Canon drops HP bombshell

Canon drops HP bombshell

(March 5, 2020) The CEO of Canon has said his company will end its long-standing supply agreement with HP if Xerox is successful in its attempts to acquire the US-based print and PC giant.

In an interview with the Nikkei Asian Review, Fujio Mitarai said the foundation of the 35-year arrangement with HP had been upon a relationship of trust between the senior management of both companies, including current HP CEO Enrique Lores and the head of its print business Tuan Tran.

If Xerox buys HP, then the combined company would be run by the current Xerox leadership team, and Mitarai’s comments suggest this would be problematic for Canon. “[We intend] to partner with and strive to advance collective interests of, organizations that have a strong track record of operating with integrity and clearly share our values,” he stated in the interview.

Ouch.

The Canon-HP agreement has been a win-win for the two OEMs for more than three decades. While they compete on many levels, Canon supplies the majority of the laser printer engines and toner cartridges for HP’s A4 LaserJet devices (and some of these products in the A3 category).

If the relationship were to suddenly end, it would leave HP needing to find alternative sources of supply. In its latest annual report, HP admitted that these 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”.

For Canon, it derives almost 14% of its total sales from supplying HP. That is around $5 billion a year in potential lost revenue if the agreement comes to an end, so it is obviously not a decision that has been taken lightly.

Conspiracy theorists will no doubt be suggesting that Canon’s revelation plays right into the hands of the HP board in its battle to fend off Xerox’s advances; and that the timing of Mitarai’s comments may have been more than coincidental as HP’s shareholders weigh up Xerox’s tender offer that was launched this week. - (OPI)