This Week in Imaging: Did Canon Just Derail Xerox’s HP Acquisition Bid?

by Kathleen Wirth · March 6, 2020

This week, the big news didn’t come from either Xerox or HP Inc. – with Xerox, as expected, making a new offer for HP, and HP’s board, as expected, advising its shareholders to reject it – but from Canon Inc.

Canon Inc. CEO and Chairman Fujio Mitarai told the Nikkei Asian Review that it would end its hardware and technology partnership with HP, established in 1985, if Xerox managed to acquire HP. Mitarai also seemed to hint that if Xerox did acquire HP, Canon would consider partnering with another company – that might be another Japanese company, such as Konica Minolta or Ricoh.

For its part, HP has been sourcing hardware from other sources – A3 copier/MFPs from Sharp, and A3 and some A4 via its acquisition of Samsung’s printer group several years ago. It also has its own homegrown PageWide inkjet line.

But HP’s had a long and profitable partnership with Canon since 1985, under which it sources primarily A4 laser printers, components, and supplies under the ubiquitous LaserJet name. Canon has also been a tireless patent-infringement protector of the toner used in these HP LaserJet printers, waging war via lawsuits and petitioning Amazon to remove third-party LaserJet supplies from its ecommerce website.

HP could conceivably fill the gaps in its A4 laser line with Samsung-derived A4 laser printers. But what about the huge number of Canon-sourced A4 LaserJets out in the field – would HP be able to continue to supply Canon components and toner? Canon might also work to strengthen its own A4 laser printer sales. Although there’s the Canon imageCLASS A4 laser-printer line, Canon has tread lightly, generally focusing on promoting its A3 imageRUNNER copier/MFP line, not its A4 printers.

back in 2009, Canon and HP also announced an expanded partnership. Under the expansion, the two companies said they would grant access to each other’s management and third-party development software portfolios, including Canon imageWARE Enterprise Management Console and Canon MEAP, as well as HP Web Jetadmin and the HP Open Extensibility Platform. That technology-sharing would also come to an end.

For its part, in its latest annual report, HP said that its laser-printer suppliers “either may not exist or may be unable to produce the quantities of those components necessary to satisfy our production requirements,” and that ending the Canon agreement “could adversely affect our business and financial performance.”

Is it possible HP may have prodded Canon’s Mitarai to cast doubt on any continuing Canon-HP partnership if HP’s acquired? Perhaps, as the two companies have peacefully cooperated for over 30 years, even when HP purchased Samsung’s printer group. It’s also in the best interests of Canon to protect its partnership with HP, as it the partnership generates about one-fifth of its revenue (sales to HP).

As we said at the beginning of Xerox’s takeover bid, we think it would be a mistake to think that Icahn-backed Xerox would be able to strong-arm HP as it did with Japan-based Fujifilm, as in Japan, the strong-arm tactics of investors such as Carl Icahn are virtually unheard of, and Fujifilm didn’t respond aggressively. We expected HP to respond much more aggressively, which it has.

Meanwhile, this week, HP’s board has again urged its shareholders not to accept Xerox’s offer, arguing that it undervalues HP and would saddle the new merged company with unacceptable levels of debt.

We tend to think that both Canon and HP’s announcements will convince HP shareholders to reject Xerox’s offer.

This Week in Imaging:

HP-Xerox

HP Advises Shareholders to Reject Xerox’s Latest Offer

Canon Threatens to End HP Partnership if HP Acquired by Xerox

Xerox Adds New Loan Partners for Proposed Acquisition of HP

HP Board Reviewing New Xerox Offer

HP Claims ‘Slow Growth’ at Xerox; Says Icahn Expressed Interest in Buying HP

Coronavirus

HP CEO Updates on Factory Production in China

In Wake of Coronavirus, Fuji Xerox Resumes Manufacturing in China

Ninestar Aiming to Resume 100-Percent Production Capacity