Hewlett-Packard Co. ( HPQ ) reportedly acquired a German cloud-based printing software developer Hiflex Software GmbH, for an undisclosed amount. Through this acquisition, the company will be adding a cloud computing platform to its Imaging and Printing segment, thus facilitating the distribution of cloud-based printing solutions.
Founded in 1991, Hiflex emerged as a software developer that automated business and technical processes in the print and media industries. Its products include HIFLEX MIS (Management Information System), HIFLEX Print Support and an open web-to-print system namely HIFLEX Webshop.
Post integration, Hiflex will be allowed to offer its products and services to its current clientele that includes commercial printing, publishing, label and packaging companies.
Since 1984, when H-P introduced both inkjet and laser printers for the desktop, we have noticed only a handful of acquisitions in this space. In November 2005, the PC giant acquired Scitex Vision America Inc., which was a very small one ($230.0 million). But we think that the acquisition proved to be very significant for H-P later on.
Scitex Vision used to develop and manufacture digital printing presses and consumables for industrial applications including wide format graphic arts, packaging and textile. The acquisition helped the computing Godzilla expand its leadership in the industrial wide-format printing category, under the Scitex brand name.
We believe that with Hiflex Software in its kitty, H-P will be able to offer more web-friendly printers and provide better support to IPG's fundamentals. Despite H-P's market leadership, the IPG segment did not perform well in the last quarter. IPG revenue dropped 1.3% year over year to $6.09 billion, driven by lackluster performance mostly in all the sub-segments.
We believe that support from Hiflex's innovative zeal, technologies, intellectual properties and customer base would make this deal accretive to its earnings shortly. But stiff competition from Dell Inc. ( DELL ) and Lexmark Inc. ( LXK ) in the printing vertical is a concern.
Moreover, the expected decline in PC shipments stemming from the hard disk drive supply cut due to the Thailand flood is raising investor confusion over the stock.
H-P now has a short-term Hold recommendation (Zacks #3 Rank).