To understand HP's
big bet on Exstream, Exstream must be viewed, not as a printing business,
but as a company that joins printing and enterprise
Early in 2008, just days before IBM
agreed to shutter its printing business to focus more on enterprise software,
Hewlett-Packard made what might have appeared to be a bold step in the other
direction. It bought Exstream Software, a fast-growing printing business based
in Lexington, Kentucky.
HP kept the lid on the price it paid for Exstream, but it was estimated to
be close to $1 billion based on a deal just six months prior, in which the
private equity firm American Capital Strategies bought a 60 percent stake in
Exstream for $548 million.
HP's willingness to stake so much on Exstream can be best understood by
viewing Exstream not so much as a printing business, as a company that exists
at the intersection of printing and enterprise software, two sweet spots for HP
that will now become more closely joined to create new business opportunities
in the future.
Exstream specializes in software to print and personalize a range of
mass-produced business documents like brochures and financial reports for
enterprise customers including banks and insurance companies. Although this is
not a brand-new business for HP, the company said Exstream's technology makes
it easier to print large volumes of personalized documents where the basic
format is the same but the contents of each individual document are different.
Common uses for this sort of personalized printing include 401(k) statements
and up-to-date loan applications containing the borrower's most recent credit
HP, which is already the market leader in so many traditional printing
businesses like inkjet printers, said the acquisition of Exstream should make
it the market leader in this emerging area of personalized printing known as
VDP (Variable Data Publishing ).
In that sense, HP is really just extending its push into the high-margin
enterprise software space, in much the same way as IBM,
while capitalizing on its longstanding strength in printing and imaging. Unlike
IBM, which neglected its printing business
so much that when it finally decided to exit, it fetched only $725 million for the
printing division, HP has long regarded printing as a key area of innovation
and has steadily invested in it.