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Effects of Xerox split analysed

February 22, 2016

xeroxThe OEM’s plan to split into two companies could see it face the same problems as Kodak.

Democrat and Chronicle discussed the OEM’s plan, revealed at the end of January, to split into two separate businesses, one focused on services and the other on hardware. Its so-called Document Technology company would be worth $11 billion (€10.1 billion), while the business process outsourcing company would be worth $7 billion (€6.4 billion).

Xerox also added that it intends for the separation to “be complete by the end of 2016”, and for it to “maximise return to shareholders and align with current market dynamics”, while a “strategic transformation programme” will also take place for three years. Democrat and Chronicle noted that the announcement “left many questions unanswered”, and “many of the legal and financial issues will take some time to untangle”, while there are “more fundamental questions” to be asked.

These include the “future of the Xerox” sites across the country, and whether the split will help it “avoid following the same path that Kodak did just a few years ago”, with one analyst interviewed stating that Xerox is “on a steadily downward course in its equipment business”, and its technology “less and less in demand”. While there’s not expected to be a “bankruptcy anytime soon”, the OEM is facing “the reality of a continued move away from making copies and manipulating paper”.

The site’s Kodak analogy refers to its failure to “retain existing customers as their behaviour changed”, and being unable to “find another core business that could replace the revenues” it lost when “the market for consumer film rapidly disappeared”. Xerox may face “an echo” of what happened to Kodak because “there is no near-term solution for turnaround of [the] document technology” business, the site added.

However, one factor in Xerox’ favour is that it has “developed a large and diverse collection of patented technologies”, with many having “nothing to do with printing documents”, and offering a “road map to what’s next”. The site concludes that Xerox’ model of moving into other industries with its patents “suggests continued success”, and that if this continues, “there is good reason to thin that Xerox will have a bright future after this split is completed”.

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