Today's Xerox Corp. is not a copy of its former self. With some
1.5 million devices under its management, Xerox remains a leading
seller of printers and copiers as well as technology for managing
documents and other information services. The company aims to sell
its extended portfolio of digital, cloud-based, automated, and
security-conscious products and services to its installed base of
customers and new ones. But Xerox has been changed significantly
through one split and one union. The company cleaved itself in two
at the end of 2016. Xerox claimed document technology and related
services while spinning off business process outsourcing to a new
company, Conduent. In 2018 Xerox agreed to become a part of
Fujifilm through a combination of a joint venture the companies
operate.
Change in Company Type
Xerox agreed to become majority owned by Fujifilm through a
joint venture between the companies. When the deal is concluded,
Fujifilm would own 50.1% and Xerox, 49.9%. The cost of the deal
would be about $6.1 billion. As part of the agreement, Xerox
shareholders got a cash dividend totaling $2.5 billion ($9.80 a
share). The companies plan to achieve about $1.7 billion in savings
following the combination. The savings would include cutting about
10,000 jobs. The companies have operated the Fuji Xerox joint
venture, which has sold office equipment in the Asia-Pacific
region, for decades.
The companies said the combination will enable them to exploit
areas such as high-speed inkjet, industrial print and workplace
tools, while pivoting off Fujifilm's stable of technologies. The
company will have joint headquarters in Norwalk, Connecticut and
Tokyo. The deal has been approved the boards of directors of the
companies and it is expected to close in the second half of
2018.
That deal came about a year after Xerox split its business
process outsourcing business into a separate company, Conduent.
After the split, Xerox began to streamline operations, intensify
focus on its products and markets, and make better use of
resources. It had expected to save $1.5 billion over three years in
efficiency improvements and reduced costs.
Operations
Xerox Corp. operates in two segments, Document Technology and
Services.
Document Technology, accounting for more than 60% of revenue,
sells Xerox's mid-range products (about 60% of segment revenue),
small and mid-sized business offerings (about 20%), and high-end
products for graphic communications and large clients (about
25%).
The Services segment, generating about a third of revenue,
includes its legacy Document Outsourcing business as well as a set
of communications and marketing products and services that had been
part of the business process outsourcing (BPO) business and were
transferred to Xerox upon the company breakup.
Geographic Reach
Xerox Corp. operates in more than 160 countries, with about 60%
of sales coming from the US, and about 30% from Europe. The company
has primary facilities in Canada, France, India, Ireland, Jamaica,
Guatemala, Mexico, the Netherlands, Philippines, Romania, the UK,
and the US.
The company outsources a significant amount of its manufacturing
to third parties while maintaining its own production facilities in
the US, Ireland, France, and the Netherlands.
Sales and Marketing
Xerox Corp. markets its products and services by geography,
sales channel type, and line of business. It complements its global
sales team and sales website with a network of third-party sales
channels, such as independent agents, dealers, value-added
resellers, and systems integrators. Xerox customers are in a wide
range of businesses that include banking, education, government,
healthcare, manufacturing, and retail.
Financial Performance
Xerox Corp.'s revenue in 2015 was $18 billion (counting revenue
from operations that became part of Conduent) and $10.8 billion
(not counting Conduent operations) in 2016. Net income was $474
million in 2015 and a net loss of $477 million in 2016. Cash flow
from operations was $1.7 billion in 2015 and $1.1 billion in
2016.
In reporting its financials for 2016 and 2015, Xerox Corp. took
into account only its post-separation operations, which did not
include contributions from Conduent. It backtracked and eliminated
Conduent operations from 2015 results to show a like-to-like
comparison.
Xerox reported revenue of $10.8 billion in 2016, down 6% from
2015. Equipment sales dropped 9% in 2016 because of lower sales of
entry and mid-range products stemming from the timing of product
launches, as well as lower OEM sales. The decline was also
partially driven by lower sales in the developing markets, along
with lower revenue from the company's high-end products, and lower
sales to partner Fuji Xerox. The company also saw a decline in
annuity/post-sale revenue because of lower sales for maintenance
services, supplies, and financing.
Xerox reported a $477 million net loss in 2016, a reversal from
its $474 million profit in 2015. An increase in restructuring and
related costs in 2016 helped drive the company to a loss.
Cash flow from operations dropped to $1.02 billion in 2016 from
$1.08 million in 2015 because of lower earnings.
Strategy
If Xerox were a start-up company, its strategy might be called a
pivot -- turning away from a defining, but fading, business to a
different business that has more perceived upside. While documents
remain a key Xerox component, it is shifting to services in a big
way. About 75% of Xerox's revenue comes from what it calls
post-sales, which is revenue that follows the sale of equipment.
Post-sale sources of revenue include document services, equipment
maintenance services, consumable supplies and financing, and other
elements.
As a large, well-established company, Xerox has challenges in
trying to change. Sometimes large organizations are unable to adapt
quickly enough to changing markets and customer preferences? But it
also has a big advantage: a large base of customers and more than
1.5 million Xerox-managed devices serving businesses throughout the
world. The company seeks to exploit that resource to sell new
products and expanded services.
With new products, Xerox is targeting what it believes are
growth areas, which include document outsourcing and the
subcategory of managed print services in the small and medium
business market. The company emphasizes the medium-business sector
with a range of products.
In 2016, Xerox added two new inkjet presses to its portfolio,
the cut-sheet Brenva HD and the continuous-speed Trivor 2400, as
well at ConnectKey-enabled i-Series multifunction printers, which
are equipped with ready-to-use apps, which are available from the
Xerox App Gallery. Xerox has what it called the biggest product
launch in its history in 2017, rolling out nearly 30
ConnectKey-enabled printers and multifunction devices with cloud
connectivity and access to more features and apps.
Xerox is targeting costs as well as developing and introducing
new products. In 2016, Xerox started a three-year Strategic
Transformation program to accelerate cost productivity. The company
expects to increase productivity and reduce costs by $500 million a
year over the three years, compared to $300 million to $350 million
for each of the previous three years. The program targets
efficiency gains in delivery, remote connectivity, sales
productivity, pricing, design, and supply chain.
Mergers and Acquisitions
Following the breakup, Xerox Corp. remains on the prowl for
acquisitions. Its recent purchases included:
-- Global Imaging Systems, a multiple-brand dealer in Iowa, and
MT Business Technologies, a multi-brand dealer in Ohio, in 2017.
The deals expand Xerox's distribution in those states.
-- Intellinex, formerly Intrepid Learning Solutions, a
Seattle-based provider of outsourced learning services.
-- RSA Medical, a provider of health assessment and risk
management for members interacting with health and life insurance
companies.
-- Healthy Communities Institute, a California-based company
with a cloud platform for health analytics.
-- inVentiv Patient Access Solutions, a patient access and
reimbursement services hub.