Inroads opened for HP’s PC rivals amid Xerox uncertainty

Inroads opened for HP’s PC rivals amid Xerox uncertainty

Unclear whether Xerox offer will go ahead and its ramifications for HP’s PC arm

Credit: HP

The rumbling uncertainty surrounding Xerox’s proposed takeover of HP may have generated unintended opportunities for the print and personal computer vendor’s rivals.

According to analyst firm Technology Business Research (TBR), HP’s primary competitors -- namely Lenovo and Dell -- and their partners are in a prime position to capitalise while the vendor fights off the potentially hostile acquisition.

One of the issues stems from the uncertainty regarding the ramifications for the PC unit should Xerox’s US$33.5 billion bid succeed.

According to TBR, while Xerox may be tempted to sell or spin off the unit to reduce the new company’s debt burden.

However, suggestions point to the US giant combining its managed print services with PC-as-a-service (PCaaS), give it a more “comprehensive” services offering -- or as one report described it, “a PC and printing juggernaut”.

If Xerox chose to sell the PC business, it would also struggle to find a buyer as market regulations would rule out the likes of Dell and Lenovo, while Huawei remains restricted in the US due to security concerns.

HP has continued to rebuff Xerox’s acquisition attempt since the news first emerged in early November, claiming the offer of US$33 billion significantly undervalues it.

According to TBR, a successful acquisition still “remains a possibility” due to the two parties’ complementary offerings.

“Xerox is stronger in the enterprise, while HP Inc. is stronger with SMBs,” the analyst firm noted. “HP relies on a strong channel, with emphasis on value-added services, and Xerox has a larger direct business, with channel partners relegated more to a reseller model.”

However, a higher offer by Xerox would be difficult to achieve due to the increasing debt burden and the decline of its share price since making the move. Meanwhile, HP itself could pose a counteroffer that would see a merger that gives itself better terms.

“Both companies are executing restructuring plans that involve headcount reduction to adapt to the globally shrinking market for printing, and therefore, print supplies, which has been a profitable part of both businesses,” TBR noted.

TBR argues that Xerox’s proposed plan for the new company is too aggressive for HP and unlikely to “align” with the latter’s board. But, ultimately a merger would be less disruptive for HP than a decision to sell or spin off its PC business, with TBR adding: “The uncertainty of this deal will continue to hinder HP as a whole until issues are resolved.”

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