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HP Inc receives a $30bn takeover bid from rival Xerox

HP Inc has acknowledged it has received a bid from rival Xerox, just days after taking on a new CEO.

Earlier this week, Xerox ended its 57-year-old joint venture with Fujifilm. Now, free from the constraints of that agreement, the printer company has put in a $30bn takeover bid for rival HP Inc, according to the Wall Street Journal.

In September, HP Inc CEO Dion Weisler stepped down. He became CEO when HP Inc formed following the breakup of HP four years ago. Enrique Lores officially became the new CEO on 1 November. Lores had previously stated that the company would reduce its gross global headcount by 7,000 to 9,000 through a combination of employee exits and voluntary early retirement, which would result in annual savings of $1bn by the end of the fiscal year 2022.

The proposed acquisition could reportedly lead to annual savings of $2bn.

Both companies have struggled to remain relevant in a world that is going increasingly paperless and have turned to technology-enabled services to build new revenue streams. In the transcript posted on the Seeking Alpha financial blogging site, of the Xerox Q3 earnings call, CEO John Visentin described some of the automation technology Xerox was developing.

“Robotic process automation (RPA) is enabling parts of our order to cash operation to increase accuracy and reduce the amount of time it takes to generate complex invoices from days to minutes,” he said. “RPA also is driving efficiencies in new areas such as pursuit and bid development.

“Using this technology to respond to multi-faceted bids allows us to respond to request for proposals (RFPs) in record times and knock-out competitors. This technology helps us secure new business with one of the US’s largest school districts for its intelligent workplace services. We see potential for RPA to be employed more broadly.”

Three-dimensional printing

HP Inc is betting its future on three-dimensional printing, which the company hopes will power a new industrial revolution. It recently opened a 150,000 square foot 3D innovation centre in Barcelona.

In the Seeking Alpha transcript of the company's Q3 2019 earnings call, Lores said: “We need to continue to expand into some of the growth opportunities that we had identified in the past, 3D printing, contractual businesses are all opportunities for us to grow. At the same time, we need to continue evolving our business model.”

The growth opportunity for both manufacturers appears to be managed print services. A report from Quocirca published in October 2018, stated: “Managed print services (MPS), along with related services and solutions, represent fundamental growth opportunities for print manufacturers and their partners.

“However, the market is mature, forcing MPS providers to differentiate themselves with new offerings. Today, MPS has largely been repositioned in the broader realm of digital workflow transformation.

“While most providers offer a broad portfolio to help drive workplace productivity and efficiency, Quocirca’s 2018 MPS survey found that some are falling short in the key areas needed to support this such as analytic insight, workflow automation and innovation.

“Quocirca recommended that MPS providers deepen their competencies in these areas and expand their influence in the enterprise through participating in the broader managed security and internet of things (IoT) space. This will enable providers to become trusted partners for services beyond print,” said the report.

Speaking to Computer Weekly, Quocirca director Louella Fernandes said: “It is a surprise to see Xerox bidding for HP Inc.” Given the relative size of the two businesses, she said: “Many would have expected it to be the opposite way around, but it makes sense for the two to join forces.”

While both offer similar technologies, one has grown out of the photocopier business; the other from printers, she said: “Joining forces gives access to different technologies.”

There is also the potential for the two businesses to develop cloud-based managed print services. In her latest Quocirca Trends report, Fernandes predicted that managed print service providers will shift toward a cloud-based offering.

“Cloud as an enabler for businesses is radically different from traditional IT outsourcing, moving away from an upfront capital cost, software licence and maintenance model to a subscription-based model,” she said.

“Long-established managed print service (MPS) providers have recognised this, adding cloud to their service range in a bid to differentiate their offerings. Independent software vendors are also stepping up to the mark, expanding their cloud print management offerings.”

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