Explaining the rationale behind the decision to split up Xerox, Burns said both the document technology and BPO sides of the business are “each facing different market and client realities”, echoing some of the factors that influenced HP’s decision to separate into two companies. Xerox expects the two companies to save a combined $2.4 billion over the next three years because of the split.
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Xerox, in an agreement with investor Carl Icahn, is splitting into two publicly traded companies – essentially breaking out the operations acquired with its largest-ever purchase five years ago. “These two companies will be well positioned to lead in their respective rapidly evolving markets and capitalize on the opportunities that now exist to expand margins and increase market share”, Xerox CEO Ursula Burns said.
At this time, one thing that is known about the new business process outsourcing business is that billionaire investor/activist shareholder Carl Icahn will be exerting considerable influence over that organization’s direction. In recent years, he has taken stakes in technology-related companies including Apple Inc., EBay Inc., and Netflix Inc., and agitated for changes such as share buybacks and spinoffs, which he argued would create shareholder value. Xerox said that Icahn will directly oversee the governance of the BPO company, as he will receive three of nine board member seats for the new company. Mr. Icahn will choose a person to advise on the chief executive search process for that business, according to a separate statement Friday on their settlement. The first one is a document technology company worth $11 billion and the other one is a provider to government and industries such as transportation and healthcare worth $7 billion.
The separation should be finished by the end of 2016.
The split continues a trend in corporate America of diversified companies breaking up into more highly specialized pieces. The latter has about 104,000 employees and produced about $7 billion in revenue previous year.
“We applaud Ursula Burns and Xerox’s Board of Directors for recognizing the importance of separating Xerox into two publicly-traded companies”. Burns said in October that the board had chose to do a comprehensive review of “structural options for the company’s portfolio”.
Xerox shares rose 4.6 percent to $9.65 (roughly Rs. 655) in premarket trading on Friday.
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Xerox has been grappling with declining annual revenue for four consecutive years. In December, he prevailed over the Bridgestone Corp.in a seesaw battle to acquire the auto parts retailer Pep Boys for US$18.50 a share, or about US$1 billion. Wall Street had expected Xerox to weigh in with 28 cents per share for the fourth quarter of 2015.
