Xerox ( XRX ) board discussed the possibility of a HP ( HPQ ) purchase on Tuesday, according to Wall Street Journal, which cited sources familiar with the case. The magazine also reported that the Xerox discussions are preliminary and may not lead to an offer to HP. Xerox and HP spokesmen were not immediately available for comment.
A deal would be complicated by the fact that HP is more than three times as large as Xerox: HP has a market value of $ 27 billion compared to Xerox's $ 8 billion valuation. But on Tuesday, Xerox announced that they are selling various shares in previous parts of the business and that they will generate $ 2.5 billion in cash from these transactions. The journal also reported that Xerox has received the blessing of a large bank to receive loans for the transaction, should it go ahead.
HP's shares rose 9% in premarket trading. Xerox was down 3%.
A marriage between the companies could make sense. Both Xerox and HP have been spying on the big bucks in recent years, leaving aging print businesses still profitable. But revenue declines every year.
HP had surprised investors by growing faster than many would have thought possible after the 201
5 split with HP Enterprise, but it has struggled in recent quarters.
Although HP still has a significant PC business, fewer customers are purchasing HP ink. Ink sales had long been HP's profit generator: HP would lose its print sales and generate the bulk of its revenue from ink. But smartphones make printing less crucial, and many print customers are finding cheaper ink suppliers.
The company announced last month that it would cut between 7,000 and 9,000 jobs by 2022. At that time, Enrique Lores, HP's new CEO, called the move "bold and decisive action" to help the company in the next chapter. HP's former CEO, Dion Weisler, resigned on Friday for a family affair.
Like HP, Xerox relies on a dying business for most of its sales and profits. It sells and services copiers and printers, primarily for companies. But sales fall and fall in each of the last seven quarters.
The agreement between two similar businesses could provide about $ 2 billion in cost savings through layoffs and other synergies, the Wall Street Journal reported.
Both companies have a historical history: Xerox started in 1906 as Haloid Photographic Co. The photographic supply company in Rochester, New York, paved the way for mega success in March 1960, when it sent its first office copier. The Haloid Xerox birth control was the size of two washing machines and weighed 648 pounds. It also sometimes caught fire. The Xerox copier's core technology – a process called xerography invented by Chester Carlson – is still widely used in copiers five decades later. Xerox is now based in Norwalk, Connecticut.
HP traces its origins to 1938, when Bill Hewlett and Dave Packard rented a garage in Palo Alto, California. That year, they invented their first product: the HP Model 200A, an audio oscillator used to test audio equipment. The company became the pioneer in Silicon Valley, building its first computer in 1966 and the famous HP-35 in 1972 – the world's first handheld scientific calculator.