HP Inc. announced it will return $16 billion to stakeholders, mainly through buybacks, and increase cost reductions in an attempt to lobby investors versus Xerox Holdings Corp. for dominion of the world's second biggest personal computer manufacturer.
The buyback will cover shares in a three-year period and will result in adjusted profits of $3.25 to $3.65 a share in fiscal 2022, which is approximately $1 more a share compared to analysts' current estimates.
The company also disclosed that it is reaching out to Xerox to find out if there is a consolidation that will create value for HP stockholders that is beneficial to HP's financial strategy.
Senior HP executives also disclosed they have discussed with Xerox a possible merger on their terms, rather than caving in to the printer giant's aggressive takeover effort.
HP said the amended Xerox bid, announced on February 10, 2020, essentially undervalues HP, creates huge risk, and puts in peril HP's future. Xerox proposed to acquire HP for $24 a share, which will be comprised of $18.40 in cash and 0.149 Xerox stocks for each of the former's share.
For the current quarter, profit will be 49 cents per share to 53 cents per share, HP said in a statement on Monday. The company's sales projections did not meet analysts' expectations of 54 cents, figures compiled by Bloomberg showed.
HP registered a revenue of $14.65 billion while Wall Street traders anticipated $14.6 billion, based on data released by Refinitiv. The company also announced a new financial plan as it faces off against Xerox.
The Palo Alto, California-based also said it saw around $650 million of cost savings to flow via its targeted operating sales growth. It had previously rolled out a cost reduction program that it projects to result in $1.2 billion of annualized run-rate cost savings in the next two years, with additional productivity improvements of at least $1 billion.
Referring to Xerox's proposal as "flawed and irresponsible", HP top executives told Reuters there were many obstacles in a potential consolidation. "It is a merger of price, capital and an analysis of synergy," Enrique Lores, who was appointed as HP's CEO in November, shared in an interview.
A deal would unify two giants of the technology market that laid the groundwork for innovations that many people still use today. However, such innovation has waned in a landscape increasingly powered by software. Xerox has announced it will roll out a "tender offer on or around March 2" for HP stocks valued at $24 in cash and stock.
