Xerox has become more than a copier company. So much more that it has been transitioning to become a provider of services for corporations’ back offices by providing business process outsourcing (BPO) and document outsourcing (DO). Services include customer service and claims filing, infrastructure, cloud computing, application development, managed print services, and document and data management. In addition, it remains a leading provider of equipment, including office printers, digital printing systems, and multifunction printers and copiers. In January 2016 Xerox announced that it would make the distinction between BPO and DO even starker by splitting them into two independent companies. The split might be final by the end of 2016.
Change in Company Type
In splitting into two companies, Xerox is looking to streamline operations, intensify focus on each company's mission, and make better use of resources. The company said the split would offer clearer choices for investors. It expects to save $2.4 billion over three years and save $700 million on an annualized basis in 2016. The document technology company would have $11 billion in annual revenue and continue with document management and outsourcing. The business process outsourcing would bring in about $7 billion a year in managing "transaction-intensive" processes. The leadership and names of the new companies will be determined later. The split comes after a review of Xerox's operations by its board and management.
Investors had pushed for the split as a way to increase the value of their holdings. Investor Carl Icahn will name three members to the nine-member board of the business processes company.
In May 2016, Xerox said that its CEO, Ursula Burns, the first black woman to lead a Fortune 500 company, would be chairman of the document technology company after the split. Xerox is looking for CEOs for the two companies.
Xerox's two main business segments account for about 97% of its sales: services (BPO and DO, 56%) and document technology (products, supplies, and related service and financing, 41%). The company's other, smaller business lines include wide-format systems, Global Imaging Systems (GIS) network integration, and electronic presentation systems; together they make up about 3% of sales.
BPO constitutes about 68% of services, with DO making up about 32%. BPO addresses common enterprise functions such as HR, support for financial services, healthcare, transportation, retail, travel, and insurance, and more. DO provides managed print services including workflow automation, and centralized print services.
Xerox's document technology segment is made up of mid-range products (nearly 57% of the segment), small and mid-sized business offerings (about 19%), and its high-end portfolio for graphic communications and large clients (about 24%).
Xerox serves more than 180 countries, with about 70% of sales coming from the US, and about 21% from Europe. The company has primary facilities in Canada, France, India, Ireland, Jamaica, Guatemala. Mexico, the Netherlands, Philippines, Romania, the UK, and the US.
Sales and Marketing
The company markets its products and services by geography, sales channel type, and line of business. It complements a network of third-party sales channels, such as independent agents,dealers, value-added resellers, and systems integrators, with a large internal global sales team and sales website.
Revenue fell 8% in 2015 to $18 billion from about $19.5 million in 2014. Sales fell across the board in both Document Technology and BPO as the company sold fewer products and services and felt the sting of a dollar stronger than other currencies.
Net income dropped by half in 2015 to $474 million from $969 million in 2014. Besides lower revenue, the company had restructuring charges (it cut some 1,700 jobs during the year) and had software asset impairment related to its Government Healthcare Solutions business.
Cash flow from operations dipped to $1.6 billioin in 2015, compared to $2 billion in 2014.
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. The company is inching its way toward its goal of getting two-thirds of revenue from services by 2017. They accounted for 56% of revenue in 2015, up from 54% in 2014.
To concentrate more on higher margin business services such as government healthcare and document technology, Xerox sold its IT outsourcing business to Atos for about $1 billion in late 2014. The company will contract with Atos to continue to use the unit's IT services. Other divestitures includes Xerox Audio Visual Solutions and Truckload Management Services.
Xerox restructured its government healthcare business in 2015 to increase focus on growing segments like medical and pharmacy benefits management and fraud and abuse detection. The company expanded its pharmacy portfolio offerings through acquisition of inVentiv Patient Access Solutions.
Signaling that it believes there's still paper in the office, Xerox introduced nine print products in 2015. The lineup included the Xerox Rialto 900 Inkjet production color press, Xerox Phaser 6022, WorkCentre 6027, (available worldwide), and Phaser 6020, and WorkCentre 6025. It also brought out a mobile application, Xerox Print Service Plug-in.
Xerox had capital expenditures of $342 million n 2015 and expects to reduce it to $300 million n 2016.
Mergers and Acquisitions
Xerox remains on the prowl for acquisitions in 2015 armed with $900 million earmarked for deals.
Its 2015 purchases included:
-- 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.