HP Buys Samsung Printer Business For $1.05B In Bid To Disrupt Copier Market With New A3 Printer Offensive

HP Inc. is buying rival Samsung's Electronics' printer business in a $1.05 billion cash deal in order to accelerate its no-holds-barred offensive to disrupt the copier market with a new portfolio of A3 printers.

"This will help us accelerate our growth into the A3 space," said HP Inc. Imaging and Printing Solutions President Enrique Lores, speaking about HP's entry into what is a new $55 billion market for the company. "This acquisition is going to help us solidify and accelerate those plans. We are really excited about the technology we are getting from Samsung."

A report last week in the Seoul Economic Daily said Samsung was considering selling its printer business to HP for $1.8 billion.

The acquisition comes a few hours before HP is set to begin its Global Partner Conference in Boston Monday morning.

[Related: HP CEO Weisler Set To Move Partner Sales Needle Higher As Competitors Grapple With Internal Turmoil]

Approximately 6,000 employees including 2,000 engineers and 1,000 sales reps will move to HP when the deal is closed. It also includes more than 6,500 Samsung patents.

The deal, in fact, provides HP with critical A3 intellectual property including the laser engine that is the heart of the eagerly anticipated HP A3 portfolio, said Tuan Tran, global general manager of HP's Office and Printing Solutions business."We have been working with Samsung over the last nine months to launch the series of products which are based on the Samsung laser printing engine," said Tran.

The Samsung laser printer engine with high speed paper capabilities and the core toner technology are "fundamental" technology that is going to be critical as HP moves to differentiate itself in the A3 space, said Tran."If you want to disrupt an industry you want to have core IP to go and disruot that," he said. "That is what this acquisition is all about."

HP plans to fully integrate the Samsung team into HP's laser jet development team, Tran said. "We will look for synergies and opportunities to take their core technology and leverage it across our product lines," he said.

HP plans to establish the Samsung operations in Korea as a leading design center for its A3 printer business.

Lores said the disruptive Samsung technology will be critical as HP moves to grab market share in the A3 market. "We are going to be bringing to market a very clear value proposition," he said. "We will introduce printers that will have the performance of copiers meaning they will have the throughput ability to print pages at the speed that only copiers have been able to do until now."

The new HP A3 printer line will also provide dramatic improvements in the serviceability in the A3 market where copiers have been notoriously difficult to service and support. "It's a very big disruption to a market that has really not seen any significant innovation in a very long time," Lores said. "We are very excited about the opportunity this is going to bring to HP."

Mont Phelps, CEO of NWN, No. 68 on the 2016 CRN Solution Provider 500, which was named the HP Printer and Personal Systems Growth Reseller of the Year in 2015, said the deal extends HP's dominance in the printer market.

"Samsung is a big company with lots of technology and a lot of capability, but at the end of the day it is not as relevant to them as it is to HP. This is a core business for HP. This is a smart deal for both companies."

Phelps said he is looking forward to growing both his managed print and device as a service business with HP which is leading the charge in a move to drive multiyear services agreements for printers and PCs rather than capital expenditure based purchases.

"Look at the copier business and how the copier companies have gone from selling to leasing and now a usage model with managed print," he said. "This is a megatrend. I think this is the way companies are going to purchase. It's good for everybody except for the folks that don't embrace it."

Phelps said he has seen HP Inc. make great strides forward in simplifying the business and moving faster since the split from Hewlett Packard Enterprise last Nov. 1. "It has made a big difference," he said. "HP was broad and convoluted and complicated before. Now you have people waking up every morning focusing on what they need to worry about rather than everything else. I can already see the impact, and I think it’s going to have an even bigger impact in the future."

HP said the deal will open the door to increased collaboration between Samsung and Canon, which has been an HP printer engine partner for more than three decades.

Lores said HP shared the news of the partnership with Canon which has pledged continued collaboration in driving the HP printer business forward. In fact, Canon CEO Fujio Mitarai said the deal will "further evolve" the collaboration between Samsung and Canon and bring about "growth" for both companies.

Under the terms of the deal, which is expected to close within 12 months, Samsung has agreed to make a $100 million to $300 million equity investment in HP through open market purchases.

HP said the deal is expected to be accretive in the first full year following the closing of the deal.

Samsung, which has been divesting non-core businesses, holds just a four percent share of the printer market compared to HP's 39 percent share.

The printer market which declined 10.6 percent year-over-year on shipment of 23.11 million units in the first quarter of 2016, according to IDC. Ink jet printers experienced a year-over-year decline of 11.1 percent, according to IDC, while the laser market declined 10.5 percent compared with the year ago period.

Several of HP's largest competitors in the printer market are in the making dramatic changes in order to compete. Xerox is splitting in two and Lexmark has agreed to a merger with a group of investors led by Chinese manufacturer Apex Technology for $3.6 billion.

Harry Zarek, CEO of Compugen, one of HP's top partners and No. 67 on the 2016 CRN Solution Provider 500 list, said the key to success in the printer business is moving into applications with document workflow with forms and scanning. "You need to move into the higher value side of print," he said. "It's like everything else – product, installation and supplies – is not enough. You need to go deeper and broader with solutions."

Zarek commended HP for driving breakthrough innovation in both the printer and PC markets. He said Compugen's HP Inc. business continues to be strong.

Once the deal closes, HP plans to move aggressively to team with Samsung solution providers who are already in the A3 and A4 market. "Our goal is to bring all those partners to HP," said Lores.