Xerox reported its 15th consecutive quarter of declining sales on Friday and announced plans to split the company into two businesses. Xerox and the BPO venture are eyeing a massive restructuring that would produce $700 million in annual savings between them in 2016 and $2.4 billion over three years.
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The company, with global headquarters in Norwalk, Connecticut, is planning to divide itself into two separate publicly-traded companies, one focused on document technology and another on business process outsourcing services.
Icahn, who first revealed a stake in Xerox in November, had said he would seek representation on the company’s board as well as pursue strategic alternatives. Icahn said he would push for operational changes, and will select three directors to fill his given board seats. Additionally, a person selected by Mr. Icahn will observe and advise the Chief Executive search committee for the services firm. “More recently, the chemical giants Dow Chemical and DuPont agreed to merge with the intent to split into three companies soon afterward”.
Reportedly, Xerox, the name synonymous to office copiers, chose to spin off its services business from the legacy hardware section. The company reported adjusted earnings per share (EPS) of 32 cents in the quarter ending December 31, above the expectations of both Xerox and financial analysts.
Later, CEO of Xerox Corp (XRX.N) Ursula Burns confirmed that the company had initiated a strategic review of the split even before Icahn disclosed that he bought the company shares.
Xerox has been innovating printers and other hardware since its founding in 1906, when it began as The Haloid Photographic Company.
Long after moving beyond its legendary roots as a copier maker, Xerox announced on Friday that it would become two, separate companies. She said the two companies are large and strong and are valued at $11 billion and $7 billion respectively and therefore it will not be a small buy.
Shares of Xerox (XRX) fell more than 1% to $9.09 in after-hours trading Thursday.
“Today’s market realities require greater agility and flexibility, the ability to innovate and adapt technology to address clients’ fast-evolving needs, and a more focused and efficient approach to operations and capital allocation”, said the company, explaining the move. However, the company’s revenue is down by eight percent year-over-year.
The combined value of those business components was an estimated $11 billion for 2015.
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But contract hiccups in recent years have hurt growth from the same sectors that were supposed to save Xerox. “Every year Xerox has to drive automation, innovation and to drive productivity in its workforce”.
