If the original plan by the dissident shareholders had been to make a quick return from Xerox, that plan is in tatters. CEO John Visentin, appointed at the behest of Carl Icahn and Darwin Deason to look after their interests, says now his job is to “rebuild Xerox into a leading tech company”.
The auction has been pushed to one side, it is too disruptive, according to Visentin, but lack of immediate interest may have had an impact. Should a proposal emerge, the board would deal with it in the normal way. But the focus is about delivering to shareholders in the long term.
The board has set aside $500 million from a cash pile of $1.3 billion to repurchase shares during the remainder of 2018. “We have not effectively deployed our capital. M&A has been minimal and we have not done share repurchases in the recent past,” he says.
The Fuji Xerox joint venture remains in place, though as this is only 25% owned by Xerox the decision may be out of its hands. Likewise decision to terminate the technology agreement between the two remains in place with Xerox keen to sign deals with other technology suppliers. There is an emphasis on continuity of supply in an arrangement which has delivered 59% of the equipment that Xerox sells.
This includes the new Iridesse, the six-colour machine that offers silver and gold metallics as well as white and clear toner. Demand for this in the second financial quarter exceeded expectations, says Visentin. But it was “not enough to offset declines in other product segments including iGen”.
Overall revenue fell in the second quarter to $2.5 billion, $561 million from equipment sales and $1.95 billion from recurring revenues. Visentin remarks that the equipment sales drive the recurring revenues. There will be a shake up to improve the effectiveness of the different sales channels, he says, including no doubt sales to customers in Asia where Xerox has threatened to go it alone.
High end production equipment revenues fell from $109 million in the three months to the end of June 2017 to $100 million in 2018.
More important will be top to bottom shake up of the business. The organisation is set up to support a much larger business. “There is a lack of clarity in decision authority and who is accountable for customers,” he says. “We have the legacy of a much larger business, with processes and system and resources beyond what are required or affordable today.”
There are, he says, 1,400 different IT systems across the business each requiring resource to manage and support them. In the quarter the company wrote off £7 million from a cancelled IT project. The challenge is to simplify this.
The rebuilt Xerox will also be looking at more partnerships, developing some of the software products it has – and XMPie will gain more attention – and some of the technologies developed in the Parc and Webster research centres can open doors to “high growth areas where we do not participate today”. This includes potentially revolutionary inks and imaging systems for digital packaging.
Xerox has experienced greater than expected demand for the iridesse, the press developed in Japan by Fuji Xerox. According to CEO John Visentin support for these products will continue should the technology agreement between the two companies not be renegotiated.