17 February 2020

Xerox Splits into Two Companies

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Xerox will separate into two companies, a $11 billion document technology company and a $7 billion business services company, the office equipment maker announced Friday. The transaction into two independent publicly-traded companies is expected to be complete by the end of the year. Xerox also announced a three-year restructuring program expected to save $2.4 billion. Billionaire investor Carl Icahn will have a continuing part to play in the separation. He will name three members to the board of the business services company and can also select someone to observe and advise the search for a CEO of that company. 

The move comes more than 70 years after the Rochester, N.Y.-based Haloid Co., the company that would eventually become Xerox, acquired the rights for xerography, or photocopying, from Chester Carlson. The company brought the Xerox 941 to market in 1959 and changed its name to Xerox two years later.

Xerox's star rose in the Seventies as it battled IBM and Kodak for dominance in the copier business. Revenue in 1996 hit $17.4 billion. But the company missed some opportunities that would come back to haunt it. Its own Palo Alto (Calif.) Research Center would develop what would become the personal computer, the PC desktop graphic interface and the Ethernet standard, but other innovators such as Apple's Steve Jobs would make those mass market products.

The company has struggled as the printer business slowed, market activity that also led to a similar split by larger competitor HP. In November 2015, HP split into two companies: Hewlett Packard Enterprise (HPE), which sells hardware such as servers for data centers, and HP Inc., which sells PCs and printers. However, Xerox remains a Fortune 500 company and is also on Fortune's 2015 Most Admired company list.

The split, Icahn said, would result in an independent (business process outsourcing) company with fresh, focused leadership and best-in-class corporate governance will greatly enhance shareholder value, and we are proud to be a part of that process. Xerox had begun a structural review of its operations in October and Icahn did not speak to the company until after it had begun that review, Burns said.

After the split, the two Xerox companies will be "more flexible, more responsive and essentially more fit and focused for the markets that we are attacking," Burns said. Xerox announced fourth-quarter adjusted earnings of 32 cents per share, which beat expectations of 28 cents per share, based on S&P Capital IQ Consensus Estimates. Revenue of $4.7 billion fell short of $4.74 million analysts expected. Xerox increased its dividend 7 cents to $7.75 per share.

Xerox hopes to complete the split by the end of the year. As for her role, she said that discussion is "purposefully ...  off the table," she told Bloomberg TV. The split essentially would unravel the company's purchase of Affiliated Computer Services Inc. in 2010 for $5.6 billion. The company employs more than 140,000 worldwide. After the split, about 104,000 employees will be part of the outsourcing company. The document technology company will be made up of the other 40,000 including most of 6,500 Xerox employees in the Rochester area.

Click here to access the full article on USA Today.

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