Xerox Corporation

Xerox CEO Details Success of Services-Led, Technology Driven Business

At its annual investor conference held Tuesday, May 10, Xerox Corporation shared its strategy to capture key growth opportunities in business services and document management and deliver long-term value for shareholders.

“This is the new Xerox. Today, we provide the most diverse set of services in the industry, offer the broadest portfolio of document technology, have a growing global customer base, and continue to invest in world-class innovation that brings differentiated value to customers,” said Ursula Burns, chairman and chief executive officer, Xerox Corporation. “The disciplined execution of our strategy is creating shareholder value through the strength of our solid annuity-based business, expanding earnings and strong cash generation.”

Delivering Shareholder Value
During the conference, Xerox outlined its financial profile, highlighting key growth drivers that include:

  • Shifting its revenue mix to a higher percentage of services, a business that is targeted to grow between 6-8 percent by 2012. More than 90 percent of revenue from services is annuity-based, providing a long-term revenue stream.
  • Expanding distribution in its document technology business to capture more opportunity in developing markets and increase its business with small and mid-sized companies. Revenue in the company’s technology business is expected to grow 1-3 percent in 2012 with growth driven both from increased distribution and an increase in color pages. Color pages currently account for 25 percent of the total number of pages printed on Xerox systems yet color pages are growing 9 percent per year.
  • Investing in acquisitions that give Xerox more scale in services and more “feet on the street” selling the company’s products in global markets. The company expects to invest about $300 million in acquisitions this year; the added capabilities and channel expansion are expected to deliver 1-2 points of revenue growth.

The company is reiterating its expectations for full-year 2011 to deliver revenue growth of 6-8 percent or 3-5 percent on a pro-forma basis and GAAP earnings per share of 89-94 cents or $1.05-$1.10 on an adjusted basis. In 2012, Xerox expects revenue will grow in the range of 4-6 percent and adjusted EPS will increase to $1.18 - $1.28.

Xerox also outlined details on the cash-generating strength of its business model, reiterating expectations to deliver $2.5 billion in operating cash flow this year. In 2012, Xerox expects to generate $2.6-$2.9 billion in cash from operations.

“Over the next five years, we expect to generate more than $10 billion in free cash flow, reflecting the benefit of our annuity-driven earnings growth and continued operational improvements,” said Luca Maestri, chief financial officer, Xerox Corporation. “We remain committed to creating value for our shareholders by growing our business organically and through acquisitions, delivering dividends and buying back stock. In 2011 and 2012, we’re targeting to use about 70 percent of our available cash for share repurchase.”

Services Led; Technology Driven Strategy

“Throughout enterprises of any size and in any industry, we are providing the back office support that results in reduced costs, more productivity, and efficient, simplified ways of getting work done,” said Burns.

She noted that the ultimate outcome for clients is freeing up time and resources better spent on their core business. It is a powerful value proposition that is reflected in how Xerox serves the marketplace and how the company is expanding its business through these areas:

  • Leading with Services: With half of Xerox’s revenue now coming from services and a more than $500 billion market opportunity in document, business process and IT outsourcing services, Xerox is scaling its offerings to expand globally, apply innovation to simplify complex processes, and integrate its well-established service delivery competencies across multiple lines of business. In the first quarter of 2011, services revenue grew 5 percent on a pro-forma basis along with a 29 percent increase in the total pipeline. Recent key services signings include a 10-year, $500 million contract to manage clinical and technology applications for clients using Allscripts remote hosting services. Xerox also secured a $200 million, five-year agreement with MGM Resorts International to provide managed information technology services.
  • Applying Innovation: Xerox’s proprietary technology in image recognition and data analysis is creating more accurate, faster and efficient ways to manage massive amounts of information. For example, in the company’s transportation solutions business, intelligent sensors give computers the ability to quickly read license plates and detect vehicle occupancy, helping cities analyze traffic data, reduce congestion and create safer highways.
  • Growing high-value color pages: Color printing increased 7 percent in the first quarter of 2011, furthering Xerox’s strategy to expand its color leadership. The company is creating more color pages through affordable office color printing, and last week introduced the latest models in its solid ink MFP series – the high speed Xerox ColorQube 9300. Cleveland-based Medical Mutual of Ohio uses 140 of the original ColorQube systems to better manage color printing costs, saving thousands of dollars annually on administrative expenses. Advanced digital production printing enables personalized printing that can be applied to everything from packaging and photo applications to more relevant direct marketing materials. Miami University of Ohio uses Xerox technology and software from XMPie, a Xerox company, to increase enrollment by connecting with students through personalized, full-color direct mail, email and Web marketing.
  • Expanding globally: Xerox is growing its global presence and capabilities through expanded distribution channels and targeted acquisitions. The company recently completed the acquisition of Unamic/HCN, the largest privately-owned customer care provider in the Benelux region. In addition, Xerox grew its document technology distribution network – including four recent acquisitions that expand access to small and mid-size businesses in Europe and the U.S.

 

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