January 29, 2016
Wall Street Journal reported, and Xerox confirmed, that the OEM would split into two separate businesses, one focused on services and the other focused on hardware in a strategy similar to the recent split of HP into Hewlett Packard Enterprise and HP Inc.
The so-called Document Technology company would be worth $11 billion (€1o.1 billion), while the business process outsourcing company would be worth $7 billion (€6.4 billion). Xerox expects the separation to “be complete by the end of 2016”, and for it to “maximise return to shareholders and align with current market dynamics”. A “strategic transformation programme” will also take place for three years in both companies.
Xerox’ board “unanimously approved” the split, with the Document Technology business to “continue to be a global leader in document management”. Reasons for the split include the need for “greater agility and flexibility” in the market, with it becoming “increasingly clear” that both sides of the business “serve distinct client needs”. Leadership and formal names for both companies “will be determined as the separation process progresses”.
In 2010, Xerox acquired Affiliated Computer Services Inc to broaden its revenue streams, which topped $20 billion (€18.4 billion) last year, but has struggled to bring services and printers and copiers together, and that is reflected in the OEM’s market valuation of only $10 billion (€9.2 billion). The proposed split would reverse that deal.
Ursula Burns, Chairman and CEO of Xerox, commented: “Today Xerox is taking further affirmative steps to drive shareholder value by announcing it will separate into two strong, independent, publicly-traded companies. These two companies will be well positioned to lead in their respective rapidly-evolving markets and capitalise on the opportunities that now exist to expand margins and increase market share.
“I am confident that the extensive structural review we conducted over the last few months has produced the right path forward for our company. We will now position the companies for success and execute our plan to separate them in the shortest possible timeframe while continuing to focus on achieving our 2016 goals.”
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