Xerox CEO to Investors: Annuity Business, Industry Leadership, Solid
NEW YORK—Nov. 24, 2008—At its annual investor conference being held here today, Xerox Corp. (NYSE: XRX) is addressing how its annuity-based business model, strong operating cash flow and industry-leading document management services and technology are assets in tough economic times.
“Our value proposition is supported by the strength of our financial position and the resiliency of our recurring revenue stream,” said Anne Mulcahy, Xerox chairman and chief executive officer. “We’re managing our operations with a close eye on the bottom line. The restructuring actions we’re taking this quarter are expected to deliver $200 million in savings next year, giving us greater flexibility to operate even more efficiently and effectively in an uncertain economic environment.
“About 85 percent of our cash flow is generated from our annuity business model. This annuity is driven by install activity of our technology and multi-year contracts for document services,” she added. “Despite the current economy, the backlog of orders for our products and a 14 percent increase this year in signings for document services along with our disciplined approach to cost management give us confidence in the overall health of our business and our ability to navigate through these challenging times.”
During the conference, Xerox will outline 2009 expectations with operating profit between $1.4 billion to $1.7 billion and cash from operations of $1.7 billion to $1.9 billion. As a result, 2009 earnings per share are expected to range between $1.00 and $1.25 and free cash flow per share of $1.60 to $1.85. The company noted that the range reflects the extraordinary volatility from the impact of currency. Given the strength of Xerox’s cash flow and its credit facility of $2 billion, the company has no requirement to access the capital markets in the foreseeable future.
Xerox’s investment in innovation has brought to market more than 100 products in the last three years, building the broadest portfolio in the industry and in Xerox’s history. Maintaining this focus on innovation, the company said it expects 2009 investments in research, development and engineering will be 4 percent to 5 percent of total revenue.
The combination of document services, affordable and innovative color technology, and broader distribution to businesses of any size enables Xerox to attack a $132 billion market. During the investor conference, the company will discuss how it is addressing this growth market, including:
Document services that help businesses work faster and smarter with lower costs.
Today businesses call upon Xerox to help reduce their infrastructure costs by outsourcing the management of office technology and in-house print shops. According to Gartner, Xerox holds the number-one market share for managed print services with 50 percent of the total U.S. market.
Also core to Xerox’s document services offerings is its industry expertise in converting paper to digital and helping customers seamlessly track, edit, share and save documents in any form. Last week, Xerox was named the preferred global imaging partner for IBM Managed Business Process Services, a unit of IBM Global Technology Services. Under the worldwide agreement, Xerox will scan and image millions of documents for IBM and its customers.
In addition, Xerox has announced strategic partnerships with IT services companies CSC and HCL Technologies, which will help drive revenue growth as clients seek more integration with their IT support and document management.
“In a world where 15.2 trillion pages are printed each year and $650 billion in productivity is lost each year due to the overload of information, Xerox’s expertise in simplifying the way work gets done helps customers save up to 30 percent on their document management costs,” said Ursula Burns, president of Xerox. “During the first three quarters of 2008, our annuity revenue from document services has increased 6 percent.”
Affordable color printing systems that cut through the clutter with high-impact communications.
Xerox continues to benefit from making color printing affordable for businesses of any size. Today, Xerox leads the industry in the number of color pages printed and holds the number-one revenue share position. Revenue from color represents more than 37 percent of Xerox’s total revenue through the third quarter of this year, and 16 percent of the total pages printed on Xerox technology are color pages.
With the broadest portfolio of color printings systems on the market, Xerox continues to create new business opportunities in production printing through color technology and systems such as the Xerox iGen4(TM) Press and Xerox 700 launched earlier this year.
More distribution channels bring Xerox’s technology and services to more businesses of any size, anywhere around the world.
Xerox sells to businesses small to large through the industry’s most extensive sales channels including approximately 14,000 dedicated sales representatives and a wide global network of resellers.
By acquiring nine office technology dealers in the last two years and launching 18 products this year designed for small and mid-size businesses, Xerox has significantly increased install activity for its desktop printers and multifunction systems that print, copy, fax and scan. Through the third quarter of this year, installs of desktop devices are up 32 percent worldwide with 38 percent growth alone from the company’s developing markets.
“We’re not immune to economic issues and the unpredictability of these coming months will likely make for a challenging environment,” said Mulcahy. “But we’re better positioned than most – and believe we have the flexibility to manage our business successfully through today’s challenges and for the long-term value of our shareholders.”