fbpx

Subcontractors eligible for aid after HP jobs move overseas

photo of hp
Subcontractors from some 30 companies are eligible for a federal program intended for workers whose jobs moved overseas. Photo by LIz Patterson Harbauer

Employees of some 30 subcontractors laid off from HP’s Imaging, Printing and Solutions Business Group in Boise have been deemed eligible for federal employment services because the jobs moved overseas.

The federal employment services, all part of the Trade Act Assistance program, could include career exploration, job search assistance, resume writing, interviewing preparation, training, job and relocation allowances, or a wage subsidy.

Employees separated between June 27, 2018, and April 20, 2022, are eligible to apply for the services through the Idaho Department of Labor.

What is the TAA program?

The TAA program is federally funded and administered in Idaho through the Idaho Department of Labor, said Kathy Nesmith, Trade Act coordinator.

“It helps employees where the company has had layoffs due to foreign imports or exports, including products or services,” she said.

The company itself, a state agency, a union or affected employees file a petition for consideration under the program. In this particular case, three employees filed the petition, but because HP laid off employees from a number of sites nationwide, petitions were combined, Nesmith said.

Once the petition is received, the company is contacted to determine the impact. If the petition is accepted, it is assigned a date of impact, typically a three-year period dating one year back from certification and two years forward, where people could qualify for services.

Even people laid off in the past who received new employment could be eligible for the services, if the layoff fell within the impact period, Nesmith said.

How many layoffs did HP have?

Exactly how many people were laid off in Boise isn’t clear yet because people are still applying for the program, Nesmith said.

“When we reached out to HP Inc. locally, they gave us a list of 126 names,” she said.

But employees from the 30 subcontracting companies, as well as leased employees from companies such as Experis, could also have been laid off and be eligible for the program, she said. Experis, for example, provided a list of 21 employees, she said.

“With each name, we have to investigate the cause of the layoff,” Nesmith said, to ensure that the person was laid off through no fault of their own due to the job moving overseas. Each subcontractor might have had only a couple of employees at HP, she said.

HP had announced in October that it intended to lay off from 7,000 to 9,000 employees worldwide by the end of 2022 but didn’t say how many would come from Boise. The company, based in Palo Alto, California, didn’t respond to inquiries by press time.

No, HP wasn’t bad

Nesmith emphasized that HP hadn’t done anything wrong, and in fact, other employers in a similar situation could file for petitions themselves to help their laid-off workers.

“Employers are afraid to file petitions because they don’t understand,” Nesmith said. “It’s not any kind of black mark on the company at all. It’s very much to their benefit in that it shows goodwill to their employees.”

Nesmith also noted that the companies aren’t responsible for funding the program.

“It doesn’t cost the employer anything,” she said. “That’s another misconception, that they think they’ll get dinged. We’re just taking advantage of the federal agreement that we help our country’s workers when they lose their jobs due to foreign competition.”

The program is funded by a Congressional appropriation to the U.S. Department of Labor, which administers the program and distributes funding to the states, said Georgia Smith, an agency spokeswoman for the Idaho Department of Labor.

This also isn’t the first time that petitions have been filed on behalf of Boise-based HP employees, Nesmith said.

“It comes up every so many years,” she said.

Other Boise-based companies have also filed petitions under the program, such as Micron, which was certified for 500 employees on December 28, 2018, and MotivePower, which was denied for 220 employees on April 28, 2020.

Xerox throws in the towel on planned HP acquisition

photo of hp
The logo on this building won’t be changing anytime soon, with Xerox giving up its attempt to buy HP. Photo by Liz Patterson Harbauer

Xerox has given up on its quixotic attempt to acquire HP, which had been going on since November, blaming the decision on COVID-19 coronavirus and the associated economic downturn.

Most recently, the Norwalk, Connecticut, company had offered up a competing slate of candidates for the HP board of directors that presumably would have been more amenable to a merger between the two companies.

“The current global health crisis and resulting macroeconomic and market turmoil caused by COVID-19 have created an environment that is not conducive to Xerox continuing to pursue an acquisition of HP Inc.,” Xerox said in a statement on March 31. “Accordingly, we are withdrawing our tender offer to acquire HP and will no longer seek to nominate our slate of highly qualified candidates to HP’s Board of Directors.”

Palo Alto, California-based HP, which had been pretty negative on the whole merger idea all along, had issued a statement on March 25 saying it couldn’t deal with it right now.

“It is important for shareholders to understand that, under these circumstances and consistent with our fiduciary duties, we believe that we should not divert valuable time, attention and resources to a dialogue with Xerox about its proposed transaction,” the company said. “Any complex, large-scale, highly leveraged transaction in the current economic environment could be disastrous for HP, its shareholders and our entire ecosystem. While we remain open-minded about M&A as a tool to add value for HP shareholders at the right time and on the right terms — it’s abundantly clear that now is not that time.”

HP also pointed out that there would be six to 12 months of significant uncertainty before knowing whether the conditions of the merger would be satisfied, and the transaction could be funded and closed.

After Xerox issued its statement, HP issued an additional one of its own.

“We remain firmly committed to driving value for HP shareholders,” the company said. “We have a healthy cash position and balance sheet that enable us to navigate unanticipated challenges such as the global pandemic now before us, while preserving strategic optionality for the future.”

The effect the merger might have had on HP’s Boise campus, set up in 1975 as one of Idaho’s earliest technology companies, was unknown, but part of the attraction of the merger was potential “synergies” — that is, layoffs — between the two companies.

Some analysts had believed that the merger was inevitable.

“The combination would help HP in foraying into the corporate copier business where Xerox shines,” noted Zacks Equity Research earlier this year. “It would help the PC maker to cater to all office equipment needs of an organization. Similarly, Xerox could penetrate in the home-printing business with HP’s expertise in making smaller printers and printing supplies. Notably, both firms have been witnessing declining sales in their respective spaces.”

Nonetheless, HP — several times larger than Xerox — was fairly consistent in indicating that it wasn’t interested in the Xerox offer, though occasionally the company’s board of directors indicated that they might be willing to at least talk about it.

After an amicable merger couldn’t be worked out, Xerox announced that it planned a hostile takeover of the company, sweetening its offer and presenting the alternative board of directors slate. In response, HP implemented a so-called “poison pill” to make it more difficult for anybody — including Xerox — to acquire the company. For example, if any single source acquired more than 20% of HP, the company would then have the right to issue more shares of stock, which would have the effect of diluting ownership and making HP more difficult to acquire. The effort, formally known as a “limited duration shareholder rights plan,” is scheduled to last for a year.

Activist investor Carl Icahn had reportedly been pushing for the merger. According to published sources, he holds a 4.2% stake in HP and a 10.9% stake in Xerox.

Xerox continues pursuit of HP acquisition

photo of hp
It isn’t clear what effect an acquisition by Xerox would have on HP’s Boise campus. Photo by Liz Patterson Harbauer

The “rough wooing” of Xerox and HP continues, with Xerox raising its tender offer to $24 per share and providing a slate of directors for HP shareholders to elect who would be more amenable to the merger.

For its part, HP has enacted a “poison pill” to make it more difficult to take over, and its board of directors has unanimously encouraged its shareholders to do nothing, which would keep the current board of directors in place.

In a March 5 press release, the HP board argued that the Xerox offer meaningfully undervalues HP and disproportionately benefits Xerox shareholders, fails to reflect the full value of HP’s assets and standalone strategic and financial value creation plan and would create an irresponsible capital structure, resulting in significant risks for HP shareholders.

In addition, HP sent out copies of opinions from Goldman Sachs & Co. and Guggenheim Securities saying that the Xerox offer was inadequate.

Long courtship

Xerox first proposed the merger in November at $22 a share and vowed to pursue a hostile takeover by going directly to shareholders when HP’s board did not acquiesce.

The $24 per share offer, which consists of $18.40 in cash and 0.149 shares of Xerox stock, amounts to about $35 billion. It was formally made on March 2 and is scheduled to expire on April 21. The Norwalk, Connecticut-based company created an entire website dedicated to the effort.

HP, based in Palo Alto, California, has had a site in Boise since 1975. In fact, according to an article in Bloomberg Businessweek, the company has sent more employees here in the past year from higher-priced offices in an effort to save money.

“The company was already shipping certain staffers to less costly offices in Texas and Idaho, where they had to accept lower salaries,” the article noted.

On Feb. 20, after Xerox first proposed increasing its offer, HP implemented a so-called “poison pill” to make it more difficult for anybody — including Xerox — to acquire the company. For example, if any single source acquired more than 20% of HP, the company would then have the right to issue more shares of stock, which would have the effect of diluting ownership and making HP more difficult to acquire. The effort, formally known as a “limited duration shareholder rights plan,” is scheduled to last for a year.

Activist investor Carl Icahn has been pushing for the merger. According to published sources, he holds a 4.2% stake in HP and a 10.9% stake in Xerox.

Effect on Boise

Part of Xerox’s motivation for the deal is that it believes the merged companies could save up to $2 billion on “corporate synergies,” which typically means layoffs. It isn’t clear what effect such a merger could have on Idaho, especially in light of the fact that Idaho is cheaper than some other offices that Xerox and HP hold.

On the other hand, over the past few years, HP has reportedly been shedding staffers from the Boise office, though the company hasn’t commented on specific numbers.

At various points, HP has had more than 3,000 employees on its Boise campus but is now down to roughly 1,700, according to a recent speech by a local executive.

HP and Xerox CEOs have also been meeting to discuss the terms under which such a merger could take place, even if it ends up being that HP buys Xerox — which some believe was Xerox’s motivation all along. HP is several times bigger than Xerox.

Some analysts believe the merger is inevitable.

“The combination would help HP in foraying into the corporate copier business where Xerox shines,” noted Zacks Equity Research. “It would help the PC maker to cater to all office equipment needs of an organization. Similarly, Xerox could penetrate in the home-printing business with HP’s expertise in making smaller printers and printing supplies. Notably, both firms have been witnessing declining sales in their respective spaces.”

Them’s fightin’ words: Xerox, HP spar over acquisition

photo of hp building
Could X mark the spot of Boise’s HP campus? File photo

After HP rejected its acquisition offer, Xerox is playing hardball with a hostile takeover or proxy war.

John Visentin, Xerox vice chairman and CEO, does not mince words in a letter to Enrique Lores, who became HP president and CEO on Nov. 1, and Chip Bergh, chair of HP’s board of directors.

“Unless you and we agree on mutual confirmatory due diligence to support a friendly combination by 5:00 p.m. EST on Monday, November 25, 2019, Xerox will take its compelling case to create superior value for our respective shareholders directly to your shareholders,” Visentin states.

HP didn’t wait until Monday to respond.

“It is clear in your aggressive words and actions that Xerox is intent on forcing a potential combination on opportunistic terms and without providing adequate information,” Lores and Bergh replied on Nov. 24. “When we were in private discussions with you in August and September, we repeatedly raised our questions; you failed to address them and instead walked away, choosing to pursue a hostile approach rather than continue down a more productive path. But these fundamental issues have not gone away, and your now-public urgency to accelerate toward a deal, still without addressing these questions, only heightens our concern about your business and prospects.”

The letter continued that HP was still willing to work with Xerox, but noted that HP was not dependent on a merger – and that there might be other fish in the sea.

“We have great confidence in our strategy and the numerous opportunities available to HP to drive sustainable long-term value, including the deployment of our strong balance sheet for increased share repurchases of our significantly undervalued stock and for value-creating M&A,” Lores and Bergh wrote.

In response, Xerox said on Tuesday that it intended to pursue a hostile takeover.

Xerox’ offer, made earlier this month, was for $22.00 per share, comprising $17.00 in cash and 0.137 Xerox shares for each HP share.

But while HP’s board had acknowledged the synergies between the two companies, Lores wrote a letter rejecting the offer saying it undervalued the company and could raise debt – reportedly $25 billion – a concern shared by  industry watchers after the initial proposal.

Xerox didn’t take it well.

“Frankly, we are confused by this reasoning in that your own financial advisor, Goldman Sachs & Co., set a $14 price target with a ‘sell’ rating for HP’s stock after you announced your restructuring plan on October 3, 2019,” Visentin wrote. “Our offer represents a 57% premium to Goldman’s price target and a 29% premium to HP’s 30-day volume weighted average trading price of $17.”

Moreover, Visentin indicated that HP wasn’t acting in good faith on its offer to continue discussion.

“You have requested customary due diligence, which we have accepted, but you have refused to agree to corresponding due diligence for Xerox,” Visentin wrote. “Any friendly process for a combination of this type requires mutual diligence – your proposal for one-way diligence is an unnecessary delay tactic.”

Xerox could complete its due diligence in three weeks, he continued.

What would the deal mean for Boise?

If accepted, Xerox said the deal could generate $2 billion in cost synergies – $1.5 billion of which were likely to be through layoffs – and result in HP holders owning 48% of the company. It is not clear how many of those layoffs could affect HP’s Boise location.

The Oct. 3 restructuring to which Visentin referred included layoffs of 7,000 to 9,000 employees by the end of 2022, but HP hasn’t said how many were expected in Idaho.

HP has had more than 3,000 employees on its Boise campus, but is now down to roughly 1,700, according to a recent speech by a local executive.

Several analysts have downgraded HP stock over the past few months due to concerns about sales of printer supplies, on which the company depends. In response, HP announced a sales model where customers could choose between paying a higher price for hardware, which can be used with third-party ink suppliers, or subsidized hardware that works only with HP printing supplies.

Some analysts have speculated Xerox’s initial offer was a ploy to get HP – which has a market capitalization ranging from $27 billion to $29 billion, compared with Xerox’s market capitalization of about $8 billion – to buy Xerox instead.

This article was updated on Nov. 26 with new information.

HP rejects Xerox offer but leaves the door open

photo of hp building
The HP campus in Boise. File photo

HP rejected a bid from Xerox to buy the company but indicated it was willing to keep talking about some sort of merger.

“Our Board of Directors has reviewed and considered your unsolicited proposal dated November 5, 2019 at a meeting with our financial and legal advisors and has unanimously concluded that it significantly undervalues HP and is not in the best interests of HP shareholders,” wrote Enrique Lores, president and CEO of the Palo Alto, California-based company, in a letter that the company made public on Nov. 17.

In particular, HP said it was concerned about the debt levels the merger could produce – reportedly $25 billion – a concern shared by a number of industry watchers after the initial proposal.

But Lores left the door open a crack.

“We recognize the potential benefits of consolidation, and we are open to exploring whether there is value to be created for HP shareholders through a potential combination with Xerox,” he wrote. “We remain ready to engage with you to better understand your business and any value to be created from a combination.”

Specifically, Lores cited several requests for diligence from Xerox on issues such as revenue decline and potential synergies. HP is currently in court with Autonomy, a British company it acquired in 2011 for more than $11 billion – a deal ranked by CB Insights as the sixth-worst corporate merger of all time. HP had to write off $9 billion of the purchase price the following year and was criticized by having done insufficient due diligence on Autonomy’s revenues.

HP also released a copy of the Xerox offer letter, which noted that $2 billion of synergies Xerox believed the acquisition could produce consisted of $0.5 billion by leveraging scale, supply chain and distribution, and $1.5 billion by combining research & development groups and streamlining corporate functions.

It is unclear what the effect of such a merger would have been on the HP facility in Boise.

Some analysts had speculated after the initial offer that it was a ploy to get HP – which has a market capitalization ranging from $27 billion to $29 billion, compared with Xerox’ market capitalization of about $8 billion – to buy Xerox instead.

What would a Xerox acquisition of HP mean for Idaho?

photo of hp building
HP started building its Boise campus in 1975. File photo.

Xerox is trying to buy HP – and it could mean layoffs.

According to media reports, Xerox has offered HP $22 per share, consisting of 77% cash and 23% stock, or $17 in cash and 0.137 Xerox share for each HP share. If accepted, the deal is expected to generate about $2 billion in cost synergies – that is, layoffs – and result in HP holders owning 48% of the company, according to CNBC.

What will HP say?

HP said it’s thinking about it.

“We have had conversations with Xerox Holdings Corporation (NYSE: XRX) from time to time about a potential business combination,” the Palo Alto, California-based company said in a statement. “We have considered, among other things, what would be required to merit a transaction. Most recently, we received a proposal transmitted yesterday. We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders.”

HP and Idaho

HP, which started building its Boise campus in 1975, is one of the most venerable technology companies in Idaho, but has faced a hard road in the past few years. The company said in early October that it expected to cut 7,000 to 9,000 employees by the end of 2022, but wouldn’t say at that time how many were likely to come from Boise.

HP has had more than 3,000 employees on its Boise campus, but is now down to roughly 1,700, according to a recent speech by Chief Diversity Officer Lesley Slaton Brown.

HP sold its 197-acre Boise campus to the state in 2017, leasing back 793,000 square feet of the total 1.346 million square feet across eight buildings. A 152,000-square-foot building had been vacant for at least five years.

Several analysts had downgraded HP stock recently due to concerns about printer supplies, on which the company depends.

Effect of acquisition

It isn’t clear what the effect could be on Idaho should HP decide to accept the Xerox offer, Idaho technology watchers said.

photo of rick ritter
Rick Ritter

“It is hard to guess what might happen if this goes through,” said Rick Ritter, lab director for New Ventures Lab, in an email message.

Xerox is likely to perform revenue and cost projections on all the HP products, including those produced in Boise, he said.

“There will certainly be fewer products available in the marketplace,” he said. “HP printer products have struggled to maintain market share over the last three years, especially on the corporate side. It may be that they opt to maintain some HP products focused on the SME market and eliminate HP products and lines from the corporate side. If that were the case, Boise may be okay.”

photo of bill connors
Bill Connors

In fact, the deal could be good for Boise, said Bill Connors, president and CEO of the Boise Metro Chamber.

“Mergers can bring consolidations, and Boise is an ideal market to consolidate to,” he said in an email message. “We have great talent at the Boise campus, and room to grow there.”

On the other hand, Xerox may choose a different tack, Ritter warned.

“If they chose another route (all Xerox that incorporates HP technologies) Boise probably faces a steep decline, if not closure,” he said. “Since the HP split, this side of the business has been growing, but that growth has been driven by computers mostly. This whole sector is due for some consolidation and reconfiguration, but it is hard to calculate how Xerox gets this done as a whole.”

In fact, some analysts have suggested that the whole offer is a ploy to get HP – which has a market capitalization ranging from $27 billion to $29 billion, compared with Xerox’ market capitalization of about $8 billion – to buy Xerox instead. While Xerox has reportedly lined up financing through Citigroup, the deal would result in up to $25 billion in debt, according to Barron’s.

No, the state isn’t going to kick HP out of its buildings

photo of hp building
HP started building its Boise campus in 1975. File photo.

HP’s Boise campus isn’t at risk of a government takeover, according to the Idaho Department of Administration.

Speculation that HP would be forced to leave when its lease expires isn’t true, said Bryan Mooney, director of the Department of Administration. The state bought the campus from HP and leases some buildings back to it.

“The lease between the state and HP, Inc. was executed as part of the purchase of the campus in December 2017,” Mooney said in an email message. “It has an initial term of seven years with two five-year renewal options exercisable at the discretion of HP, Inc.”

The Palo Alto, California-based company, which has been in Boise since 1975, has had a number of layoffs in recent years. Most recently, the company announced on Oct. 3 that it expected to lay off 7,000 to 9,000 people worldwide but wouldn’t break down the restructuring by site or location.

HP has had more than 3,000 employees on its Boise campus but is now down to roughly 1,700, according to a recent speech by Chief Diversity Officer Lesley Slaton Brown.

Anonymous sites that track layoffs have included speculation that HP’s hand would be forced because the state would want access to all of the former HP campus for government offices, and that the company would take the opportunity to shut down the Boise campus entirely.

Mooney emphasized that the state valued its relationship with HP and appreciated the contribution it makes to the local economy.

HP sold its 197-acre Boise campus to the state in 2017, leasing back 793,000 square feet of the total 1.346 million square feet across eight buildings. A 152,000-square-foot building had been vacant for at least five years.

How many of HP’s jobs cuts will come from Idaho? No one knows

photo of hp building
HP started building its Boise campus in 1975. File photo.

HP Inc., one of Boise’s most venerable technology companies, expects to cut 7,000 to 9,000 employees by the end of 2022, but it isn’t clear how many cuts will come from Idaho.

“We do not break the restructuring out by site or location,” said an HP spokesperson, who asked not to be named, in an email message.

Eligible employees in the U.S. can retire early with enhanced benefits, the spokesperson said.

Altogether, restructuring is expected to cost $1 billion and result in annualized gross run rate savings of $1 billion, the company said in a press release. Of the expenses, approximately $100 million will occur in fiscal Q4 of 2019, $500 million in fiscal 2020 and the rest split between fiscal 2021 and 2022, the company said.

The announcement was made during a Securities Analyst Meeting at the company’s Palo Alto headquarters.

HP history

HP has had more than 3,000 employees on its Boise campus, but is now down to roughly 1,700, according to a speech last week by Chief Diversity Officer Lesley Slaton Brown, as reported by the Idaho Press.

HP sold its 197-acre Boise campus to the state in 2017, leasing back 793,000 square feet of the total 1.346 million square feet across eight buildings. A 152,000-square-foot building had been vacant for at least five years.

photo of jay larsen
Jay Larsen

“HP has been at the epicenter of innovation for Idaho and has transformed our tech ecosystem,” said Jay Larsen, president and CEO of the Boise-based Idaho Technology Council.

photo of rick ritter
Rick Ritter

Layoffs aren’t necessarily bad news, said Rick Ritter, lab director for New Ventures Lab.

“Some of those laid off will start something new or buy something they like doing.  More, depending on their age, will either look for a position elsewhere or simply retire,” Ritter said in an email message. “Economically, it means high-wage jobs will decline a bit, a business or two will have new owners and we will get a small number of new companies.”

Print supplies pressure

Several analysts downgraded HP stock recently due to concerns about printer supplies, on which the company depends.

“With supplies growth expected to be negative in both 2019 and 2020, and supplies now having declined at a 4% [compound annual growth rate] since 2011, we worry that printing may be facing greater structural headwinds from the shift to digital (i.e., people printing less) and increased pressure from cloned/remanufactured supplies,” wrote Toni Sacconaghi, a Sanford C. Bernstein analyst, in September.

He categorized HP as a “melting ice cube,” a term of art for an investment vehicle with a value that is expected to decline over time.

John Roy, an analyst with UBS, downgraded HP stock a week later, saying he expected “print supplies to remain under pressure due to secular trends, lack of consolidation, and competition from third party suppliers.”

In an email message, he said he didn’t have any information about the effect on Boise.

For the most recent quarter, ending on July 31, HP reported revenue of $14.6 billion, in line with estimates, with non-GAAP profit of 58 cents per share, ahead of the company’s previous guidance of 53 to 56 cents. But it also reported a 5.3% revenue drop in printing, including a 10% drop in consumer hardware, a 3% increase in commercial hardware and a 7% decline in supplies.

Speaking at the meeting, HP executives acknowledged that customers buying third-party printing supplies rather than HP’s, particularly in Europe, was hurting the company. The company plans to change its sales model, which currently depends on cheap hardware.

Instead, HP will offer two sales models, said Enrique Lores, currently president of imaging printing and solutions, who takes over as CEO Nov. 1. Customers will be able to choose between paying a higher price for hardware, which can be used with third-party ink suppliers, or subsidized hardware that works only with HP printing supplies, he said.