visentin | Rochester Business Journal

Xerox furthers hostile takeover bid in HP shareholder presentation

Xerox Holdings Corp. has launched its hostile takeover bid of Hewlett Packard Inc., beginning with an investor presentation made available to HP shareholders on Monday.

“There is a clear path to realizing increased value from your investment in HP—the proposed transaction with Xerox,” Xerox Vice Chairman and CEO John Visentin wrote in the 33-page presentation.

In November, Xerox officials reached out to HP executives requesting due diligence surrounding a proposition to acquire HP for $22 per share, which would comprise $17 in cash and 0.137 Xerox shares for each HP share. The proposal closely followed news that Fujifilm Holdings Corp. would buy out Xerox’s one-quarter share in Fuji Xerox, a 52-year partnership that soured last year during a failed merger attempt.

The $2.3 billion buyout gave Xerox the leverage it needed to pursue acquisitions, with Visentin telling one media outlet last month that the company was in “attack mode.”

But HP answered Xerox’s proposal by saying it “significantly undervalues HP and is not in the best interests of HP shareholders.” Still, HP left the door open for a potential combination that would put the computer giant in the driver seat.

Had HP accepted the proposal its shareholders would have owned roughly 48 percent of the combined company. The offer represented a 20 percent premium to HP’s closing share price of $18.40 on Nov. 5.

HP at the time said its board had considered the “highly conditional and uncertain nature” of the proposal, including the impact of outsized debt levels on the combined company’s stock.

The two companies traded barbs, and on Nov. 24 Xerox said it would attempt a hostile bid by going straight to HP’s shareholders. HP officials noted Xerox’s declining revenue, perceived versus real synergies and a host of other issues that could affect company value.

In Monday’s shareholder presentation, Visentin said the value of the transaction “goes beyond economics.”

“In consolidating industries, first movers not only win but also have an opportunity to reshape the competitive landscape in an enduring way,” he wrote, noting that the cash flow generated by the deal would enable rapid de-leveraging and greater capital returns for shareholders.

The presentation suggests cost savings for the combined company of roughly $2 billion in two years and projects $1 billion to $1.5 billion of potential growth opportunities. Xerox says the combined company would be worth roughly $31 per share.

Xerox officials are looking for three weeks of mutual due diligence on the offer.

Shares of company stock (NYSE: XRX) were down slightly at $37.31 midday Monday.

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Reports: Xerox in talks to acquire HP

Xerox Holdings Corp. is reportedly in talks with HP Inc. to acquire the computer and printer giant, a deal valued at more than $27 billion. And it’s a deal that could mean good things for Xerox’s Webster campus, one local analyst said.

In a move the Wall Street Journal calls “audacious,” Xerox has made a cash-and-stock offer for California-based HP, several media outlets have reported. The news comes on the heels of Tuesday’s announcement of a truce with Fujifilm Holdings Corp. that will result in the Japanese company’s buyout of Xerox’s 25 percent stake in Fuji Xerox for some $2.3 billion.

Xerox Chairman and CEO John Visentin said the company would use the funds from the sale to pursue mergers and acquisitions in core and adjacent industries, return capital to shareholders and pay down its $550 million in debt, which matures in December 2019.

“This is a huge deal. I look at Xerox management as having played defense for nearly 40 years, and for at least 20 years Xerox management’s principal function was to see how steadily they could shrink the company. Essentially, Xerox management was playing defense, was watching their business shrink; all of them got comped very well while Xerox was in constant restructuring mode for the better part of 20 years,” said Brighton Securities Inc. Chairman George Conboy. “With this presumed deal, you have Xerox management making a bold stroke, a very bold stroke. In numbers, Xerox’s annual sales now are $9 billion, Hewlett Packard’s are $58 billion.”

The Wall Street Journal reports that Xerox’s board discussed the possibility of an HP acquisition Tuesday and has an informal funding commitment from a major bank. Xerox has a market cap of $8.05 billion, compared with HP’s market value of $27.27 billion.

CNBC is reporting that the offer is a “real premium” to HP’s stock price, and the two companies are looking at synergies of at least $2 billion. Xerox reportedly has explored the possibility of an HP acquisition in the past.

Under Visentin’s lead, Xerox’s stock (NYSE: XRX) has risen more than 84 percent in the last year. Visentin in a phone call Tuesday told CNBC that Xerox was in “attack mode” as far as possible mergers and acquisitions.

“For 18 months we have new management put in by activist investors. Management was placed there by shareholders—not anonymous shareholders, not shareholders with small votes, big shareholders who care about the company: Carl Icahn and Darwin Deason, who combined own about 15 percent,” Conboy said. “I’m sure that when Icahn and Deason put management in and kicked out the do-nothing board of directors, they said ‘get this company growing.’ So for a change, we’re seeing Xerox management play offense and not defense.”

Conboy noted HP’s large market share for computers but said the company continues to make a lot of printers and sell a lot of printer supplies, which could play handily in Xerox’s business locally.

“That’s been a very profitable and recurring part of Xerox’s business, the consumables business,” Conboy explained. “We could see a meaningful jump in employment here at the Webster plant because there’s a meaningful toner operation out there.”

In heavy trading Wednesday, Xerox shares were up more than 3 percent at $37.53.

*HP late Wednesday afternoon released the following statement:

“As reviewed at HP’s most recent Securities Analyst Meeting, we have great confidence in our multi-year strategy and our ability to position the company for continued success in an evolving industry, particularly given the multiple levers available to drive value creation.

Against this backdrop, we have had conversations with Xerox Holdings Corp. from time to time about a potential business combination. We have considered, among other things, what would be required to merit a transaction. Most recently, we received a proposal transmitted yesterday.

We have a record of taking action if there is a better path forward and will continue to act with deliberation, discipline and an eye towards what is in the best interest of all our shareholders.”

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Xerox to sell stake in Fuji Xerox for $2.3 billion, continue work with Fujifilm

The feud between Xerox Holdings Corp. and Fujifilm Holdings Corp. may finally be over.

Fuji has agreed to acquire Xerox’s one-quarter stake in Fuji Xerox for $2.3 billion, the two companies said Tuesday. Both companies’ boards agreed to the deal, which will give Fujifilm 100 percent ownership of the 57-year-old joint venture.

“This transaction is an ideal next step for Fuji Xerox and Fujifilm that we believe serves our stakeholders well and reflects our commitment to create innovative products that contribute to society,” said Fujifilm Chairman and CEO Shigetaka Komori in a statement Tuesday. “Fuji Xerox has now become a lean and strong company after a series of reforms we started in 2018, and I am confident that with this initiative it will be even stronger.”

Fuji Xerox will operate as a wholly owned subsidiary of Fujifilm and will continue to supply to Xerox after completion of the transaction, Fuji officials said. As part of the deal, Fuji will withdraw its $1 billion breach of contract lawsuit against Xerox.

“These agreements reset our relationship with Fujifilm and provide both companies with tremendous opportunities to grow, together and independently,” said John Visentin, vice chairman and CEO of Xerox, in a statement. “These agreements also unlock significant unrealized value for our shareholders, provide greater clarity for our customers and help us speed our transformation to a digital-first company.”

It’s a sharp departure from Visentin’s words in June 2018.

“We cannot stand by and let them further harm our iconic brand,” Visentin said in a statement following the filing of Fuji’s lawsuit last year. “The lawsuit is nothing more than a desperate and misguided negotiating ploy to save their takeover attempt, which to this day remains enjoined by order of the New York State Supreme Court, and could take our focus away from serving our customers.”

Visentin had vowed at the time to not renew the company’s Fuji Xerox contract when it expires in 2021 and to source products from new vendors, a move he said at the time would create “enormous opportunity for Xerox to sell products directly into the growing Asia-Pacific market with sole and exclusive use of the valuable Xerox name, and a more efficient, better-managed supply chain than exists with Fuji Xerox today.”

The feud between the two companies began early last year when Xerox majority shareholders Darwin Deason and Carl Icahn called for Xerox to rethink its $6.1 billion deal with Fujifilm that would have given the Japanese company a 51 percent ownership stake in Xerox. Icahn and Deason arguably were responsible for the ousting of former Xerox CEO Jeff Jacobson, who had brokered the failed merger, as well as five of Xerox’s former board members.

With the merger off the table, Visentin and Komori went head to head, with Komori chastising Visentin for his bad manners.

The Xerox/Fujifilm partnership dates to 1962 when the two companies agreed to a 50/50 joint venture in order to develop, produce and sell xerographic and document-related products and services in the Asia-Pacific region. Fujifilm raised its stake in the company to 75 percent in 2001. Fuji Xerox Co. Ltd. is headquartered in Tokyo.

Visentin on Tuesday said Xerox would use funds from the sale to pursue mergers and acquisitions in core and adjacent industries, return capital to shareholders and pay down its $550 million December 2019 debt maturity.

Shares of Xerox stock (NYSE: XRX) were up nearly 6 percent at $36.63 in heavy volume Tuesday afternoon.

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Xerox shares soar on positive Q3 earnings report

Xerox Holdings Corp. shares spiked Tuesday on earnings that surpassed Street estimates. Company stock (NYSE: XRX) had climbed 16 percent to $35.72 in heavy volume midday, eventually settling at roughly $34.50.

Despite a 6.5 percent decrease in revenue to $2.2 billion in the quarter, sales beat analyst estimates by $10 million in the third quarter ended Sept. 30. Net income for the quarter was $222 million, up from $93 million in the third quarter of 2018.

GAAP earnings for the quarter were 96 cents, up from 34 cents in the year-ago quarter. Adjusted earnings were $1.08, compared with 85 cents a year ago, beating Street estimates by 21 cents.

“Our strategy and execution delivered a strong third quarter despite industry headwinds,” Xerox Vice Chairman and CEO John Visentin said in a statement. “We increased cash flow, earnings per share and adjusted operating margin while we improved the revenue trend. These results give us confidence to raise our earnings and cash flow guidance for the year as we position Xerox for long-term growth.”

Xerox now expects fiscal 2019 revenue of $9.05 billion, with GAAP earnings of $3.10 to $3.20. Adjusted earnings are expected to be $4 to $4.10 per share. The company is expecting free cash flow of $1.1 billion to $1.2 billion.

Xerox officials said the company is on track to drive 2019 gross savings of $540 million or more under Project Own It, Xerox’s enterprise-wide initiative to simplify operations, drive continuous improvement and free up capital to reinvest in the business.

Third-quarter Project Own It restructuring and related costs totaled $27 million, compared with $29 million in the same quarter last year. Worldwide employment was 27,600 at the end of the third quarter, down 4,800 from Dec. 31, 2018, officials said.

Xerox in May received shareholder approval to reorganize as a wholly-owned subsidiary of a new holding company. The company announced plans for the reorganization in March.

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Xerox reports mixed Q2 financials

Xerox Corp. on Tuesday reported second-quarter financials that topped Street estimates for earnings but fell short on sales.

For the second quarter ended June 30, Xerox reported an 8.8 percent decrease in revenue to $2.29 billion, missing analyst estimates by $10 million. Net income for the quarter was $181 million, while adjusted net income was $233 million.

On a per-share basis, GAAP earnings were up 35 cents to 77 cents, missing Street estimates by 10 cents, while adjusted earnings were up 19 cents to 99 cents, missing estimates by 11 cents.

Officials said revenue declines for the quarter were affected by organizational changes, primarily in North America. Xerox recorded restructuring and related costs of $37 million during the quarter. The company has reduced its headcount by 4,500 since Dec. 31, resulting in a worldwide employment count of 27,900.

“This quarter we delivered improvements in EPS, adjusted operating margin and free cash flow largely underpinned by our enterprise-wide transformation initiative, Project Own It,” Xerox Vice Chairman and CEO John Visentin said in a statement. “These results have enabled us to increase planned investments for the second half of the year to support our revenue roadmap while maintaining our full-year guidance for EPS, adjusted operating margin and free cash flow.”

Project Own It, a plan announced earlier this year, is expected to drive gross savings of at least $640 million in 2019 and $1.5 billion by 2021. The plan includes flattening the organization for better accountability, leveraging its customer base for end-to-end solutions, investing in emerging technologies and expanding earnings and cash flow.

Xerox ended the quarter with $313 million of operating cash flow, up $78 million year-over-year, and $297 million of free cash flow, up $94 million. The company has completed $300 million of share repurchases year-to-date and expects another $600 million or more in total for the year, officials said.

As part of its Project Own It strategy, Xerox has added revenue streams for software and services, targeting small- and medium-sized businesses through partnerships with HP and American Express. The company has expanded Xerox Business Solutions’ IT Services capabilities and has acquired two new multi-brand dealers, Rabbit Office Automation and Heritage Business Systems.

Xerox adjusted its full-year revenue guidance to a 6 percent decline, compared to previous guidance of a 5 percent decline, while reiterating its GAAP earnings guidance to $2.90 to $3.05 and adjusted EPS to $3.80 to $3.95.

Xerox Corp. in May received shareholder approval to reorganize as a wholly-owned subsidiary of a new holding company. The company announced plans for the reorganization in March. The reorganization is set for completion on Wednesday, July 31.

Shares of company stock (NYSE: XRX) were down more than 3 percent to $32.82 in late morning trading Tuesday.

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Xerox filing details ‘Project Own It,’ plans to save $1.5 billion

Xerox Corp. is exploring the possibility of a “strategic transaction” involving its customer financing business and related assets, a filing with the Securities and Exchange Commission this week shows.

Monday’s filing included slides from a March 2019 presentation in which the document company detailed plans to “position Xerox for success.” Those plans, dubbed “Project Own It,” include flattening the organization for better accountability, leveraging its customer base for end-to-end solutions, investing in emerging technologies and expanding earnings and cash flow.

Project Own It, according to the filing, is expected to drive gross savings of at least $640 million in 2019 and $1.5 billion by 2021. The strategy includes the potential deal for its customer financing business, which accounts for roughly $3.4 billion of Xerox’s total debt of $5.2 billion.

Reuters reported that Xerox was considering the sale of its financing unit last summer.

The SEC filing also detailed a partnership with global technology company HCL Technologies in which HCL will manage portions of Xerox’s shared services, including global administrative and support functions. Those functions include selected information technology and finance functions, excluding accounting.

The seven-year agreement, for an incremental $1.3 billion, builds on Xerox’s decade-long product engineering relationship with HCL. Together, Xerox and HCL have delivered 215 U.S. patents and created research and development labs that are tightly integrated with Xerox infrastructure and standards, officials said in a statement Tuesday.

“The evolution of our shared services represents our culture of continuous improvement and allows us to more efficiently address customer needs while delivering significant cost savings to reinvest in the business,” Xerox President and Chief Operations Officer Steve Bandrowczak said in the statement. “We selected HCL as our partner for this strategic initiative due to our successful track record together thus far and our shared values.”

The announcement comes on the heels of an early March SEC filing in which Xerox detailed a plan to reorganize into a holding company. That document stated that following the restructuring, Xerox will become a direct, wholly owned subsidiary of the new holding company. The purpose of the reorganization is to provide Xerox with “strategic, operations and financial flexibility,” the first SEC filing stated.

In a March 15 proxy statement filed with the SEC, Xerox officials elaborated on the reorganization, stating that the new company will be known as Xerox Holdings Corp.

“By providing optionality for future innovation, investment and growth opportunities to exist either within or separate from current Xerox businesses, we believe that the holding company reorganization is an important step in re-establishing Xerox as a technology powerhouse with a robust portfolio of hardware, software, solutions and services, while preserving our existing customer, partner, vendor and supplier relationships,” the filing states.

The proxy statement, which will be voted on at Xerox’s annual meeting of shareholders May 21, also seeks approval of 2018 executive compensation proposals. John Visentin, who joined Xerox in May as vice chairman and chief executive following Jeffrey Jacobson’s ouster, has a total 2019 target compensation of $13 million, which includes a base salary of $1.2 million.

In 2018, according to the proxy statement, Visentin earned nearly $23.46 million, which included a base salary of $756,522, bonus and non-equity incentive awards of $3.3 million, stock options of $19.07 million and other compensation of $329,642. Visentin earned a cash sign-on bonus of $1.5 million and an initial equity award of restricted stock valued at $10 million.

“The one-time compensation grants at hire were designed to provide significant incentives to lead a turnaround. They increased Mr. Visentin’s compensation above the expected future annual rate going forward,” the proxy states.

Xerox in its fourth-quarter earnings filing reported revenues of $9.83 billion for the full year, a decrease of 4.2 percent. Net income for fiscal 2018 climbed to $361 million from $195 million in the previous year.

Shares of company stock (NYSE: XRX) were trading at $31.87 midweek. Xerox’s 52-week range is $18.58 to $32.34.

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Xerox announces three-year growth plan

Xerox Corp. has outlined a three-year strategy to expand its market and boost its bottom line.

At an Investor Day meeting, Xerox Vice Chairman and CEO John Visentin said the company will focus on four key areas to position Xerox for success: optimizing operations; a focus on cash flow; re-energizing the company’s innovation; and driving revenue.

Xerox believes it has the opportunity to expand its market by $54 billion, particularly in new areas of digital packing, 3D, IoT sensors and services and artificial intelligence workflow assistants, but also within adjacent markets including digital services and software.

“No matter what it is, it starts with digital,” Visentin told investors.

The company’s Powered by Xerox initiative will leverage the document company’s intellectual property through partnerships with others, Visentin said, rather than supplying physical products. Xerox will invest in robotics, analytics and IT solutions/cloud.

“The fact that we have areas that we’re focusing on gives us confidence today to show you a three-year roadmap,” Visentin said. “(2018) was to simplify business; 2019 it’s all about transforming the portfolio and getting our sales accelerated and investing in it; 2020 is a stabilization and our road to growth in 2021.”

Visentin spoke often about how Xerox has “earned the right” to do a multitude of things, including to “go and get what we want to get.” Each of the company’s 32,000 employees has been asked to think critically, he said.

“Tell us what we don’t know. Tell us the ideas. What are areas that we can improve our business, be better?” he said.

Xerox’s three-year strategy represents a sea change from where the company stood this time last year. The tempestuous year started with the announcement of a $6.1 billion merger with Fujifilm Holdings Corp. Through a series of majority shareholder-filed lawsuits, as well as an injunction blocking the merger, Xerox abandoned the deal and replaced a number of executives, including then-CEO Jeff Jacobson, as well as its board. Fuji, in turn, sued for breach of contract.

With much of the controversy in the rear-view mirror, Xerox in January posted full-year earnings of $3.46 per share, a 1-cent increase over 2017. Net income climbed to $361 million for the year, from $195 million in the previous year. Revenues were $9.83 billion for the full year, a decrease of 4.2 percent.

But Visentin and team were optimistic in Wednesday’s investor day. As a result of simplifying operations, instilling a culture of continuous improvement and investing in growth, Visentin said Xerox expects adjusted earnings in 2019 of $3.70 to $3.80, while 2020’s per-share earnings will top $4. And he expects free cash flow in excess of $3 billion over the next three years.

“With a history of designing breakthrough technologies, Xerox is ‘made to think,’” Visentin said, referring to the company’s roadmap to stabilize and grow revenue by improving core technologies and driving innovation and new business growth. “We are taking a disciplined approach to creating the next generation of innovative technologies and intelligent work solutions to meet our clients’ evolving needs.”

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Xerox earnings improve in Q4

Xerox Corp. on Tuesday posted mixed fourth quarter results, falling short of some Street estimates.

Revenue for the quarter ended Dec. 31 was $2.53 billion, a nearly 8 percent decrease from the fourth quarter last year. Net income for the quarter was $137 million, compared with a net loss of $190 million in the year-ago quarter. Adjusted earnings were $1.14 per diluted share, an 11-cent increase from the same quarter last year.

Full-year earnings were $3.46 per share, a 1-cent increase over 2017. Revenues were $9.83 billion for the full year, a decrease of 4.2 percent. Net income climbed to $361 million for the year from $195 million in the previous year.

Analysts polled by Zacks Investment Research had expected fourth-quarter EPS of $1.16 on revenue of $2.63 billion. Other Street estimates had pegged earnings at $1.04 per share on sales of $2.56 billion.

“Our Q4 results reflect continued progress on our strategic initiatives to optimize our operations, re-energize our innovation engine and increase shareholder returns,” said Xerox Vice Chairman and CEO John Visentin in a statement.

Xerox last year underwent a management shakeup following a failed merger attempt between the company and Fujifilm Holdings Corp., a longtime partner in another venture. The upheaval was led by activist investors Carl Icahn and Darwin Deason.

Following Visentin’s installation at the helm, as well as the appointment of a new board and other leadership, Xerox vowed to streamline its business.

“We remain focused on removing complexity in the way we work, organizing more effectively and creating a better customer experience, and we are seeing those efforts reflected in this quarter’s results,” Visentin said.

Net cash in the quarter was $415 million, a $564 million increase from the fourth quarter 2017. The company attributed the increase to the termination of all accounts receivable sales arrangements in North America and all but one in Europe during the fourth 2017.

Fourth quarter 2018 contract signings decreased 21.6 percent from fourth quarter 2017 to $747 million. For the full year, signings decreased nearly 13 percent to $2.37 billion, Xerox reported.

Net restructuring and asset impairment charges of $66 million during the quarter included $72 million of severance costs related to headcount reductions of 850 employees worldwide and $1 million of lease cancellation costs.

Worldwide employment was roughly 32,400 as of Dec. 31, 2018, and decreased by 2,900 from Dec. 31, 2017, largely driven by the document company’s business transformation. Half of the reduction was due to restructuring, while the remaining resulted from attrition, most of which are not expected to be backfilled, according to the earnings report.

Xerox’s board has approved an incremental share repurchase of $1 billion, and the company expects $300 million or more of share repurchases in 2019. The company expects adjusted earnings per share of $3.70 to $3.80 for full-year 2019. Separately, Xerox recently rebranded its Global Imaging Systems as Xerox Business Solutions. Company officials said the rebrand was a result of an increased focus on better serving the small- to medium-size business market with a more “client-centric, simplified and integrated approach” across the country.

“We are well positioned as we enter 2019 to continue to build on all our initiatives to deliver greater shareholder value,” Visentin said. “We look forward to sharing the details around our strategy and three-year financial expectations at our investor day on February 5.”

Shares of company stock (NYSE: XRX) were down slightly to $24.30 in heavy early morning volume Tuesday.

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Xerox reports drop in sales in first full quarter since shakeup

Xerox Corp. on Tuesday reported a drop in third quarter revenue and earnings, missing Street estimates for sales, but beating estimates for EPS.

In the first full quarter since its leadership shakeup in May, Xerox reported a nearly 6 percent year-over-year decline in revenue to $2.35 billion. For the third quarter ended Sept. 30, net income dropped by nearly half to $89 million. On a per-share basis, earnings fell to 34 cents from 69 cents in the third quarter last year.

Analysts polled by Zacks Investment Research had expected earnings of 77 cents on revenue of $2.42 billion.

“We are progressing on our priorities, which include optimizing our operations for greater simplicity, re-energizing our innovation engine and focusing on cash flow to drive increasing shareholder return,” Xerox Vice Chairman and CEO John Visentin said in a statement. Visentin was named CEO in May, following the ouster of then-CEO Jeff Jacobson.

Adjusted cash flow increased in the quarter to $157 million, while the company returned $284 million to shareholders through share repurchase. Xerox paid out $69 million in dividends in the third quarter.

“Work remains on the priority to drive revenue,” Visentin said. “Actions are underway to streamline the organizational structure, expand our channel presence and further differentiate our products and services to provide greater value to customers.”

The document company has taken a hit in recent years as the need for printers continues to decline. Equipment sales—which accounts for 22 percent of total revenue—in the quarter fell nearly 4 percent to $511 million.

Xerox reported $29 million in restructuring costs in the quarter.

Last week a New York Appellate court overturned preliminary injunctions that blocked Fujifilm Holdings Corp. from moving forward with a planned $6.1 billion merger of the two companies.

In January, Xerox and Fujifilm had announced plans for a merger that would give Fujifilm 50.1 percent ownership of the combined company, to be known as Fuji Xerox. Xerox shareholders were to receive a $2.5 billion special cash dividend, or roughly $9.80 per share, funded from the combined company’s balance sheet. Xerox shareholders would own 49.9 percent of the company.

Through a series of majority shareholder-filed lawsuits and public condemnation, as well as an injunction blocking the merger, Xerox shelved the deal and replaced a number of executives and its board. Fuji, in turn, sued for breach of contract.

Last week’s reversal could give Fuji some leverage in new merger negotiations.

Shares of company stock (NYSE: XRX) closed Monday at $26.40 and were trading at 26.58 in heavy volume Tuesday morning.

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Xerox misses Street estimates in Q2

Xerox Corp. on Thursday reported a drop in second quarter revenues and earnings, missing Street estimates.

The document company also announced plans for a $1 billion share repurchase program, and Xerox will opportunistically buy back up to $500 million in 2018. Xerox ended the quarter with a cash balance of $1.26 billion.

“This positive step forward is a strong endorsement of the company and represents an immediate action to deliver value to our investors,” said new company CEO and Vice Chairman John Visentin in a statement.

For the quarter ended June 30, Xerox reported revenue of $2.51 billion, down 2.2 percent from $2.57 billion a year ago. Income for the quarter dropped to $112 million, or 42 cents per diluted share, from $166 million in the second quarter last year. On an adjusted basis, Xerox earnings for the quarter were 80 cents per diluted share.

Analysts polled by Zacks Investment Research earnings of 92 cents per share on revenues of $2.5 billion.

“It’s clear after two months as CEO of this iconic brand that we can return Xerox to the forefront as a leading tech company,” Visentin said. “We currently have software, services and printing technologies, along with a pipeline of innovations, which can disrupt the marketplace and bring increased value to those we serve.”

Visentin stepped into the role of CEO upon the ousting of then-CEO Jeff Jacobson. Jacobson’s resignation came after months of sparring between Xerox major shareholders and several executives following Jacobson’s $6.1 billion deal with Fujifilm Holdings Corp. That deal collapsed amid accusations that Jacobson had gone rogue in making the deal.

Fujifilm has since sued Xerox for $1 billion for breach of contract, and in response Visentin in June promised not to renew the company’s Fuji Xerox contract when it expires in 2021 and to seek new vendors for its products. Visentin also said that Xerox plans to compete with Fuji in the Asia-Pacific market.

In the second quarter Xerox reported $40 million in severance costs related to headcount reductions of 550 employees worldwide, impacting the company’s balance sheet. Transaction costs for the quarter were $58 million, which included costs associated with legal fees and other costs from the terminated Fuji agreement.

“Our second-quarter results demonstrate the benefit of having a business model underpinned by annuity cash flow. However, it also highlights the challenge of improving revenue and flowing cost savings to the bottom line,” Visentin said in Friday’s news release. “Our success will depend on operating with a relentless focus on optimization.

“Actions include improving the effectiveness and efficiency of our supply chain and go-to-market channels,” Visentin added. “Equally important is ensuring we provide a great experience for our customers and address their evolving business needs.”

Shares of company stock (NYSE: XRX) spiked Thursday morning and have remained near $26.

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Fujifilm chairman accuses Xerox CEO of bad manners

The Xerox/Fuji feud is looking more and more like a bad breakup.

Fujifilm Holdings Corp. Chairman Shigetaka Komori responded in kind this week to a “Dear John” letter from new Xerox Corp. CEO John Visentin, in which he detailed why the two companies could no longer be together.

“Our agreements to combine Xerox and Fuji Xerox were fairly negotiated at arms’ length by sophisticated parties and were unanimously approved by the boards of directors of both Xerox and Fujifilm,” Komori said in his letter to Visentin. “Although you desperately attempt to justify your unilateral termination of these agreements in your letter, we are confident that the court will see through your misleading misstatements and conclude what is obvious to objective observers: that your stated reasons for terminating our deal are merely a thinly veiled pretext to bargain for a higher price from Fujifilm at the behest of two minority shareholders.”

Fujifilm is suing the document company for more than $1 billion for breach of contract, stemming from the failed $6.1 billion merger that was announced in January. The Japanese photo and imaging giant in the June 18 complaint accused Xerox of engaging in “intentional and egregious conduct” in abandoning the merger.

As a result of the lawsuit, Visentin this week reached out to Komori, stating that Xerox would not “stand by and let them further harm our iconic brand.”

“No matter what you tell the Japanese media, it is abundantly clear that the bad actor here is Fujifilm, not Xerox,” Visentin said in his letter to Komori this week. “Fujifilm, as 75 percent owner and controlling partner of Fuji Xerox, has concealed from Xerox the true extent of a massive and ongoing accounting fraud at Fuji Xerox caused by Fujifilm’s own gross mismanagement.”

Fujifilm last year had acknowledged improper accounting standards at the Fuji Xerox subsidiary, which resulted in a $341 million adjustment to six years’ net profits and the resignation of Fuji Xerox Chairman Tadahito Yamamoto.

Komori in his letter said he would not “dignify every misstatement” in Visentin’s letter, but he did address the Fuji Xerox accounting debacle.

“As you very well know, Fuji Xerox has devoted extensive resources to ensure that past accounting issues have been properly resolved and there is no reason to assert that these issues continue to exist,” Komori said. “While you criticize Fujifilm as a shareholder of Fuji Xerox for its questionable accounting issue, you should note that Xerox is another shareholder of Fuji Xerox and it is (an) obvious mistake to accuse only one party of the joint venture for the accounting issue.”

Visentin earlier this week said Xerox will not renew its Fuji Xerox contract when it expires in 2021 and the company will move to accomplish three things:
• Xerox will start, in a material way, to source products from new vendors.
• Xerox will build partnerships with companies that are aligned with Xerox’s mission to provide world-class technology and solutions.
• Xerox believes the company will be much better served by not renewing its Technology Agreement with Fuji Xerox when it expires.

“As for your stated intent to not renew the Technology Agreement in 2021 and conduct business in the Asia Pacific market, we are prepared to respond by competing with Xerox here in Asia Pacific, and by marketing in territory where Xerox is currently doing business unchallenged by us, such as America and Europe,” Komori responded. “While Xerox presently has no marketing facilities here in Asia Pacific, we have global infrastructure that we can utilize for marketing worldwide. Accordingly, we believe it would be enormously costly and difficult for Xerox to gain business in Asia Pacific.”

Komori in his letter also pointed out Visentin’s bad manners in failing to attend Fuji Xerox’s June 20 annual shareholders’ meeting and board meeting, as well as publicizing his letter to Komori before Komori had received it.

“This is impolite and wrong, and I hope our communications will be in a more respectful manner going forward,” Komori wrote.

Xerox declined to comment on Komori’s letter.

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Xerox’s Visentin states plan to cut all ties with Fujifilm

New Xerox Corp. head John Visentin broke his silence Monday about the failed Fujifilm Holdings Corp. merger and subsequent $1 billion lawsuit brought against the document company.

“We cannot stand by and let them further harm our iconic brand,” Visentin said in a statement that referenced a letter he sent Monday to Fujifilm Chairman Shigetaka Komori. The letter was in response to a lawsuit Fuji filed last week. “The lawsuit is nothing more than a desperate and misguided negotiating ploy to save their takeover attempt, which to this day remains enjoined by order of the New York State Supreme Court, and could take our focus away from serving our customers.”

As part of an agreement with major shareholders Darwin Deason and Carl Icahn, Xerox in May announced that Visentin had been named chief executive, replacing ousted CEO Jeff Jacobson. Visentin also was elected vice chairman of the company’s board of directors, while Keith Cozza was elected chairman.

Five Xerox board members had resigned as part of the same agreement and Jacobson had stepped down amid testimony that he had sidestepped the board’s advisement to make an all-cash deal when he made the arrangement with Fuji. Witnesses testified he did so to keep his own job, while thousands of Fuji Xerox employees would lose theirs.

Earlier that week, Xerox said it had terminated its $6.1 billion acquisition agreement with Fuji Xerox as a result of Fuji failing to deliver the audited financials of Fuji Xerox by April 15 and the differences in the audited financials from the unaudited financials.

Fujifilm last year had acknowledged improper accounting standards at the subsidiary, which resulted in a $341 million adjustment to six years’ net profits and the resignation of Fuji Xerox Chairman Tadahito Yamamoto.

As a result of the failed merger and the lawsuit Fuji filed against Xerox last week, Visentin said Xerox will not renew its Fuji Xerox contract when it expires in 2021 and the company will move to accomplish three things:
• Xerox will start, in a material way, to source products from new vendors.
• Xerox will build partnerships with companies that are aligned with Xerox’s mission to provide world-class technology and solutions.
• Xerox believes the company will be much better served by not renewing its Technology Agreement with Fuji Xerox when it expires.

“We will detail for our shareholders the enormous opportunity for Xerox to sell products directly into the growing Asia-Pacific market with sole and exclusive use of the valuable Xerox name, and a more efficient, better managed supply chain than exists with Fuji Xerox today,” Visentin said in Monday’s statement. The company’s annual shareholder meeting is set for July 31.

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John Visentin becomes CEO at Xerox

As part of an agreement with major shareholders Darwin Deason and Carl Icahn, Xerox Corp. on Wednesday announced that John Visentin has been named chief executive.

Visentin also was elected vice chairman of the company’s board of directors, while Keith Cozza was elected chairman.

Earlier this week, Xerox said it had ended its acquisition agreement with Fuji Xerox as a result of Fujifilm failing to deliver the audited financials of Fuji Xerox by April 15 and the differences in the audited financials from the unaudited financials.

Xerox subsequently settled with Icahn and Deason, and in doing so resolved Deason’s litigation against the company and its directors. The settlement does not affect Deason’s or any other shareholders’ claims against Fujifilm.

Other key elements of the settlement include:

Under the terms of the agreement:

• Jeff Jacobson resigned from his role as CEO and as a member of Xerox’s board.
• Xerox appointed five new members to its board: Jonathan Christodoro, Cozza, Nicholas Graziano, Scott Letier and Visentin.
• Robert J. Keegan, Charles Prince, Ann N. Reese, William Curt Hunter, and Stephen H. Rusckowski each resigned from the board.
• Gregory Brown, Joseph Echevarria, Cheryl Krongard and Sara Martinez Tucker will continue to serve as members of the Xerox board.

In Wednesday’s statement, Xerox officials said that “in order to replace the value of certain compensation Visentin is forfeiting in order to join Xerox,” independent directors approved an award of 350,755 restricted shares of Xerox common stock, which will vest on May 1, 2019.

Xerox also has chosen July 31 as the date for its annual shareholders meeting.

Xerox shares (NYSE: XRX) tanked on Monday as news of the agreement spread. At midday Thursday shares were trading at $28.72.

[email protected] / 585-653-4021
Follow Velvet Spicer on Twitter: @Velvet_Spicer

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