HP Inc. is acquiring the printing device division of a junior player, Samsung Electronics, for $1.05 billion. The transaction is subject to regulatory approval and is expected to be completed within 12 months. Samsung-branded printers and multifunctional devices will stay on the market for another two years and then will be rebranded to HP. In South Korea, Samsung will continue to sell new printers under its own brand.
Samsung initially entered the low-end printer segment, with models aimed at home users and small and medium-sized businesses (SMBs). Of late, it has tried to enter the higher-margin, mid-market A4 and A3 printer and MFP segment, as well as the printing services market. So far, it has seen only limited success. According to IDC research, Samsung claimed a 4.2% share of the global printing device market in H1 2016 and a 10.6% share of the global laser segment.*
HP is buying Samsung’s printing device division with 6,000 employees in 50 subsidiaries around the world and revenue of $1.8 billion in 2015. The company holds more than 6,500 printing-related patents, possibly the most crucial aspect of the acquisition.
Besides A4 and A3 laser technology, Samsung owns advanced mobility and cloud technology solutions that HP plans to implement in its products. The acquisition draws a large question mark over future collaboration with Canon, HP Inc.’s current supplier of printing engines for A4 laser printers and MFPs.HP and Samsung have been working together on the development of new A3 printing devices for more than a year. New products resulting from this effort were introduced on September 12, but will not be available until 2017.
While Samsung is going to focus on its core activities in the area of smart phones and consumer electronics following the acquisition, HP Inc. is entering a new era with new growth opportunities. Ilona Stankeova, IDC research director for Imaging Devices and Document Solutions in the CEMA region, says HP will focus primarily on an aggressive entry to the A3 segment where it currently holds less than a 5% stake.
“The A3 MFP segment is undoubtedly attractive, in particular as regards the total page volume and related supplies of consumables. Our research shows that A3 laser MFPs account for 40% of the total page volume in offices and households globally,” she said.
In relation to A4 laser products, which make up more than 95% of unit shipments for both HP and Samsung, Stankeova added: “HP is getting rid of a pesky competitor, but the resulting market share will probably be smaller than the sum of the two companies’ respective shares today, with vendors such as Canon, Brother, Ricoh and Kyocera presumably jumping in to fill the gap. We expect a major clash in the colour A4 MFP space, as this is one of the few growth segments in a printing device market that has been in decline.”
It will be key for HP Inc. to evaluate the capabilities of channel partners — both its own and Samsung’s — in terms of A3 MFP sales and to adjust the distribution network for its future strategy. A3 MFPs are usually supplied as part of a print service or a wider enterprise document solutions contract. The ability to supply not only hardware, but also services and solutions, will be a key success factor. The A3 market is highly competitive, and to succeed against players like Ricoh, Canon, Xerox and Konica Minolta, HP will have to come up with a major innovation of its current business model that will enable it to win over their customers.
* Source: IDC Hardcopy Peripherals Tracker, Q2 2016