Hewlett Packard Company (NYSE: HPQ), the Palo Alto, California-based technology giant, will continue to look opportunistically at buys for its laser printing division following the appointment of new unit head, Ron Coughlin. However, Coughlin said he expects the division’s growth won’t be driven by M&A. He was recently named senior vice president of HP’s LaserJet and Enterprise Solutions global business unit within the company’s roughly USD 24bn Imaging and Printing Group, or IPG.
Although Coughlin said he believes HP has the best R&D capability in the industry, he said the division wasn’t closed off to acquiring anything in the hardware, software or solutions space. He noted HP’s acquisitions of Exstream Software, MarketSplash and Snapfish as examples of strategic buys.
Looking ahead, Coughlin said IPG plans to innovate and grow its core business of ink and laser printers, citing the recently released wireless touch screen printer, which allows users to print documents from the Web without being connected to a PC. The group also plans to grow its long-term, high-value annuity businesses. Coughlin said the goal is to “manage the whole printing ecosystem for enterprise customers” such as retail photo services available at Walgreens. Additionally, IPG is focused on leading the analog-to-digital transition in graphics, noting the market for on-demand printing of books and magazines. Another component of IPG’s strategy is the expansion of Web and mobile printing, demonstrated in the Snapfish acquisition, Coughlin said.
Lexmark, a listed printer company in Lexington, Kentucky, has intermittently assessed its sale options in recent years and might be attractive to HP, according to a previous report by this news service. When asked about Lexmark’s attractiveness as a possible acquisition target, Coughlin declined to comment, only saying HP remains “very happy” with its own portfolio.
Aaron Rakers, an analyst at Stifel Nicolaus, said he anticipates HP will attempt to focus aspirations for its printer division on improving the supply chain and moving into “value added” hardware like kiosks. Andrew Graham, president of Infinite Peripherals, said printer kiosks, found in airports and retail chains, are growing and evolving, led by the likes of NCR in Dayton, Ohio; D2 Sales of Mequon, Wisconsin; and US Payments in Tulsa, Oklahoma. Graham said HP could acquire these companies but would more likely develop its own expertise in-house, because of the recent hit to sales in the weakened economy. “Kiosks used to be made by finding metal fabricators who’d add printers and screens to the hardware. Now some companies are dedicated to kiosks and add services like payment processing.”
HP, which has a market capitalization of USD 121.5bn, doesn’t break out revenue for the separate units of IPG, which consists of LaserJet and Enterprise Solutions, Inkjet and Web Solutions, Graphics Solutions Business and Managed Enterprise Solutions. Coughlin noted that the bulk of IPG revenue comes from the LaserJet and Enterprise Solutions unit. In the latest quarter, IPG posted revenue of USD 6.45bn, down 15% from USD 7.57bn in the year-ago quarter. At that time, CEO Mark Hurd said he believed the company’s printer division was poised for recovery. Coughlin said recovery in the laser printing side of HP’s business is strongly correlated to employment, and noted there have been some “positive initial signs” as the economy has begun to stabilize.Coughlin, who previously served as IPG’s senior vice president of worldwide strategy and marketing, said his appointment was a statement by HP’s management that the company views laser printing as a growth business. “My job is to take that growth as far as we can,” Coughlin said.
HP needs to continue beefing up its commercialization capabilities in the digital production printing space. Most of the previous purchases were software firms with niche application portfolios to accelerate the adoption of color digital publishing. I would expect HP to devote most of its M&A interest to storage and software. The appointment of Coughlin should help CEO restructure the unit faster as he was losing his patience with lagging results. In my opinion, HP’s purchase of Lexmark is out of question due to anti-trust regulations. It will be interesting to find out how Oce/Canon acquisition will impact HP’s long standing partnership with Canon.
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