by Jim Lundy
On January 31, 2018, Xerox announced that it gave up control of its ownership to Fuji Xerox, its long-term partner and occasional nemesis, to prevent activist shareholders from selling the company. Xerox sold itself for only $6.1 billion to Fuji Xerox, which is owned by Japanese entity Fujifilm. Xerox shareholders will get a one-time U.S. $2.5 billion dividend ($9.80 per share).
Fuji Xerox indicated it would cut 10,000 jobs primarily in Asia and deliver a 30% return—likely a challenging feat in a market that does not demand high speed copier/printers like it used to. This blog examines Xerox and its defining eras alongside missed opportunities for change.
The Copier, an American Icon
AMC’s show Mad Men, set in the 1960s, referenced an iconic historical moment for past workforce generations with the introduction of the Xerox 914 copier.
That was then and even with the rise of the multi-function copier printer device (which yours truly helped to launch when I was at Xerox), Xerox’s evolution wasn’t enough to keep up with the modern digital era.
The Xerox Sales Machine
Along with copiers, Xerox created one of the most powerful sales organizations in U.S. history, and their approach was one to be looked at carefully. Their process included adopting a methodology, hiring experienced military officers and K-12 teachers and training them in the processes, and adding fresh college hires to do the same.
Even when Xerox stumbled in low-end copiers, the sales machine they built overcame product deficiencies. However, the issue they faced was that, as the market matured, the focus on sales competency and the compensation for high performers diminished greatly.
Printing and PARC: The Anne Mulcahy Era
As copying faced a decline, Xerox was presented with a number of issues. Former IBM CFO Rick Thoman had a short tenure as Xerox CEO. It ended when he spent too much cash purchasing Tektronkix in a bid to dethrone HP in printing.
Anne Mulcahy took over as CEO and did a solid job refocusing the company and rebuilding morale. Despite the successes under Mulcahy, Aragon views the 2001 Xerox Parc spinoff in efforts to cut costs as a strategic mistake.
Xerox and Services: The Ursula Burns Era
The world shifted to managed print and document services and Xerox wanted more. Xerox insider Ursula Burns took over as CEO following Mulcahy and drove the acquisition of services provider ACS for $6.4 billion in 2009.
That didn’t last long, and in 2016, Xerox elected to split the business in half in 2017—a move eerily similar to HP’s split under Meg Whitman.
Xerox and the Battle Between Investor Carl Icahn and CEO Jeff Jacobson
Activist investor Carl Icahn wanted the hardware company Xerox to sell and he wanted to remove Xerox CEO Jeff Jacobson, whose heritage was in imaging and printing. Instead, Xerox decided to merge with its partner Fuji Xerox and Jacobson maintained his job. He remains as Xerox CEO under Fuji Xerox’s ownership.
Would Xerox have been better off if it had just sold? In our Aragon Live research call this week, the consensus was yes. It is clear that Jeff Jacobson would have been replaced if Icahn had found a buyer; therefore, Xerox took the path of least resistance.
The Culture of Japanese Imaging Companies
Fuji Xerox now faces new challenges as the primary owner of Xerox. In a nutshell, it never really trusted Xerox management, just as Sharp, Ricoh, and Canon never trusted their American operators. This lack of trust explains why those companies have had such high turnover in the North-American market.
3D Printing: Still an Opportunity
In Aragon’s opinion, Xerox still has a potential opportunity in 3D printing, and could strategically leverage Parc. HP has already jumped into 3D printing but the question remains: will Fuji Xerox see it as a future opportunity or continue to focus on toner and ink?
Managed Services: Cash Cow
Xerox is still a strong provider of managed services for printing and copying, and it will remain that way. The irony of the issue is that in an era of Digital Transaction Management (DTM) and content automation, Xerox invented the future and in the end, gave it away to its former Japanese partner.