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HP bets on maintaining pandemic changes


HP’s deal to buy Poly is the largest it has reached since the 2015 split from the Hewlett-Packard conglomerate.


Photo:

David Paul Morris/Bloomberg News

Zoom cannot afford Zoom fatigue. And now neither does HP Inc.

HPQ -2.74%

The PC and printer maker is buying video conferencing equipment maker Poly for about $1.7 billion in cash. The deal, which carries a price tag of around $3.3 billion including Poly’s net debt, is the largest HP has undertaken since the Hewlett-Packard conglomerate split in 2015. It’s a move major, even by these standards, considering the only time the former Hewlett-Packard bet a larger amount on a hardware-focused company was the $23 billion acquisition of PC maker Compaq, which was completed in 2002.

With this in mind, picking up Poly for a relative fraction hardly seems like a stretch. And HP has long aired its intentions to broaden its exposure to other types of technology equipment used by businesses and consumers. CEO Enrique Lores told analysts at a meeting in October that “mergers and acquisitions are going to be an important part of our strategy”, with a particular focus on the computing peripherals market which can include everything from webcams to mice. through helmets. The company also reiterated on Monday its intention to buy back at least $4 billion of its own stock this year.

Still, HP shares fell about 3% on the morning news. Poly, formed by the combination of Polycom and Plantronics in 2018, hasn’t been able to take full advantage of the same work-from-home trend that has spurred other hardware makers. Adjusted revenue rose less than 1% for the fiscal year ended March 2021 and is expected to fall more than 3% in the current fiscal year to just under $1.7 billion. The company blamed supply chain constraints for its woes and said in its latest quarterly investor call last month that it now had a backlog worth “hundreds of millions of dollars”.

HP is betting he can take out that clog, and more. Lores said Monday that HP’s supply chain clout will accelerate Poly’s growth, so much so that HP is targeting Poly’s revenue growth of 15% annually over the next three years. Wall Street only forecast a 5% pace for fiscal years 2023-24, with no consensus estimate available for Poly’s fiscal year 2025.

Much of this will depend on the pandemic-induced transition to hybrid work environments that will endure for the long term, prompting employers to invest in high-quality home and office video conferencing capabilities. Such a result, however, is hardly assured; a recent survey of tech-savvy Bay Area businesses by Robert Half found that 71% of employers want their employees to return to the office full-time. But a separate survey of more than 1,000 professionals by the same firm also found that half of them said they would quit their job under such a demand.

HP is effectively relying on workers to keep the upper hand.

What is an endemic and how will we know when Covid-19 becomes one? The WSJ’s Daniela Hernandez explains how public health experts assess when a virus like Covid-19 enters an endemic phase. Photo: Michael Nagle/Zuma Press

Write to Dan Gallagher at dan.gallagher@wsj.com

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Appeared in the March 29, 2022 print edition.

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