HP Inc is buying rival Samsung Electronic's printer business in a US$1.05 billion cash deal in order to accelerate its no-holds-barred offensive to disrupt the copier market with a new portfolio of A3 printers.
"This will help us accelerate our growth into the A3 space," said HP Inc imaging and printing solutions president Enrique Lores, speaking about HP's entry into what is a new US$55 billion market for the company. "This acquisition is going to help us solidify and accelerate those plans. We are really excited about the technology we are getting from Samsung."
A report last week in the Seoul Economic Daily said Samsung was considering selling its printer business to HP for US$1.8 billion.
The acquisition came a few hours before HP is set to begin its Global Partner Conference in Boston Monday morning, where the vendor launched 16 new multifunction devices, bringing three PageWide platforms and 13 LaserJet platforms in a bid to shake up a market dominated by Fuji Xerox, Konica Minolta and Ricoh.
Approximately 6,000 employees including 2,000 engineers and 1,000 sales reps will move from Samsung to HP when the deal is closed. It also includes more than 6,500 Samsung patents.
The deal, in fact, provides HP with critical A3 intellectual property including the laser engine that is the heart of the eagerly anticipated HP A3 portfolio, said Tuan Tran, global general manager of HP's office and printing solutions business."We have been working with Samsung over the last nine months to launch the series of products which are based on the Samsung laser printing engine."
The Samsung laser printer engine with high-speed paper capabilities and the core toner technology are "fundamental" technology that is going to be critical as HP moves to differentiate itself in the A3 space, said Tran."If you want to disrupt an industry you want to have core IP to go and disrupt that," he said. "That is what this acquisition is all about."
HP plans to fully integrate the Samsung team into HP's laser jet development team, Tran said. "We will look for synergies and opportunities to take their core technology and leverage it across our product lines," he said.
HP plans to establish the Samsung operations in Korea as a leading design center for its A3 printer business.
Lores said the disruptive Samsung technology will be critical as HP moves to grab market share in the A3 market. "We are going to be bringing to market a very clear value proposition," he said. "We will introduce printers that will have the performance of copiers meaning they will have the throughput ability to print pages at the speed that only copiers have been able to do until now."
The new HP A3 printer line will also provide dramatic improvements in the serviceability in the A3 market where copiers have been notoriously difficult to service and support. "It's a very big disruption to a market that has really not seen any significant innovation in a very long time," Lores said. "We are very excited about the opportunity this is going to bring to HP."
Under the terms of the deal, which is expected to close within 12 months, Samsung has agreed to make a US$100 million to US$300 million equity investment in HP through open market purchases.
HP said the deal is expected to be accretive in the first full year following the closing of the deal.
Samsung, which has been divesting non-core businesses, holds just a four percent share of the printer market compared to HP's 39 percent share.
The printer market which declined 10.6 percent year-over-year on shipment of 23.11 million units in the first quarter of 2016, according to IDC. Inkjet printers experienced a year-over-year decline of 11.1 percent, according to IDC, while the laser market declined 10.5 percent compared with the year ago period.
Several of HP's largest competitors in the printer market are in the making dramatic changes in order to compete. Xerox is splitting in two and Lexmark has agreed to a merger with a group of investors led by Chinese manufacturer Apex Technology for $3.6 billion.
Once the deal closes, HP plans to move aggressively to team with Samsung solution providers who are already in the A3 and A4 market. "Our goal is to bring all those partners to HP," said HP's Lores.