CRN Exclusive: HP Printing President Lores On Closing The Samsung Acquisition, 'Disrupting' The Copier Industry And Getting 'More Aggressive' On Pricing

The Samsung Difference

HP Imaging and Printing President Enrique Lores says the completion of the $1.05 billion deal to buy Samsung's printer business opens the door for the company to accelerate its A3 market share offensive.

"We will be able to be more aggressive in terms of pricing and programs (as a result of the acquisition)," said Lores in an interview with CRN. "Over time we will be integrating into the HP programs all the Samsung partners as well. Both for the HP resellers and the Samsung resellers this is a great opportunity to accelerate their growth."

The completion of the blockbuster deal provides HP with the R&D talent and intellectual property to grab a bigger slice of the $55 billion A3 copier market and also strengthens the company's A4 laser printer business.

The deal, which closes on the second anniversary of the HP split from Hewlett Packard Enterprise, brings HP 1,300 researchers and engineers and 6,500 print patents."This gives us the technology that we will need to drive the transformation in the copier industry," said Lores.

What impact will the closing of the Samsung deal have on HP?

It is one more step in our strategy to disrupt the copier industry. This is a huge $55 billion industry where we have had very limited presence until now. We declared two years ago that we are going to become one of the key vendors in the A3 industry.

This gives us the technology that we will need to drive the transformation in the copier industry. It will help us to reinforce and strengthen our position in A4. Also, this will position us in a very strong position from a technology perspective. They have a great engineering team in Korea and a very strong patent portfolio that we will be integrating into our portfolio.

We are really excited about having completed this process. It has been a year since we announced the deal. Now we are going to be able to have the two companies working together to start growing and accelerating our growth into this space.

What kind of integration will take place now with HP's multifunction printer lineup now that you have officially acquired the Samsung Print business?

A few months ago we started to sell the new HP portfolio of MFPs (multi-function printers), and in that portfolio, we already integrated the Samsung technology. It was done as an OEM agreement before. Now we will full ownership of the technology.

So for the partners, it actually has already started. It shows our commitment. This will help us accelerate the penetration into this business.

We are really excited about bringing into the HP family these 1,300 researchers in Korea. Samsung has a solid reputation as a company there. They were able to hire some of the brightest engineers coming from the Korean university. Now, these engineers are going to be part of the HP family. We are having a big celebration with all of them in Seoul. We will be welcoming them to HP and explaining to them how they fit into the HP strategy.

What is your message to the new HP employees?

The message to them is: We are the leading printing company in the world. We have a very ambitious plan and goal to grow the business and expand into new categories.

Disrupting the copier industry is one of the key priorities for us and the technology they have built in the last few years both from a hardware and solutions perspective is going to be a critical part of this strategy. This is a welcome ceremony to let them know about HP, what is HP's intent and where they will fit in our plans.

What kind of opportunity does the HP acquisition open up for the Samsung employees?

From a culture perspective, we want to move into a much more open and less hierarchal culture than what they have experienced up until now. They are a very young employee base that we think is really going to appreciate the difference in style that there is between the traditional Korean Samsung world and what HP will be bringing.

There is also the opportunity this brings to employees from a career perspective. We have great career opportunities in many other parts of the world that will be available to them. One of the big announcements we will make is we will have a rotation program where we will be looking at moving employees from Korea to other sites of HP for a period so they can learn new technologies, new cultures and other parts of the print business. This is a great career opportunity for the Samsung employees.

Where does the Samsung acquisition fit into the organization?

As you know our business is structured into three units: the home unit, the office unit, and the graphics unit. The team in Korea is going to part of the office led by Tuan Tran (General Manager & Global Head, Office Printing Solutions) who has already moved to Korea. He is going to be living there with his family to make sure that we drive a very smooth integration and process between HP and Samsung.

From a process perspective, we are looking at fully integrating the two portfolios which means we will remove and eliminate from the portfolio any areas where there is duplication between the current HP printer portfolio and the current Samsung portfolio. We will remove any duplication, and we will minimize any areas where we have overlaps between the two products. This is something will do in the months ahead.

What's the product roadmap and the brand plan?

This acquisition is going to help us accelerate the development of the next generation of printers. HP is going to continue expanding its portfolio to really lead the A3 category.

We are going to do the (product) rationalization first keeping both brands. This is going to be done within the first three months. We have the option to use the Samsung brand for another two years. We still haven’t defined when we will stop using that (Samsung) brand. We can do that for two years with hardware and supplies.

Will you make a move to the HP brand a lot quicker than two years?

Probably yes. However, if there are some areas where it makes sense to keep the Samsung brand for the two years we will because of course, we do not want to create any disruption to our customers or our partners. This is a very important principle as we go through the integration. We want this to be very positive for Samsung partners making sure that they can support the contracts they have. The commitments they have with their customers is critical for us. This will be one of the drivers that will define how long we will keep the Samsung brand.

Will the Samsung brand remain in Korea for a couple of years?

In Korea, we are going to have a slightly different model. Rather than selling the portfolio under the HP brand, we are going to be OEMing the HP products to Samsung, and they will continue selling the printers under the Samsung brand. In Korea – just in Korea- Samsung has a stronger brand than HP. It makes more sense that we use their brand to sell our products than ours. We have made that change only for Korea.

What is the message to partners about the economic impact on them?

For our current HP resellers, this will help them to reinforce the position they have in selling HP products. We will have a stronger portfolio.

We will be able to be more aggressive regarding pricing and programs. Over time we will be integrating into the HP programs all the Samsung partners as well. Both for the HP resellers and the Samsung resellers this is a great opportunity to accelerate their growth.

How important is that more aggressive pricing and program in the A3 market?

Our strategy in the A3 space is to disrupt the industry by offering printers that have the performance of copiers – the speed of copiers and the cost of copiers – but have the simplicity of printers which means the support costs are significantly lower. This is critical for our partners because, if the support costs are lower, they can be more aggressive in the offers they make to the end users or they can be more profitable in selling HP printers.

This acquisition is going to help us to sustain that position going forward. Samsung engineers going forward will continue to develop the technology and integrate into some of the technologies HP has been building in smart device services that also drive that reduction in service cost. This is going to help us accelerate our plan and to solidify our plan going forward. This is really, really important for our partners.

What is the crown jewel of the Samsung acquisition?

The key differentiator of the technology is the fact that they have an architecture that is much simpler than the architecture of any other copier in the market. If you take a copier from any other company and you count the number of parts the number of parts will be between five and six times bigger than you will find in an HP MFP now. This is what supports the lower service cost that drives the competitive advantage that we will have in the industry. This is really what attracted us to Samsung: the simplicity of the architecture that they have.

What is the one plus one equals five of this acquisition?

The very important ingredient we bring to this is security. We have been using security to differentiate our portfolio. Security is one of the most important challenges that CIOs and their IT departments have. We have developed the most secure printers on the planet. Now we can integrate this security technology into the printing technology that Samsung has built. This is a very, very important differentiator.

This week IDC recognized HP as the company that has the most secure printers. This will be very important for our channel partners. Now they have an objective way to show that HP printers are far more secure than the printers from any other company which again for channel partners will be very important.

Talk about the Samsung $100 million to $300 million equity investment in HP?

The equity investment is important especially from a symbolic perspective. Samsung had been investing in space for a long time. They actually didn't want to abandon it. They were looking for a partner that could take the work they had been doing and expand it and take it into the future. This is actually how the conversation between the two companies started. We were looking for the right technology and they were looking for a company that would be taking the technology they had been building and project that into the future. This is what this shows. This also shows as you are saying that they believe in the technology they built and the ability of HP to drive and grow this business.

What is the goal with regard to revenue and share growth in the A3 market?

From a goal perspective within the next three years, we want to at least double our share and reach12 percent share of the A3 business. This is the goal we have defined. It is an aggressive goal, but we think the combination of the HP teams and the Samsung teams, the HP technologies, and the Samsung technologies will enable us to do that. Of course, this means that we will have to work with partners all over the world to make sure they understand the value proposition that we bring and to make sure they really embrace what we are taking to market.

From a technology perspective, we will be offering in the A3 space the combination of both the PageWide technology that we introduced a year ago with the technology that Samsung had been building. This gives us the most complete portfolio of A3 products in the market. With laser, we can cover monochrome and high-quality color, and with PageWide we can open a new segment of low-cost color which really puts us in a very different position from any other vendor in the industry.

What is the commitment to the partners on the HP A3 advantage?

Our commitment to the partners is that with both PageWide and the laser products based on Samsung technology the service cost will be between 20 to 30 percent lower than the service cost of other products in the market. This acquisition helps us with that.

This is what our strategy is centered around. This is important for partners because this will allow them to be more aggressive or be more profitable.

How does it feel now that this acquisition is completed and be moving forward with the strategy?

This is really a major milestone for all of us. We have actually been working on this for almost two years. One of the nice things is we are going to be completing the acquisition on the same day the company is becoming two years old. It is really a great way to show the type of things that by being an independent company we can do. We have said this many times: the Samsung acquisition is something that would have never happened in the previous company.

We are extremely excited and happy about having made it happen and the opportunities it opens for HP and our partners.