Xerox’s split into two companies is the “optimal path forward” for the company, according to its chief executive, as the company promised “a number of exciting production printing announcements” at Drupa.
Burns: “Our brand is strong and our offers are very strong”
Speaking to investors on Friday following the company’s Q4 and full-year results, chairman of the board and chief executive Ursula Burns said the Document Technology business, which includes production printing and had a 2015 revenue of $11bn (£7.7bn), could see strong profitability and cashflow through “operational discipline and a commitment to transformative productivity”.
“Despite secular declines in the printing industry, our Document Technology business remains highly profitable with annuity-driven revenue representing more than 70% of our sales,” she said.
“Through relentless cost discipline, this business generates strong and consistent cashflows that allow us to make strategic investments to penetrate higher growth markets such as aqueous inkjet, high-end color printing, managed print services and workflow.”
The company also announced a strategic review, which will aim to make savings of $600m over three years.
Burns said this would be “a thorough review of how we work and how we operate” and would bring Xerox’s total cumulative savings target to $2.4bn.
The Connecticut, US-based corporation reported total Q4 2015 sales of $4.7bn, down from $5bn in Q4 of 2014. It reported a full-year revenue of $18.1bn, compared to $19.5bn in 2014.
Document Technology saw a Q4 revenue of $1.9bn, down from $2.2bn in the same period last year. Full-year revenue was $7.4bn, down from $8.4bn in 2014.
Vice-president and interim chief financial officer Leslie Varon said that revenue in its Document Technology division was weaker than anticipated, which was primarily driven by lower supply sales.
However, she added: “But margin remained in the middle of our range, reflecting our ongoing cost discipline and business model flexibility.”
She said she expected a decline of 5% to 7% in Document Technology constant currency revenue this year.
This would be offset by up to 3% growth in its Services division.
“Considering the uncertain macro environment, we don’t expect our revenue to deviate substantially from trend. But we do expect modest improvement in both segments, as we move through the year and map the onset of some headwinds in both Document Technology and Services,” she said.
The decision to split follows a structural review undertaken by outside advisors that started in October and is now complete. Burns said it was “a robust assessment of options for the company’s portfolio and capital allocation”.
“It became clear through this analysis that the benefits of separation outweighed the benefits of maintaining the current structure. The board unanimously agreed that the optimal path forward for Xerox is to become two market-leading focused publicly traded companies,” she said.
Burns added that Xerox was still “actively pursuing” consolidation opportunities that will expand its distribution channels.
“We found that our brand is strong and our offers are very strong. We just have to get more people to carry them to the market. So that will be our primary focus from an acquisition standpoint.”
Varon added the 2007 acquisition of office technology supplier Global Imaging had been “extraordinarily successful and had a very, very successful 2015”. She said that the company would also continue to pursue technology-focused acquisition opportunities to further boost its product range, expressing an interest in the “high end of inkjet”.