off when Steve Jobs returned. SGI died, MIPS is nearly dead, Sun is dead, Compaq died, Dell might be considered a comeback, National Semiconductor died, AT&T Bell Labs died, Northern Telcom died, Polaroid died, Kodak is nearly dead.

There are obvious issues when the accountants take over and start squeezing the cash out of a company, and companies that just keep getting deeper and deeper into a technology that isn't going to survive when something new has come along. But why are these events so crippling that companies that have the resources to re-invent themselves seem to so often fail to do so?

dman2• 7 years ago

Think it comes down to incentive structures and what kind of behavior is rewarded. In a well functioning company people creating value bottom up see an upward trajectory in their careers. Companies that lose their way end up in a limbo state where power brokers, star communicators, coordinators end up capturing all the value and the act of creating bottom up value becomes an irrational act. An employee will do exceptional work if they have some kind of belief that they will be able to monetize it by capturing some of the value created. Once this belief evaporates doing great work becomes a fools errand. We (humans) appear to be hard wired to reverse engineer the incentive structures both explicit and implicit in any given situation.

ChuckMcM3• 7 years ago

I think there is a lot of truth in this. It was certainly the case at Sun when my friends started leaving that they had lost hope of being able to "make a difference." I expect that is an expression of the condition you describe.

MichaelMoser123• 7 years ago

Is it possible to get some sort of measure for that? Is it possible for an outsider to understand if creation of value is a priority at a given company?

dreamcompiler• 7 years ago

The older I get the more I believe this. Everything about a company's behavior can be explained by their incentive structures. Mission statements and grand visions mean nothing. Incentive structures are everything.

snarfy• 7 years ago

I've basically seen this happen at my former employer. They started an industry, made hundreds of millions, but instead of investing in development, the executives all receive massive bonuses. Competition is now creeping in and they have no way to compete. What was once new and innovative tech is now legacy enterprise. Instead of a cooperative relationship with customers it has become adversarial. Instead of hiring engineers and building better technology that sells itself as it once did, they hire salesmen to negotiate multiyear reoccurring contracts.

rahulnair23• 7 years ago

This is absolutely spot on.

A good deal of resources in some large organizations are wasted on vanity projects initiated by mid-management specifically for such value-capture.

gumby• 7 years ago

What I don't know is what allows a company to successfully 're-invent' itself or to recover its core values and return to a previously powerful position. IBM did that once transitioning from PCs...

By the way IBM did it at least four times before: once when they Computing-Tabulating-Recording company reinvented themselves and their focus and became IBM; once after WWII when they made a push into electronic computing and once in the 60s with the phenomenal 360 project and finally in the 80s when PCs dominated revenue.

Thomas J Watson’s autobiography is a must-read and covers up through the 360.

kwanbix• 7 years ago

They re-invented themselves as a services company in the 2000s. For good or for worse.

seminatl• 7 years ago

I'm not sure if Nat'l Semi died or not. They became a division of TI which is currently trading near its all-time-greatest valuation. TI is one of the most valuable companies on earth. Before the acquisition National had healthy profits.

dbcurtis• 7 years ago

The Nat Semi & TI merger is an interesting case. They both had huge numbers of parts in the same categories, but little actual overlap in actual part catalogs. They complemented each other nicely in terms feature-space coverage. At the same time, building a modern semiconductor fab is so capital intensive that only huge companies can do it. So the economics of that merger were uncommonly attractive.

emayljames• 7 years ago

Photocopy and Copy & Paste finally become one.

basch3• 7 years ago

In this case though, HP isnt the former powerhouse, which is alive and well, as HPE, reinventing itself and on quite an acquisition spree. HP is the printer and pc business they shed to keep themselves from bleeding out. HP is the kind of thing Lenovo likes buying, some scrap somebody else wanted. HP may have the larger market cap, but HPE is the company building itself for the future.

simonh5• 7 years ago

Yep, the old HP is alive and well as Agilent Technologies. They’re no technological powerhouse, but a respected and successful scientific instruments business. Just the sort of business Bill and David set out to create in the first place.

oblio• 7 years ago

HP Inc has higher revenue than Lenovo. Just sayin' :-)

gretch• 7 years ago

The popular theory which explains why this happens is documented as the innovator's dilemma: https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma

Basically to become that successful, companies have some hit product that becomes their golden goose. All data in the world says that a dollar invested in keeping the golden goose alive and healthy is the optimal way to invest that dollar. No one in the company (not execs, or accountants, or engineers) would want to disrupt this good thing that's going on.

Like, suppose that technologists/engineers make rational data-driven decision - look at this huuuge pile of data that validates the decision to continue doing the same thing over and over again.

At that point the business model and original product are baked into the companies DNA, and despite new things coming along, they really can't even imagine what it's like to do anything else.

The ability to reinvent is truly the secret sauce to business. Very few execs can do this for their organizations. If someone could do it reliably and predictably, they'd instantly be compensated $100M+ and dropped into any of the companies you mentioned to 'turn it around'

sumanthvepa2• 7 years ago

This used to be true for the old line of tech companies. The new tech behemoths have learned that lesson well. Their senior management and boards are paranoid about disruption. They are extremely agile with new opportunities. See Alphabet's range of investments, ditto Amazon, Microsoft, Facebook and Apple. In many cases, the founders separate themselves from the day-to-day management and short term revenue pressures that Wall imposes. This allows them to focus on new areas of growth. The share structure, allows this to happen -- class B stock give the founders the ability to ignore short term revenue pressure to some extent. This generation of tech companies are different beasts.

mixmastamyk• 7 years ago

A critcal point in that book is about profit margins. No one making 40% is interested in a new business making 20% even if it may eventually be 10x bigger. It’s seems risky until it’s too late.

agumonkey6• 7 years ago

there's an anthropomorphic factor.. companies know there's a chance they will die, but they can't find the strength to overcome fear of switching most of the time. They'd rather milk the cow until the last drop, which is what happens.

simonh5• 7 years ago

It’s timing. When a technology is only just starting out, the cost of entry is peanuts. Linus started Linux in his student bedroom, Zuck did the same with Facebook. The Apple I was a spare time project. The original HP was a bit more organised, they started in a garage but did intend it to be a business from the start.

When a technology is at the point where it is maturing, the cost of entry is bank-breaking. By then the first movers have attracted serious capital, but more importantly they have network effects on their side. Everyone can see this is the way to go and they are way ahead of you. There’s a decision point, spend billions to probably be an also-ran anyway, or essentially give the money to the shareholders.

Everybody focuses on the technology, but it’s the network effects that really matter. This is why WebOS and Windows Phone failed, why couldn’t HP and Microsoft buy their way into the mobile phone landscape? Their technology was excellent. The problem was the weren’t competing with Apple and a Google. They were competing with them, plus all the companies that had invested in the iPhone and Android ecosystems. The carriers, device manufacturers, software developers, service companies, all with huge investments in those platforms. Add that all up and it’s maybe 10x as much as just Apple and Google on their own. By now, probably a lot more.

So it’s all about timing. Google knew this, which is why 20% time happened. You pretty much have to invent the future to have any chance of owning it, or even getting a slice. Google was just incredibly lucky that Android fell into their laps at just the right time, and was powerful enough to compete with iOS. So the problem is, how do you keep genuinely innovating?

tonyedgecombe5• 7 years ago

On the other hand Apple wasn't in the phone business at all a decade ago, it was dominated by Nokia. Windows CE was on a lot of devices.

The opportunity came because the whole industry was moribund, they couldn't see the wood for the trees. Most of us hated our phones.

mashgin• 7 years ago

You can add Yahoo to that list as well. I was using Yahoo mail, music, briefcase, messenger, chat, daily 'only' like ~15 years ago!

foobar19623• 7 years ago

What I don't know is what allows a company to successfully 're-invent' itself or to recover its core values and return to a previously powerful position.

An excellent article about Fujifilm, and why it survived but Kodak died.

Kodak is dead. Today's Kodak is basically just a brand. The film division is a different entity.

https://petapixel.com/2018/10/19/why-kodak-died-and-fujifilm...

jacobush3• 7 years ago

The film division is really not dead though, which must be pointed out.

big_chungus• 7 years ago

MIPS is nearly dead

In the embedded systems space, MIPS is alive and if not kicking, at least twitching a bit. ARM has grabbed a lot of marketshare, but MIPS will likely hang on to some of the very low-clock systems.

lukego• 7 years ago

Is attempting a re-invention an efficient use of capital?

Maybe those companies that went gracefully into the night were able to pay out dividends for their owners to reinvest in Google, Facebook, etc and nobody lost much of anything from their decline?

chadlavi• 7 years ago

Lack of vision at the top.

pergadad• 7 years ago

A company with $10bn revenue buys one with $58bn revenue. This comes after cancelling a merger and nearly getting sued for $1bn because they last-minute-cancelled a merger with Fujifilm.

Sounds totally healthy and not at all like some financial game played by Xerox's activist investors.

Prediction: if this happens the joint company will be worth nothing in 2030. They are already now kicking out lots of staff, so are probably as usual destroying the R&D departments in favour of short term profit margins.

kchoudhu• 7 years ago

Printer companies belong together.

archeantus• 7 years ago

Apple is at an all-time high and Xerox is circling the drain. Pretty amazing to see what Apple has become with the point-in-the-right-direction Steve got from Xerox all those years ago.

r00fus• 7 years ago

https://news.ycombinator.com/item?id=8979051

bgorman2• 7 years ago

This makes no sense, HP is in much better position than Xerox. HP has the best inkjet technology, overall software/firmware and recently absorbed Samsung's printer business which gives them a great laser portfolio as well. Xerox is only a few years removed with flirting with bankruptcy.

Disclosure: used to work on HP printers several years ago

mikorym2• 7 years ago

Maybe you can answer this question for me: Why does HP not have a good ink tank printer based on the shell of something like the HP OfficeJet 3830?

It seems like Canon, Epson and Brother are the only real current options for ink tank / bottle refill printers.

bgorman2• 7 years ago

HP does have ink tank printers, but I believe they are only sold in emerging markets.

https://store.hp.com/id-en/default/printers-hp-ink-tank-syst...

In developed economies HP was/is pushing for users to use its "Ink subscription" service. I am assuming that using cartridges has higher margins for HP. The business model for HP is to make money selling supplies, and with ink tank printers it is trivial for a customer to use non-OEM refills.

skissane• 7 years ago

If Xerox buys HP, is someone else going to buy HPE? (Any speculation on who?)

basch3• 7 years ago

They have second largest market share behind Dell. Who would be in the market to buy something just so they can tackle Dell head on? Cisco?

als0• 7 years ago

EMC was in talks with HPE before deciding to merge with Dell. The next logical player would be Cisco. A merger with Oracle doesn’t sound likely but isn’t outside the realm of possibility.

HPE is a more complex acquisition now since they’ve started pouring more investment into supercomputing, which heavily depends on getting a few good long term deals. They’re no longer a pure infrastructure play.

But if someone buys HP it shouldn’t have any effect on HPE. These are separate topics.

gigatexal• 7 years ago

I used to work testing printers for Xerox. Back then they were benchmarking their printers against the HP ones that performed a lot better. This is a bold move but one that I’m not sure will ever pay off. I always thought printers and consumer electronics is a low margin business and not something people really want to be in.

goatinaboat• 7 years ago

It is very important to remember that this isn’t the “real HP”, it’s just some generic PC OEM with the name. The real HP lived on as Agilent.

kevin_thibedeau• 7 years ago

Even Agilent didn't like the real HP and kicked them to the curb as Keysight. I hope that when the HP name is up on the auction block, Keysight is smart enough to take it back.

foobar19623• 7 years ago

I just read a Reuters article on the legal action that was recently found in Fuji's favour, it said that Xerox relies on Fuji for copiers. The new Xerox management is anti-Fuji merger, so buying HP makes sense as an alternative source of copiers to Fuji.

https://www.reuters.com/article/us-xerox-fujifilm/fujifilm-w...

jjar• 7 years ago

https://www.bloomberg.com/news/articles/2019-11-06/xerox-con...

Bloomberg link with no paywall

tus88• 7 years ago

Isn't HP the number one server vendor in the world? Who is xerox? Maker of dying tech. Doesn't make sense.

neilalexander• 7 years ago

That would be post-split HPE, not HP.

alphadevx• 7 years ago

HP stock already up 10% in pre-market alone, based on this rumour: https://finance.yahoo.com/quote/HPQ?p=HPQ&.tsrc=fin-tre-srch

ch_123• 7 years ago

I'm reminded of Steve Job's insight into why Xerox failed to capitalize on their Alto/Star tech:

https://www.youtube.com/watch?v=_1rXqD6M614

mcv2• 7 years ago

Does this mean that support from my Samsung printer will now come from Xerox? I was appalled to discover I had to contact HP for support.

Xerox Considers Takeover Offer for HP

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