HP bets hybrid working is here to stay

HP (HPQ) said it would buy office headset maker Poly (POLY) for $3.3 billion last week. It’s a big deal for a company looking for its next chapter.

In recent memory, deals have been inextricably linked to the old-guard tech giant and its prospects, but when the COVID-19 pandemic hit, that all changed. In 2020, Xerox (XRX) withdrew its offer buy HP after a month, TVdrama worthy of the name which involved hostile takeover threats, a poison pill blueprintand activist investor Carl Icahn.

HP has since pursued its own deals, some of which have been hybrid work bets. In July 2021, HP bought remote computer software provider Teradici. In the release at the time, HP touted Fortune Business Insights’ work-related hybrid projections, which valued that the remote desktop software segment will grow at a “compound annual growth rate of 17% through 2028”.

The Poly deal was therefore no surprise, but what is perhaps more remarkable is the extent of HP’s faith in the permanence of hybrid working. The company believes hybrid working has power because the pandemic has irrevocably altered the roles our homes and offices play in our lives, said Alex Cho, president of Personal Systems at HP.

“We used to leave our homes to work, learn, go to movies, or get treatment,” Cho told Yahoo Finance in an email. “Today, these things are happening more from home through digital experiences…As a result, people will be working more from home, and we’re seeing both individuals and businesses investing in these spaces. More and more people will join new employers without ever setting foot ‘on campus’.”

That’s not to say that HP thinks desktops are going away – what will change is how those desktops are used. The era of the daily office is over, according to Cho.

“Companies are investing to transform office spaces into centers of culture, community and collaboration – making them places where we go for a purpose rather than where we spend the most working hours,” he said. -he declares.

While HP’s hybrid work gamble could pay off, there’s a debate around returning to work within the tech industry. Recently, Apple employees have would have protested the company’s return-to-work plan, while Google and Microsoft began bringing employees back to their offices, according to CNBC.

A conference attendee walks past the HP logo. REUTERS/Jim Young.

Pperipheral type acquisitions

There are, in a sense, two HPs – HPQ and Hewlett Packard Enterprise (HPE), a byproduct of the company 2015 division of its activity. The former retained the famous PC and printer business while the latter took over the hardware, storage and networking businesses.

Today, for HPQ, the pandemic has triggered a wave of personal computer purchases, reversing a decade of decline in the segment, but this windfall is not enough to secure the company’s future. “I’ve made it clear that this business needs more than PC unit growth to drive the next wave of overall business growth,” Jefferies analyst Kyle McNealy told Yahoo Finance.

HP therefore explored other avenues of growth, many of which also resulted in deals. In February 2021, the company acquired maker of HyperX gaming accessories from Kingston Technology. Like Poly, the deal emphasizes peripherals and ancillary products that add to a computer’s capabilities. A printer, for example, is a peripheral, as are a gaming headset or, in Poly’s case, conference room cameras.

“[HyperX] was a different type of device acquisition…and Poly is in a similar category because it’s also about devices, just different types that are focused on collaboration,” McNealy said. “Because of supply constraints, the opportunity will ultimately come from increasing market share or expanding into new markets…They make acquisitions like this because they are trying to accelerate their expansion opportunities.”

McNealy said HP stock is ultimately stuck right now. The company is pursuing the right objectives and the acquisition of Poly fits well into its strategy of accelerating its expansion opportunities. Other old-guard Big Tech names, like IBM (IBM), have also braced for a resurgence.

“You have to be careful about the right time to invest and be bullish on IBM and HP Enterprise, but I think now is the time with the post-pandemic wave of digitalization, especially with rising interest rates,” he said. he declared. noted. “These rising interest rates are going to be a headwind for growing companies, and they’re certainly supportive for investors returning to value names.”

“Execution is the key” in a context of fierce competition

Any deal for HP is ultimately a beginning rather than a conclusion. It all depends on what happens next, some experts say. HP’s acquisition of Poly appears to be a “positive way,” but more importantly “execution is key,” Cowen analyst Krish Sankar wrote in a March 29 note.

Additionally, HP will likely have some serious competition when it comes to snagging the best work-related hybrid tech deals, according to Will Andereck, managing director of Union Square Advisors, who predicts hybrid work technologies will continue to dominate. subject of a roll -as this year progresses.

Other recent mega-deals in the space include Ericsson’s successful $6.2 billion acquisition from Vonage, Workday acquisition from Peakon and, more recently, Stryker’s redemption de Vocera which closed in February.

“We expect consolidation to continue as legacy solution providers seek to add industry-leading capabilities to meet the ever-changing needs of their employees, end customers,” he said. “This disruption is causing massive waves across a wide range of digital markets [including unified communications, human capital management, and e-commerce].”

Allie Garfinkle is a senior technical reporter at Yahoo Finance. Find her on twitter @agarfinks.

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