Samsung is to sell the entire global operations and assets of its printing business to HP. The move, part of Samsung’s efforts to concentrate on its core business areas, represents a major shake-up in the print industry
In a meeting held in Seoul on September 12, Samsung’s board of directors approved the sale of its printing business unit to HP Inc., a deal valued at $1.05 billion.
In a statement the company said that upon the approval of shareholders it would spin off the printing business unit into a separate company as of November 1 and sell a 100 per cent stake of the newly created company and overseas assets related to the business, to HP.
This is the largest print acquisition in HP’s history and one which according to HP, accelerates its growth opportunities in the copier segment, strengthens its leading laser printing portfolio that has been established with Canon and paves the way for future printing innovation.
An announcement released by HP stated that it aims to reinvent and replace service intensive copiers with superior multifunction printing. The company said that the acquisition positions it to ‘disrupt and reinvent the $55 billion copier industry, a segment that hasn’t innovated in decades’ and that it is investing to ‘disrupt this category by replacing copiers with superior multifunction printer (MFP) technology’.
“When we became a separate company just 10 months ago, it enabled us to become nimble and focus on accelerating growth and reinventing industries,” Dion Weisler, President and CEO of HP said.
HP also says that the deal also creates new avenues for growth and greater profitability for partners as they expand managed print services as sales models shift from transactional to contractual.
“We are doing this [accelerating growth and reinventing industries] with 3D printing and the disruption of the $12 trillion traditional manufacturing industry and now we are going after the $55 billion copier space. The acquisition of Samsung’s printer business allows us to deliver print innovation and create entirely new business opportunities with far better efficiency, security, and economics for customers,” Weisler added.
HP argues that copiers are outdated, complicated machines with dozens of replaceable parts requiring inefficient service and maintenance agreements, claiming that customers are frequently frustrated with the number of visits needed to keep copier machines functioning.
Under the agreement, Samsung will source printers from HP and continue to market in Korea under the Samsung brand
Samsung’s printing business which has 6,000 employees, a production base in China as well as more than 50 sales offices globally, posted 2 trillion Korean won in revenue in 2015. The acquisition brings a compelling intellectual property portfolio of more than 6,500 printing patents and a world-class workforce that includes nearly 1,300 researchers and engineers with advanced expertise in laser printer technology, imaging electronics and printer supplies and accessories, to support continued innovation in print market solutions.
Formidable A3 portfolio
Samsung has built a formidable portfolio of A3 MFPs that deliver the performance of copiers with the power, simplicity, reliability and ease-of-use of printers and with as few as seven replaceable parts. Integrating the Samsung printer business’ products, including their mobile-first and cloud-first user experience, with HP’s next-generation PageWide technologies will, according to HP, create a breakthrough portfolio of printing solutions with the industry’s best device, document and data security.
“HP Inc. has been a valued partner and customer of Samsung,” said Dr. Oh-Hyun Kwon, Vice Chairman and CEO of Samsung Electronics. “We can now leverage our combined capacity for innovation to further enhance the value of our relationship.”
Acquiring Samsung’s printer business will also strengthen HP’s ability to service customers in global laser printing, a category where it has enjoyed a strong, mutually beneficial partnership with Canon for more than three decades. HP is confident this transaction will provide new opportunities to further strengthen and accelerate this highly valued relationship.
Fujio Mitarai, Chairman and CEO of Canon Inc.said: “HP and Canon have long discussed print innovation to create customer value in business printing and in the growing MPS market. This transaction will further evolve our collaboration and bring about growth for both of our companies.”
The acquisition is expected to be accretive in the first full year following closing, with cost synergies and a strong financial model. The transaction is expected to close within 12 months pending regulatory review and other customary closing conditions. After closing, Samsung has agreed to make a $100 million to $300 million equity investment in HP through open market purchases.
More questions than answers
Michael Burke, Managing Director, Burke Systems and Solutions said that the first he knew of the HP Inc. acquisition of Samsung Print was on Monday morning (12 September) when he received a phone call from his Samsung Channel Manager.
He said that the news has sent a shockwave through the organisation, which is Samsung’s OA partner for Northern Ireland. “It has certainly been at the forefront of my mind since announced. At this stage, there are more questions than answers,” he explained. So far, we have received no information from Samsung,” he explained.
“While I don’t expect much to change in the short to medium term, I would be concerned about how HP plan to increase their market share of the A3 market,” Burke commented.
“They’ve stated they intend to ‘disrupt and remodel’ a market they see as lacking innovation for decades. When they start to market the new A3 products through the HP Partner network, we immediately face a greater number of competitors selling the same product portfolio. If this happens it will have a commoditising effect on the products with the inevitable erosion of margin. However, if they stick with the tried and tested method of appointing authorised and accredited Partners who are fully trained on products and solutions and if they take a strategic viewpoint on the geographical market, then this could increase credibility with the products and may actually enhance our opportunities with a wider and diverse HP product portfolio,” he added.
“In the immediate future we will of course remain committed to the Samsung print portfolio,” Burke said. “Ideally Samsung in conjunction with HP would have outlined joint plans for the next 12 months. I’ve spoken with a few Samsung Partners and we’re all the same; in considerable doubt and uncertainty as to what happens next,” he concluded.
Commenting on the news, Mark Smyth, Operations Director at Vision said: “We were initially aware of HP’s partnership with Samsung to go to market with printer technology from Samsung’s current line up and the plan to launch a complete new range of innovative, market leading A3 print devices from HP. So when the rumours of an acquisition hit the market, we did assume like most, it was simply the new OEM partnership.
“Come the announcement on Monday 12 September and once we had digested the news and fully understood the dynamics and components of the acquisition, we started to clearly identify the opportunities and recognise the market strength of two global and leading printing brands coming together. As a current Global Partner, we remain committed to our partnership and the exciting developments the new alliance will present.”
Louella Fernandes, Associate Director at Quocirca says that HP does have a strong portfolio for the A3 space but it faces challenges in integrating Samsung’s A4 portfolio. “Its disruption of the A3 market is based on displacing very established competitors with a loyal client base and it is hugely reliant on its channel to step up and sell contractually for it to achieve any measure of success,” she said.
“The majority of A3 copiers are sold under a managed print service contract, which typically includes proactive maintenance and automated supplies replenishment. With service delivery being a key strength for many established MPS vendors such as Canon, Ricoh and Xerox, potential customers will need a compelling reason, beyond serviceability, to shift completely to an HP fleet. HP faces challenges ahead, and absolutely needs its channel fully engaged to gain any measure of success in the market,” she added.
A significant event
In the context of how it will impact the UK market, Toni Gibiino, Group Marketing Director of independent reseller RDT Office Solutions, said he would class the event as significant in its contribution towards transforming the market, adding that the term ‘disruptive’ appears to be over-used right now, for a number of reasons.
“HP Inc. have some work to do structurally, in terms of connecting with the traditional A3 copier/ MPS dealer channel, when it comes to contractually focussed resellers, rather than transactional,” he said. “HP have certainly made some inroads with their MPS partner programme in A4 over the last three years, but it’ll be very interesting to see how they’ll integrate the Samsung products into their offering.”
In Gibiino’s opinion, the battle for market share won’t be won over who has the best equipment or applications, he believes that it’s going to come down to pricing, engagement with the channel resellers and the OEM’s marketing budget. “Samsung created a strong blueprint in many of these aspects. Structurally, how they line up against the likes of Xerox, Ricoh and Konica on A3 is going to be important to the speed of their success. Let’s be realistic, it’s not a case of ‘if’ they’ll become a dominant A3 player, it’s more of a ‘when’ discussion,” he added.
“The market is heading for further consolidation. We’ve seen the number of OEMs halve to 16 over the last 30 years and I wouldn’t be surprised to see some other big moves over the next 12 months,” he predicted.
“It’s all being set-up for a Game of Thrones style finale, as the pieces of the puzzle begin to fall into place for the end game. Who will be left standing? he said in conclusion.