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.
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