New York (CNN Business) Xerox is reportedly considering the purchase of Hewlett-Packard Inc. as part of a merger of two former American technology giants, both of whom have seen better times.
The board of Xerox (XRX) discussed the possibility of an HP (HPQ) buy on Tuesday, the Wall Street Journal quoted sources familiar with the matter. The Journal also reported that the Xerox discussions are preliminary and may not lead to an offer for HP. Xerox declined to comment. An HP spokesperson was not immediately available for comment.
One business would be hampered by the fact that HP is more than three times larger than Xerox: HP has a market value of $ 27 billion compared to $ 8 billion at Xerox. But Xerox announced on Tuesday that it will sell various portions of its former business and generate $ 2.5 billion in cash from these transactions. The Journal also reported that Xerox has been blessed by a major bank to obtain loans for the transaction should this progress.
HP shares gained 9% in premarket trading. Xerox dropped 3%.
A marriage between the companies could make sense. Both Xerox and HP have outsourced their big money making in recent years, leaving behind aging printing companies that continue to be profitable. But these revenues disappear every year.
HP had surprised investors by growing faster than many thought was possible after it separated from HP Enterprise in 2015, but had problems in recent quarters.
Although HP still has a substantial PC business, fewer customers buy ink from HP. The sale of ink has long been the profit of HP: HP would take losses on printing sales and earn most of his income with ink. However, printing is less important on smartphones, and many customers who print can find cheaper ink suppliers.
The company announced last month to reduce between 7,000 and 9,000 jobs by 2022. At that time, Enrique Lores, the new CEO of HP, called the step “brave and determined” to support the company in its next chapter. HP’s former CEO, Dion Weisler, resigned on Friday for family reasons.
Like HP, Xerox relies on a dying company that generates most of its revenue and profits. It sells and services photocopiers and printers, especially for businesses. However, sales have declined and have fallen in each of the past seven quarters.
The deal between two similar companies could lead to cost savings of approximately $ 2 billion through layoffs and other synergies, the Wall Street Journal reported.
Both companies have a long history: Xerox was founded in 1906 as Haloid Photographic Co. With the delivery of the first office copier in March 1960, the photo equipment manufacturer in Rochester, New York, achieved a mega success. The Haloid Xerox apparatus was the size of two washing machines and weighed 648 pounds. It also caught fire occasionally. The core technology of the Xerox copier – a process invented by Chester Carlson called xerography – is still widely used in photocopiers five decades later. Xerox is located in Norwalk, Connecticut.
HP dates back to 1938, when Bill Hewlett and Dave Packard rented a garage in Palo Alto, California. This year, they invented their first product: the HP Model 200A, an audio oscillator for testing sound devices. The company became a pioneer of Silicon Valley and built its first computer in 1966 and in 1972 the famous HP-35 – the world’s first scientific calculator.