Xerox Ends Its Hostile Pursuit of HP, Finally

(Bloomberg Opinion) -- It’s finally over.

Xerox Holdings Corp. announced late Tuesday that it is abandoning its tender offer to acquire HP Inc., citing the global health crisis from Covid-19 and the ensuing difficult market environment. The maker of photocopiers also called off its effort to enter into a proxy fight to replace HP’s board.

It marks the end of a dramatic back-and-forth struggle that began last November, when Xerox began its pursuit of HP, the second-largest computer maker. HP has repeatedly rejected Xerox’s overtures, including its most recent offer, valued at about $35 billion. But while Xerox is blaming coronavirus, its attempt to take over a company more than three times its size never made much sense in the first place. Not only would it require tens of billions in inherently risky debt financing — the whole strategy of buying a secularly challenged business and relying primarily on cost savings was never a winner.

In February, for example, HP reported a 7% decline in its printer revenue and a 10% drop in printer-hardware unit sales for its fiscal first quarter ended in January. Cost cutting is not going to save this troubled business. Xerox wasn’t much better when it posted a sales decline for its December quarter.

Both companies should instead focus on figuring out new growth strategies for their respective businesses, instead of being distracted by M&A and financial engineering.

Adding two dinosaurs together was never going to magically make a new tech behemoth.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.

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