The company said the document technology company, which will make printers and copiers, would have annual revenue of $11 billion, while the business process outsourcing company would have $7 billion in revenue.
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A large part of the Business Process Outsourcing division would be Affiliated Computer Services, which Xerox purchased for $6.4 billion in 2010.
Shares of Xerox (XRX) fell more than 1% to $9.09 in after-hours trading Thursday. Xerox also announced a three-year restructuring program expected to save $2.4 billion.
Analysts polled by Thomson Reuters expect Xerox to report earnings per share of 28 cents, down 9 percent from earnings per share of 31 cents during the previous year’s quarter.
After the split, the two Xerox companies will be “more flexible, more responsive and essentially more fit and focused for the markets that we are attacking”, Burns said. The document technology company will handle document management and document outsourcing, while the business process outsourcing business will help companies with automating and simplifying business processes. They have fallen 13 per cent so far this year compared with a 7.4 per cent drop in the Standard & Poor’s 500 Index.
Behind this spinoff plan there is Carl C. Icahn, the activist investor who succeeded in campaigning for spinning off PayPal from eBay in 2015. At a securities filing in November, Mr. Icahn said his firm meant to have discussions with Xerox management and board “relating to improving operational performance and pursuing strategic alternatives, as well as the possibility of board representation”.
The Norwalk, Connecticut-based company made the announcement as it reported profit for the fourth quarter but a loss overall for 2015.
Pending regulatory approval, the split is expected to be completed by the end of the year.
On Friday, Xerox announced that there will be two publicly traded entities.
In a Friday conference call with investment analysts, CEO Ursula Burns said Xerox arrived at its decision in mid-January after a “bottom-up” strategic review of all facets of the company and how shareholders value Xerox. He tweeted on Friday that “the separation will greatly enhance value for Xerox Corp shareholders”.
Xerox, which came into prominence with the launch of the 914 photo copier in 1959, said the leadership and names of the new companies were yet to be decided. “Every year Xerox has to drive automation, innovation and to drive productivity in its workforce”.
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Burns underscored that the outsourcing business will be an independent company to ensure it the focus and flexibility it needs to adapt to the changing needs of its clients. We asked George Conboy of Brighton Securities how a company might achieve such steep savings.
