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Digital in talks to sell printer business

Digital is in talks to sell its printer business to Genicom, as a part of its continuing effort to find a formula to return to profitability.

    Digital (DEC) is in talks to sell its printer business to Genicom (GECM), as a part of its continuing effort to find a formula to return to profitability.

    According to Genicom, the companies are discussing a "possible transaction involving Digital's printing systems business."

    Although Digital does not break out sales for its printer unit and related services, analysts have estimated it may reach upwards of $240 million.

    "In terms of only hardware, a real rough estimate would be that worldwide, Digital's hardware business is less than $150 to 160 million in revenue," said International Data Corporation analyst Angele Boyd. "Sometimes a company's service business can be 20 to 35 percent of hardware revenues, so this total deal might be around $200 million to upwards of $240 million."

    Genicom is an international supplier of printer hardware and network management services, with revenues of $73.6 million for the most recently ended quarter. Last year, Genicom bought the printer and related supplies business of Texas Instruments in a deal worth approximately $150 million, according to analyst's estimates.

    Genicom consolidated the two product lines, and would have to do so again if they purchased Digital's printer business.

    "Genicom may be interested in Digital's printer line from a business services perspective. If Digital is having a fire sale, then Genicom might be interested in that fire sale just to get access to the installed base of customers for servicing and supporting," said Boyd.

    But Boyd added that it would be a challenge for Genicom to finance such a big deal.

    Over the past seven fiscal years, Digital has lost more than $5.8 billion; for the first six months of its current fiscal year, the company lost $25 million. CEO Robert Palmer has restructured the company three times during his tenure, cutting in half the number of employees to about 55,000. Still, the company has yet to return to a sustainable pattern of growth.