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February 28, 2020 05:00 pm

Printing's Not Dead: The $35 Billion Fight Over Ink Cartridges

America's onetime innovation icons are wrestling over their biggest remaining piles of money. From a report: The HP 63 Tri-color ink cartridge retails for $28.99 at Staples. Stuffed with foam sponges drenched in a fraction of an ounce of cyan, magenta, and yellow dyes, this bestseller, model No. F6U61AN#140, can spray 36,000 drops per second in the Envy printers made by HP. The 63 Tri-color cartridge may not look like much, but that ink, which needs a refill every 165 pages, is ridiculously valuable. HP's printer supplies business garnered $12.9 billion in sales last year, and the printer division overall represented 63% of the company's profits. Here in the year 2020, proprietary ink cartridges remain important enough to spark a fight worth at least $35 billion. With backing from Carl Icahn, Xerox has been trying to buy the much larger HP for what the target says is a laughable bid. On Monday, HP Chief Executive Officer Enrique Lores moved to protect his hold on F6U61AN#140 and its toner brethren. During his report on the company's latest quarterly earnings, which met Wall Street's expectations, Lores announced that HP would triple its share buyback program to $15 billion over three years as part of an effort to fend off the hostile takeover. While Lores said he was open to exploring new merger frameworks, he dismissed the size and technology of Xerox Holdings Corp. and stressed that HP already had a winning strategy. "I am pumped up," the CEO tells Bloomberg Businessweek in an interview shortly after the earnings call. "We have a great plan." Lores, who's spent three decades at HP, has survived his share of existential threats. Before he took over as CEO in November, he'd led the printer business to a streak of revenue gains after even his bosses had left it for dead. But last year also saw HP's share price fall by a third from a February high. The company announced thousands of employee layoffs as it struggled to compete with cheaper ink cartridges from Asia. That public floundering has left HP freshly vulnerable to activist investors such as Icahn, who owns 11% of Xerox and 4% of HP. Icahn snarked in December that HP appears in danger of following "the road to the graveyard." For decades, HP and Xerox ranked among the most powerful forces of invention in Silicon Valley. Now they're arguing over who has the superior vision to acquire competitors, jettison workers, and jealously guard the tech specs of their aging intellectual property. It's unclear whether either company's leaders will be able to repeat the miracle Lores's team managed a few years back. Consumer and office printers still churn out an estimated 3.2 trillion pages a year, according to market researcher IDC, but Toni Sacconaghi, a tech analyst at Sanford C. Bernstein, warned in a client note that the "traditional printing and copying business is slowly collapsing." Recalling the image that critics deployed in 2002, when HP tried to acquire its way out of trouble in the PC business by buying Compaq, Sacconaghi wondered if the company is facing another deal that looks an awful lot like "two garbage trucks colliding."

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