ANALYSIS: Xerox HP, what it means for ANZ printers
The battle for control of HP is in full flow, with a war of words between the HP and Xerox boards as they attempt to coalesce HP shareholders to their respective sides, but what does it mean for commercial printers in ANZ?
Both HP and Xerox are huge players in the commercial print space, and print technology from both is used by many print business across Australia and New Zealand.
HP will have the biggest booth at drupa for the second time in a row, taking the whole of Hall 17. Its product portfolio is huge, and growing, and – in a not so subtle dig at the previous owner of its digital print engine, and other developers – it proudly states that everything it showed at drupa last time around became commercially available, and says the same will be the case this time too. Its investment in R+D is enormous and paying dividends: commercial, carton, flexibles, labels, wide format, books – you name it and HP is taking a leading position in it.
Xerox, despite its recent travails, is still market leader in toner-based print systems, and while its US-manufactured iGen has slipped in the standings, particularly against HP's Indigo, its Iridesse – manufactured in Japan – is a shining star for the company in the commercial world, gaining more plaudits and customers with each quarter. The Versant – also manufactured in Japan – is a popular bread and butter digital colour print system for printers, franchises and inplants across ANZ, and everywhere else. The US-manufactured monochrome Nuvera is also market leader.
However, as far as the suits in New York are concerned, commercial print represents a minor part of these gigantic businesses. Commercial print is about eight per cent of the HP business, and about four per cent of the Xerox business. Safe to say then that the commercial print industry will not be top of mind if the two businesses do become one.
If Xerox does prevail, would the new owners spin off the commercial side of the business? Possibly. The track record of activist shareholders – or corporate raiders as they used to be called – suggests that profitable divisions are sold off.
Who would buy it? Private equity would be favourite, but you can't rule out a well-funded industry rival making a move – step forward Fujifilm.
How would a combined business look? HP is on its own as far as its technology is concerned – no-one else is in liquid toner and after 27 years it is safe to assume no-one will get there. Xerox of course is dry toner, although it has been dabbling with inkjet, with sheetfed and webfed systems released at the last drupa and installed into the US and Europe, although not available here. It has also just closed down the Impika factory in France, transferring it to the US. A combined business would be market leader by a long way in digital printing with liquid toner, dry toner, and inkjet.
What does the wider world think? Unfortunately, the commercial print element has not been portrayed in the best light in financial commentary and reporting on the potential deal, variously described as dying and dinosaurs by financial journalists who have their own experience of the mass closures of US newspapers and are largely ignorant of the evolution of print and the growing digital opportunities.
When will we know? Could be any time. Xerox says it has the cash to buy, and says its offer to shareholders gives a sizable upturn in the value of their shares. The onus is on the HP board to convince its shareholders they would be better off sticking with the status quo in the hope of getting more jam tomorrow, not an easy ask in the quick-buck world of Wall Street.
How would it play out here? Depends who buys it and what they do with the commercial print divisions. A combined HP Xerox would be interesting in ANZ if Fujifilm does not buy it. Xerox is sold through Fuji Xerox here, which is now a wholly owned subsidiary of Fujifilm, which competes with HP in B2 sheetfed and in wide format and grand format print systems. On the Indigo side, whatever happens, it would be unthinkable for HP to end its arrangement with Currie Group, which has been beneficial for both parties, and especially for printers.
However it does play out, the reality is that the massive amnounts of cash both companies pour into R+D would be unlikely to change, as they have to develop and innovate to compete. Well funded rivals such as Canon, Konica Minolta, Ricoh, Heidelberg, KBA, Durst, EFI et al, including Mr Landa, would take every opportunity they could to step into any gaps.
Print business owners in ANZ, and everywhere else, are the big beneficiaries of the competitive forces driving the technology developers onwards to produce print systems that are better, cheaper, more efficicient, more flexible, and offering more applications and market opportunities than ever before. The machinations of New York financiers will not change that.