Xerox buys Tektronix printing division

Xerox Corp. and Tektronix Inc. announced an agreement under which Xerox will pay US$950 million in cash for Tektronix’s Color Printing and Imaging Division. With the acquisition, Xerox hopes to challenge Hewlett-Packard Co.’s dominance in the colour-printing arena.

Xerox president and CEO Rich Thoman, speaking at a press conference in Tokyo, called the acquisition “another in a series of strategic moves to lead the digital-document marketplace.

“What makes this news so significant for Xerox is that colour is the most profitable segment of the office-printer market,” Thoman said. “The bottom line is the marriage of complementary products, distributions, channels, people and technology.”

Xerox will set up a new business unit adding Tektronix’s colour-printing technologies to Xerox’s existing black-and-white workgroup printer offerings. Tektronix’s printer operations will remain based at the company’s headquarters in Wilsonville, Ore., and Xerox plans to blend its own colour-printer operations, based in Webster, N.Y., with Tektronix’s division.

Tektronix’s 2,400 colour-printer division employees will become Xerox employees once the transaction is completed, which is expected to happen within two months, according to the companies. Gerald Perkel, president of Tektronix’s Colour Printing and Imaging Division, is slated to become president of the Office Printing Business in the Xerox Channels Group.

Xerox no longer sees colour printing as a niche area and is gearing up for an aggressive rollout of ground-breaking colour-printing products, said Anne Mulcahy, president of Xerox General Markets Operations.

“What interested us from the very beginning is the fact that (Tektronix) has set the pace for innovation in the colour marketplace,” Mulcahy said. “Together, the two companies now have won more than 50 products awards and numerous vendor-of-the-year awards. Together, we’ll offer seven workgroup colour-printing products under US$5,000 — more than any of our competitors.”

The companies expect the acquisition to help Xerox become HP’s strongest competitor in office colour printing. Tektronix’s Phaser colour laser and solid-ink printers racked up close to US$725 million in sales last year, according to the companies, and Xerox’s distribution capacity is expected to rise to more than 16,000 resellers and dealers around the world – almost double the current number.

“It hasn’t been easy for us to compete with HP, but we’ve shown that it can be done, and done successfully,” said Tektronix’s Perkel. “We’ve had some good success, but we’ve fought a constant financial battle to compete with larger companies. With a relatively narrow product line, we’ve had a hard time getting the attention of some customers. Combining forces now with Xerox gives us the global reach and the support capabilities people want around the world.”

Perkel said the acquisition – which Mulcahy said the companies see as more of a “partnership” – will strengthen the ability of Tektronix products to challenge those of bigger and more established competitors, thanks both to Xerox’s strong research-and-development capabilities and to the marriage of the companies’ distribution channels.

After taxes, fees and costs of separation, Tektronix expects its net proceeds from the sale to be between US$700 million and US$750 million. Some of that will be used to pay off debts, and the rest will be distributed among shareholders via share buyback or a special dividend.