This Week in Imaging: Two Surprises this Week
This week, we saw two surprising new developments. The first of these was printer-cartridge remanufacturer Clover Imaging Group’s announcement that it had acquired the assets of rival LMI Solutions. This is despite the fact that Clover’s parent company, 4L Technologies, announced this summer that it’s carrying some $650 million in debt and appears to be experiencing financial difficulties. The financial difficulties appear to be related to the loss of a key contract (which may involve AT&T), as well as to the recently expanded HP-Xerox partnership, under which it appears Xerox would be supplying toner to HP, and Xerox may have to cease selling remanufactured toner – presumably supplied by Clover – for HP machines
The other surprise was a court decision denying a settlement on behalf of Xerox investors who claimed that they were harmed by the actions of Xerox management. In a nutshell, New York Justice Barry R. Ostrager blasted the private settlement between Carl Icahn and Darwin Deason with Xerox last year. That settlement resulted in the resignation of Xerox CEO Jeff Jacobson and several board members, with Icahn and Deason appointing the replacements, effectively giving the two control of Xerox and scuttling the Fujifilm purchase of Xerox – with the two arguing that the purchase price was too low.
Justice Ostrage essentially said this private settlement didn’t do anything to benefit other Xerox shareholders, and even went so far as to refuse some $7.5 million in attorney’s fees for the law firm representing these shareholders, stating:
“The net result of the actions …was to transfer control of a public corporation to Messrs. Deason and Icahn via a private agreement that offered no tangible benefits to the interests of the class.”
The end result is likely more litigation, with Xerox investors arguing that they were harmed by the actions of Xerox management. Meanwhile, Fujifilm is still pursuing its own litigation, arguing that it was harmed by Xerox’s termination of the proposed transaction, and is seeking $1 billion damages.
At the same time, Icahn’s promises for Xerox still haven’t panned out. Neither Apollo Management nor HP Inc. have appeared to purchase Xerox at a profitable price, as Icahn once suggested would happen. While Xerox’s 2018 net income of $361 million was an improvement over the previous two fiscal years, most would agree that was mainly due to cost-cutting, as 2018 revenue was down versus the previous two fiscal years ( a detailed look at Xerox’s financial results for 2005 to 2019 can be found here.) Meanwhile, Icahn has urged lots of “patience.”
This Week in Imaging