Xerox is planning to shut down Impika, the French inkjet press developer that it acquired back in 2013, despite having opened a worldwide research centre at the Aubagne site in 2014.
Xerox has tried to do this quietly without any major announcement, and has still not issued an official confirmation despite a local French newspaper, La Provence, having broken the story a couple of days ago. It appears that the decision was actually taken back in July but that under French law Xerox had to make an effort to save the jobs of the employees. Both Kyocera and EFI were said to have been interested in acquiring Impika but negotiations with both have fallen through. Consequently, the plant is set to be shut by 20 December 2019, with the loss of 141 jobs.
Impika, which is based in Aubagne in the south of France near Marseille, was set up back in 2003. Most of the core team, including managing director Paul Morgavi, had come from GemPlus, where they had developed techniques for printing to plastic for things such as credit cards and smart passes. The company showed a number of highly innovative single pass printers, such as the iPrint Extreme pictured above, that suggested that this relatively small French company could easily give some of the bigger press vendors a run for their money.
So it looked like a clever acquisition back in 2013, given that Xerox badly needed to catch up in the production inkjet space. Up until then, Xerox had concentrated its own efforts on its waterless Production Inkjet System, which didn’t sell in great numbers though it did allow journalists to take the PIS with clever headlines!
But Impika never seemed to match its early promise after being taken over by Xerox. It did produce the Rialto, a roll to sheet printer that had been shown as a concept before the Xerox acquisition. For Drupa 2016 the company introduced the sheetfed Brenva and the rollfed Trivor, and the following year announced a High Fusion inkset to allow the Trivor to print to offset papers.
However, the release of the Baltoro HF earlier this year, which replaced the Brenva, showed the true direction that Xerox was moving in. Where the other inkjet printers had been built at the French factory, the Baltoro was developed in North America using Xerox’s own W-series printheads combined with a transport system adapted from its toner presses. I think that it remains to be seen how well this strategy will work for Xerox over the coming years as it inevitably tries to broaden its inkjet portfolio and branch into new markets such as packaging.
So what went wrong? It always seemed to me that the Xerox executives simply never appreciated the French culture surrounding Impika, with its creative approach and willingness to push the boundaries, which ultimately led to presses that not only produced good results but looked stylish as well. In my opinion, plan A should have been to invest a chunk of money into the Aubagne plant and to leave the established team at Impika to carry on producing world-beating single pass inkjet presses, whilst quietly sorting out the service and distribution issues, which is what I, and probably most other people reading this site, would have done. Plan B seemed to be to tame the gallic eccentricities and instill some good old fashioned anglo-saxon values, leading directly to Plan C, transfer the IP back to the States, flush the rest of the company down the pan and hope that nobody notices how badly Xerox botched the whole episode.
This brings us neatly to the continuing story of Xerox’s quest to buy HP. Xerox had proposed paying $22.00 per share, comprising $17 in cash plus 0.137 Xerox shares for each HP share. Not surprisingly, HP rejected this fairly quickly, prompting John Visentin, Xerox’s vice chairman and CEO, to send an open letter on 21 November saying that he was surprised and confused by this.
HP sent its own letter a few days later reiterating its position, and adding: “In particular, there continues to be uncertainty regarding Xerox’s ability to raise the cash portion of the proposed consideration and concerns regarding the prudence of the resulting outsized debt burden on the value of the combined company’s stock even if the financing were obtained.”
The letter continued: “It is clear in your aggressive words and actions that Xerox is intent on forcing a potential combination on opportunistic terms and without providing adequate information. When we were in private discussions with you in August and September, we repeatedly raised our questions; you failed to address them and instead walked away, choosing to pursue a hostile approach rather than continue down a more productive path. But these fundamental issues have not gone away, and your now-public urgency to accelerate toward a deal, still without addressing these questions, only heightens our concern about your business and prospects. Accordingly, we must have due diligence to determine whether a Xerox combination has any merit.”
From there on, HP basically lets rip with both barrels, stating: “there are significant concerns about both the near-term health and longterm viability of your business that have a significant impact on Xerox’s value.” HP goes on to say that Xerox has missed consensus revenue estimates in four of the last five quarters, and that its customers Total Contract Values are declining.
HP concludes: “It appears to us that when Xerox exited the Fujifilm joint venture, Xerox essentially mortgaged its future for a short-term cash infusion. We fear that the exit has left a sizeable strategic hole in Xerox’s portfolio. In addition, we have concerns as to the state of Xerox’s technology resources, research and development pipeline, future product programs, and supply continuity and capability. Finally, we note that Xerox will have to get access to the fastest growing Asia Pacific region.”
At this point, you might expect Xerox to retire gracefully, but instead Visentin fired back another missive yesterday (26th November), announcing that Xerox would engage directly with HP shareholders and claiming to have received enquiries from a number of those shareholders already. He then refuted HP’s comments about the state of Xerox’s business, extolled the virtues of Xerox’s three-year plan and generally dissed HP’s own restructuring plan.
So, it’s game on for another exciting Xerox take over. Essentially Xerox is gambling that enough of HP’s shareholders will simply take the money and run, especially as there’s little chance that HP’s fumbling efforts at cost cutting will translate into a higher share price in the near future. HP’s management will be hoping that its shareholders remember the messy courtship between Xerox and Fujifilm and stay well clear. What could possibly go wrong…