We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why is HP Inc Eyeing to Acquire Samsung's Printer Business?
Read MoreHide Full Article
Looks like HP Inc. (HPQ - Free Report) is prepared to leave no stones unturned to turn around its printer business. The technology giant is reportedly looking to buy Samsung Electronics’ printer business.
Last Friday, Seoul Economic Daily reported that Samsung will potentially sell its printer business to HP for approximately $1.8 billion, citing an unnamed senior executive of the Seoul, South Korea-based electronic giant.
Why Would Samsung Offload its Printer Business?
The spin-off is considered to be part of a broader restructuring process at Samsung, under which the company is trimming its business through the divestitures of non-core assets. Note that Samsung is a global leader in manufacturing smartphones, televisions and memory chips.
Despite its market position, Samsung failed to make a mark in the printer space, lagging a long way behind HP, Canon Inc. and Espon. In fact, according to International Data Corporation (IDC), Samsung holds the fifth position in the global hardcopy peripheral industry, with a mere 4% share in the second quarter of 2016.
Hence, we believe that the divestment of its printer business will unlock investments for the company and help it to focus better on its core segments.
Why Would HP Choose Samsung’s Printer Business?
HP is one of the two publicly traded entities that were formed after the Nov 2015 split of Hewlett-Packard Company. The split also led to the formation of Hewlett Packard Enterprise Company (HPE - Free Report) . HP focuses on PC and printing products and services.
Over the past few quarters, HP has been losing market share to its Japanese rivals – Canon and Espon – due to intense price competition. These Japanese manufacturers have been able to slash prices due to a weak Yen compared to the U.S. dollar.
Although HP is still the biggest printer manufacturer in the world as per IDC, the company’s market shrunk 420 basis points (bps) year-over-year to 36.6% in second-quarter 2016. In the same quarter, however, Canon and Espon’s market share expanded by 100 bps and 220 bps, respectively.
Furthermore, HP’s recently released third-quarter fiscal 2016 results showed a 14% year-over-year decline in printing revenues to $4.432 billion, primarily due to an 18% plunge in supplies revenues and weak performance at the hardware segment. HP’s total hardware unit sales were down 10% primarily due to declines of 2% and 14% in Commercial hardware units and Consumer hardware units, respectively.
Thus, we believe that the acquisition of Samsung’s printing operations could help HP turn around the printer business. The transaction will not only eliminate a major competitor, but also help to control prices. Apart from this, the acquisition will also give HP access to Samsung’s partners and strengthen the former’s position across various geographies.
HP to Revamp Business with 3D Printing
Demand for printers has witnessed a secular decline over the past several years as consumers are increasingly favoring digital alternatives over printed materials due to their cost effectiveness.
Post the split from its parent company, HP has been focused on product innovation and differentiation to maintain its leading position in the space. This May, the company hinted at the possibility of enhancing its 3D printing business capabilities in an effort to revive tumbling sales.
Note that even though HP has been operating in this space for almost five years now, the company lags behind 3D Systems Corporation (DDD - Free Report) and Stratasys Ltd. (SSYS - Free Report) .
Thus, in order to establish its presence in this space, HP recently unveiled its Jet Fusion 3D Printing Solution, with two models to choose from – 4200 and 3200. Unlike 3D Systems and Stratasys, which target all kinds of consumers, HP is emphasizing only on industrial markets because of their ability to afford a premium range of 3D printing solutions.
To satisfy customers in this space, HP has collaborated with various companies like BMW, Nike Inc. (NKE - Free Report) and Autodesk Inc. (ADSK - Free Report) with an aim to develop more advanced 3D printing technologies for a wide array of industrial use.
Additionally, the 3D printing market presents significant long-term investment opportunities as a large number of engineers, designers, architects and entrepreneurs are now turning to 3D solutions for primary designing and product modeling.
According to market research firm, CONTEXT, over half a million 3D printers have already been shipped across the globe between the 1980s and mid-2015, and the industry is currently on track to ship its millionth unit by 2017. Data from the Wohlers Report 2014 revealed that the worldwide 3D printing industry is expected to grow from $3.07 billion in 2013 to $12.8 billion by 2018, and will exceed $21 billion by 2020 at a CAGR of 34%.
Bottom Line
HP’s efforts to turn around the printing business have been commendable. Its strategy of focusing on product innovations and enhancing 3D printing capabilities will help to stabilize falling revenues at its printer division.
If HP succeeds in acquiring Samsung’s printer business, it would prove to be a prudent move for geographic expansion and market share capture.
Interested in IPOs? Check out the special edition of Zacks Friday Finish Line below, where Editor Maddy Johnson and Content Writer Ryan McQueeney interview Kathleen Smith of Renaissance Capital about the IPO market in 2016 (see part two here).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why is HP Inc Eyeing to Acquire Samsung's Printer Business?
Looks like HP Inc. (HPQ - Free Report) is prepared to leave no stones unturned to turn around its printer business. The technology giant is reportedly looking to buy Samsung Electronics’ printer business.
Last Friday, Seoul Economic Daily reported that Samsung will potentially sell its printer business to HP for approximately $1.8 billion, citing an unnamed senior executive of the Seoul, South Korea-based electronic giant.
Why Would Samsung Offload its Printer Business?
The spin-off is considered to be part of a broader restructuring process at Samsung, under which the company is trimming its business through the divestitures of non-core assets. Note that Samsung is a global leader in manufacturing smartphones, televisions and memory chips.
Despite its market position, Samsung failed to make a mark in the printer space, lagging a long way behind HP, Canon Inc. and Espon. In fact, according to International Data Corporation (IDC), Samsung holds the fifth position in the global hardcopy peripheral industry, with a mere 4% share in the second quarter of 2016.
Hence, we believe that the divestment of its printer business will unlock investments for the company and help it to focus better on its core segments.
Why Would HP Choose Samsung’s Printer Business?
HP is one of the two publicly traded entities that were formed after the Nov 2015 split of Hewlett-Packard Company. The split also led to the formation of Hewlett Packard Enterprise Company (HPE - Free Report) . HP focuses on PC and printing products and services.
HP INC Price
HP INC Price | HP INC Quote
Over the past few quarters, HP has been losing market share to its Japanese rivals – Canon and Espon – due to intense price competition. These Japanese manufacturers have been able to slash prices due to a weak Yen compared to the U.S. dollar.
Although HP is still the biggest printer manufacturer in the world as per IDC, the company’s market shrunk 420 basis points (bps) year-over-year to 36.6% in second-quarter 2016. In the same quarter, however, Canon and Espon’s market share expanded by 100 bps and 220 bps, respectively.
Furthermore, HP’s recently released third-quarter fiscal 2016 results showed a 14% year-over-year decline in printing revenues to $4.432 billion, primarily due to an 18% plunge in supplies revenues and weak performance at the hardware segment. HP’s total hardware unit sales were down 10% primarily due to declines of 2% and 14% in Commercial hardware units and Consumer hardware units, respectively.
Thus, we believe that the acquisition of Samsung’s printing operations could help HP turn around the printer business. The transaction will not only eliminate a major competitor, but also help to control prices. Apart from this, the acquisition will also give HP access to Samsung’s partners and strengthen the former’s position across various geographies.
HP to Revamp Business with 3D Printing
Demand for printers has witnessed a secular decline over the past several years as consumers are increasingly favoring digital alternatives over printed materials due to their cost effectiveness.
Post the split from its parent company, HP has been focused on product innovation and differentiation to maintain its leading position in the space. This May, the company hinted at the possibility of enhancing its 3D printing business capabilities in an effort to revive tumbling sales.
Note that even though HP has been operating in this space for almost five years now, the company lags behind 3D Systems Corporation (DDD - Free Report) and Stratasys Ltd. (SSYS - Free Report) .
Thus, in order to establish its presence in this space, HP recently unveiled its Jet Fusion 3D Printing Solution, with two models to choose from – 4200 and 3200. Unlike 3D Systems and Stratasys, which target all kinds of consumers, HP is emphasizing only on industrial markets because of their ability to afford a premium range of 3D printing solutions.
To satisfy customers in this space, HP has collaborated with various companies like BMW, Nike Inc. (NKE - Free Report) and Autodesk Inc. (ADSK - Free Report) with an aim to develop more advanced 3D printing technologies for a wide array of industrial use.
Additionally, the 3D printing market presents significant long-term investment opportunities as a large number of engineers, designers, architects and entrepreneurs are now turning to 3D solutions for primary designing and product modeling.
According to market research firm, CONTEXT, over half a million 3D printers have already been shipped across the globe between the 1980s and mid-2015, and the industry is currently on track to ship its millionth unit by 2017. Data from the Wohlers Report 2014 revealed that the worldwide 3D printing industry is expected to grow from $3.07 billion in 2013 to $12.8 billion by 2018, and will exceed $21 billion by 2020 at a CAGR of 34%.
Bottom Line
HP’s efforts to turn around the printing business have been commendable. Its strategy of focusing on product innovations and enhancing 3D printing capabilities will help to stabilize falling revenues at its printer division.
If HP succeeds in acquiring Samsung’s printer business, it would prove to be a prudent move for geographic expansion and market share capture.
Currently, HP carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Interested in IPOs? Check out the special edition of Zacks Friday Finish Line below, where Editor Maddy Johnson and Content Writer Ryan McQueeney interview Kathleen Smith of Renaissance Capital about the IPO market in 2016 (see part two here).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>