BOSTON — HP Inc. announced its surge into the A3 printer market with a splash at its Global Partner Conference (GPC) here today, with the announcement that it has concluded a definitive agreement to acquire Samsung’s printer business for $1.05 billion. The transaction is expected to close within 12 months.
While Samsung’s business has been struggling, HP sees this deal as being about far more than just acquiring market share. It gives them an instant presence in the A3 market, heavily dominated by traditional copier dealers, which they plan to build by augmenting it with their own technology and by leveraging synergies between Samsung’s A3 channel and HP’s own A4 channel. The longer term goal is to grow the HP A3 business this way from the 5 per cent they have now to the 40 per cent share they have in A4 printers.
The A3 segment – printers which can print documents or media larger than conventional A4 pages – is one of the areas HP identifies as part of its Growth component. These are areas of the systems and printing market where HP can realistically expect to drive growth at well above average rates, either because HP has well below average space, or through technology innovation – or preferably both.
“This is all about accelerating our entry into the A3 space,” said Dion Weisler, HP’s CEO. “The A3 copier space is a 55 billion market where we are largely underrepresented. We believe that this space has older machines and is very dated.”
“We are looking for the same 40 per cent share in A3 that we have in A4,” said Christoph Schell, President of the Americas at HP. “We are not doing this for peanuts.”
HP also announced a portfolio of 16 new A3 multifunction printers with the capabilities of copiers from their 16 Laserjet and PageWide platforms, which come from this acquisition. They will however be upgraded with security and other features from HP’s A4 portfolio. HP partners will be able to start selling these products in the first half of next year.
HP is buying the whole Samsung unit, including engineers, sales and the supply chain. The plan is to integrate the supply chain and support teams into HP’s own organization.
“We expect to use the Samsung brand for about two years and then change it to HP,” said Enrique Lores, President, Imaging, Printing and Solutions at HP. “We will also integrate the Samsung resellers into HP programs.
HP has had a thirty year co-opetition relationship with Canon, where they co-operate with them in the laserjet space while competing strongly with them in inkjets.
“When we first looked for an A3 vendor to partner with to expand into this space, we naturally looked at Canon because of our long-term partnership,” Schell said. “Canon was not that receptive to the idea, however, so we looked elsewhere. We liked Samsung’s engine and what we could do with that engine. So we started to develop an engine together in an OEM deal, and had been working on these new products announced today with them for months. At some point, we changed from doing an OEM deal with them to acquiring them.”
The idea is not simply to acquire market share – really the antithesis of the innovation-driven growth strategy that HP maintains is at its core.
“This isn’t just to flip Samsung products,” Schell said.
“Samsung has more than 6 and a half thousand patents, and now we get to be the beneficiaries of that,” Weisler said. “We will continue focusing on our A4 business with Canon while accelerating our A3 business with this.”
Samsung’s business had not been a particularly successful one, however, as the company has had issues convincing resellers to sell its products. HP believes strongly, however, that the synergies with HP’s own technology will give the Samsung technology the boost it could not generate on its own.
“We have learned that competing in the copier market with a non-differentiated copier is not a winning position,” Lores said, referring to the indifferent success HP has had selling Sharp copiers. “These printers that can compete head to head with copiers – this is a differentiated value proposition that will help us to win.”
Leveraging the cutting edge security in HP A4 printers in the A3 models is another key part of the value proposition.
“We will use security as our key differentiator,” Lores said. “We are introducing the world’s most secure printers in A3 space, as we did in A4. This is one of the key differentiators in the HP portfolio.
“Samsung has also developed a lot of value in connecting the printer to the cloud,” Lores added. “This is something we will take from the Samsung part of the portfolio, ideally by the end of 2017.”
HP has doubled down on its commitment to the channel at GPC this year, and building the right channel will be key here. Schell noted that while the A3 market in the US has already seen massive consolidation, there simply aren’t national channel players in this space, something that HP has to recognize in building out a channel.
“You don’t have partners that operate A3 across the U.S.,” he said. “We cannot reinvent the go-to-market here. We have to convince the partners out there that what we have is mature, and is superior.”
Lores indicated that they anticipate about half of their A3 sales will come from resellers HP already is working with, and the rest from ones today that are selling copier devices of other vendors, who can be induced to see the HP value proposition.
“Part of the value proposition to partners who have been selling A3 devices from competitors is that have also been selling A4s from us,” he said.
Some of the copier channel not presently working with HP can bring new value as well.
“A key independent copier reseller advantage is that they have become very good at driving down costs in their own model,” said Tuan Tran, VP and general manager of the LaserJet and Enterprise Solutions Group at HP. “Their technology may be antiquated but their service model is not. We can offer them better channel programs and being simpler to do business with, as well as great products.”
“This is only a small part of all the changes we are doing in the printing business,” Lores told partners at the event. “We are reinventing our print business. We need to get it back to growth working together with all of you.”