One of the overarching themes of the imaging industry in recent years has been a return to focusing on core business. HP, Xerox, Lexmark, Samsung and others have signaled that – after billions invested in M&A and R&D, and many examples of unproven business expansion– the best route to profitable growth is simply through a renewed focus on their existing core businesses. While each company’s announced spin-off or sale of non-core assets makes financial and operational sense, it was Samsung’s decision to sell its print business to HP last year that was the most striking for its timing and strategic impact, with the sale likely to have major consequences for Samsung Electronics’ ability to achieve significant growth in the years ahead.
Image Credit: samsung.com
Samsung Abandons Print
It’s difficult to overstate the surprising speed of Samsung Electronics’ pivot away from printing, which until very recently was positioned as the single most important growth engine for the company. Just 12 months ago, I wrote about Samsung’s long list of goals for its Printing Solutions business, including the unit’s strategic role in expanding Samsung Electronics’ B2B sales beyond 20% of total revenue. In late-2015 the company’s print leadership also restated (and revised to a later date) its goal of being a top 3 printing brand by 2020. Printing to Samsung Electronics was literally going to bring the next wave of growth to the company after chips, panels, and smartphones. Riding this wave of growth, printing was going to help Samsung Electronics more than double sales to $400 billion by 2020. For perspective, in its fiscal year 2016, Samsung Electronics is not even halfway to that goal at ₩201.87 trillion (+/- $176.2 billion) in revenue.
Image Credit: myce.com
Compared to other printer company’s expansions, such as Xerox (ACS, others), Lexmark ($2B + in software acquisitions), and HP (multiple software), you could argue that Samsung’s expansion into A3 printing was closer to its existing business and that the company therefore had reason to believe it could succeed. With a sprawling range of B2C and B2B businesses, including a well-established A4 printing unit, Samsung had the engineering and operational capabilities to design and ship competitive devices, while its broad software and hardware portfolio presented many opportunities for synergies with print (the latter, a point Samsung frequently emphasized but never fully realized). Yet despite these advantages Samsung had difficulty penetrating the mature MFP industry and displacing very entrenched manufacturers and their dealer partners. And, Samsung also lacked the direct sales operations necessary to support the large deals required to achieve its very lofty sales targets.
Where Does Samsung Grow from Here?
With HP’s $1.05 billion acquisition of Samsung Printing Solutions expected to close in 2017, Samsung’s ability to achieve its previous 2020 sales target ($400B) and B2B contribution target (21%) is now almost certainly impossible, and it is now quite unclear what the company’s next major growth driver will be. Growth in most of its existing businesses has been difficult to achieve, with Samsung’s profitable semiconductor business achieving notable 8% growth in fiscal 2016 but most other segments declining by -2% to -3% and total company sales flat.
For the near term, it appears that Samsung will largely focus on expanding profit margins in its existing businesses and investing in incremental product improvements (and possible incremental market share gains). The company has also hinted at investments in automotive, wearables, and IoT, though major sales contributions from these segments is likely years away,
Facing an uncertain outlook and, strikingly, what the company views as “rapid paradigm shifts in the technology industry,” it is vital that Samsung not only communicate its near-term strategy but also an updated long-term roadmap amid these paradigm shifts. With printing gone and its other mature business units slowing, Samsung’s leadership, employees, its partner network, and its customers will all benefit from a clear plan that illustrates where the company plans to invest, innovate, and grow in the future.