Xerox on Friday confirmed reports that it would split its services business and legacy hardware operations into two separate, publicly-traded companies.
Advertisement
Xerox Corp. also announced a three-year plan to save $2.4 billion across all segments.
She said the two entities would be in a position to “lead in their respective rapidly evolving markets”, with opportunities to expand margins and increase market share. The spinoff will largely consist of Affiliated Computer Services, the business-outsourcing company that Xerox bought in 2010 for US$6.4 billion, according to The New York Times, which quoted a person briefed on the decision.
In November, Carl Icahn began amassing shares of Xerox that by December were up to 8.3%. Icahn will control three of nine seats on the board that will oversee the outsourcing company.
In premarket trading Friday, shares rose 1.8% to $9.40 as the company also issued upbeat earnings guidance for the current quarter and year.
He tweeted Friday: “We believe the separation will greatly enhance value for Xerox shareholders”.
“This is absolutely a good thing for the reseller community”, said Steve Jenkins, president of Xerox partner Precision Document Solutions of Carrollton, Texas, likening it to the split previous year of Hewlett-Packard into HP Inc. and Hewlett Packard Enterprise.
Xerox will create new publicly traded companies to house its copy machines and business services separately.
In the past 12 months, Xerox Corp (XRX.N) shares fell by over 30 percent and it tried to turn itself around after focusing on its services and software even as the company’s customers slashed their printing costs, reports said.
The split, however, represents a dramatic change from Xerox’s earlier strategy, which saw its strength in a diverse portfolio, addressing different business needs.
“We’re happy that he is in support of it, but he had nothing to do with the initiation, the contemplation, the analysis, or any discussion around the deal”, Burns told CNBC, referring to Icahn. Revenues were down $4.7 billion – an eight or five percent year-over-year decrease in constant currency.
Xerox hopes to complete the split by the end of the year. Burns was initially reported to be against separating the two businesses, seeing value in having them both under one roof, but did note in October that the structure was one of the things that would be analyzed during the review. That was an $11 billion business for Xerox a year ago.
Advertisement
While Burns acknowledged that her role in the new companies has yet to be clarified, she was quick to point out that the figures reflect the urgent need to adapt to an increasingly agile document management market.
