Tag: xerox

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.

John Visentin
John Visentin

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.

Shigetaka Komori
Shigetaka Komori

“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.

John Visentin
John Visentin

“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.

John Visentin
John Visentin

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.

John Visentin
John Visentin

“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 reorganization receives shareholder approval

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

Shares of company stock (NYSE: XRX) dropped roughly 3 percent on Wednesday as a result of Tuesday afternoon’s announcement.

Xerox said the proposal was approved by 99.7 percent of shareholders who were present and voting at the company’s annual meeting. Those shareholders represent roughly 77 percent of all outstanding common stock.

Zacks Investment Research said Wednesday morning it believes the move will help Xerox “protect patents, reduce tax bills and diversify businesses efficiently.” The reorganization will complement the company’s strategic transformation program to achieve productivity and cost reduction and aggressive product development efforts, Zacks officials said.

Zacks’ current rank of Xerox is 2, or buy.

Closing of the holding company reorganization is subject to regulatory conditions, but company officials expect it to be finalized by the third quarter this year.

Following the closing, Xerox expects the holding company’s common stock to continue to trade on the New York Stock Exchange under “XRX.” Xerox has notified NYSE Chicago that it intends to voluntarily delist Xerox common stock from trading on NYSE Chicago prior to completion of the holding company reorganization.

The company also late Tuesday announced a quarterly cash dividend of 25 cents per share on common stock. The dividend is payable on July 31 to shareholders of record on June 28. The board also declared a quarterly cash dividend of $20 per share on the outstanding Xerox Series B convertible perpetual preferred stock. The dividend is payable July 1 to shareholders of record on June 15.

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Conduent reports drop in earnings; CEO steps down

Shares of Conduent Inc. stock (NYSE: CNDT) rebounded slightly Friday following a more than 42 percent drop in share price Thursday.

conduent-logoThe drop—from Wednesday’s close of $12.51 to Thursday’s low point of $7.17—followed a less-than-stellar first-quarter earnings report and the resignation of Conduent chief executive Ashok Vemuri. Vemuri had come under fire in April when board member Michael Nevin resigned. Nevin wrote a scathing criticism of Conduent leadership, in particular, Chairman William Parrett and Vemuri, which was filed with the Securities and Exchange Commission April 11.

Nevin had been appointed to the board by activist shareholder Carl Icahn, who last year caused a similar stir when Xerox Corp.—which Conduent was spun out of—was in merger talks with Fujifilm.

In his letter of resignation, Nevin took to task Vemuri’s decision to join the board of Kroger Grocery Stores. Nevin wrote: “Ashok, with Chairman Parrett’s acquiescence, determined to take this board seat only a few short months after negative disclosures by Conduent resulted in the evaporation of almost half the company’s stock market valuation in a matter of weeks. How Bill could have missed or ignored this glaringly obvious red flag is a mystery. The only answer that makes any sense to me is that he was asleep at the switch, as he has been in so many instances during his tenure, or perhaps he was distracted by his myriad other responsibilities as a director of Oracle, Blackstone, Eastman Kodak and UBS Americas.”

For its part, Conduent said the “noisy letter” was Icahn’s attempt at a board takeover in order to replace Parrett.

In the announcement of Vemuri’s resignation, Conduent officials praised his role in transforming the company’s business.

“Under his leadership, the company has implemented a comprehensive cost-reduction program and is continuing to make key investments in technology and products as it pivots to growth,” Parrett said.

A search is underway for Vemuri’s replacement, which Parrett said will focus on identifying a leader “who shares our vision for the power of digital interactions, can accelerate the pace of our progress and deliver enhanced shareholder value.”

“It has been my privilege, as CEO of Xerox Business Service, to separate and then to lead as the first CEO of Conduent,” Vemuri said in a statement. “We have made enormous progress—standing up a public company, driving a significant transformation program in a relatively short period of time, laying the foundation to become a digital interactions company and resolving the legacy issues we inherited.”

Vemuri said he would stay on until his successor is named, likely sometime during the third quarter this year.

In a separate announcement, Conduent released first-quarter revenue of $32 million, compared with $47 million in the first quarter last year. On a per-share basis, earnings were 14 cents, down from 22 cents a year ago. The decline was primarily driven by divested businesses.

Conduent was expected to post a year-over-year decline in sales; Zacks Investment Research expected quarterly earnings of 19 cents per share, a nearly 14 percent decline. Revenues were expected to be $1.18 billion, down 17.2 percent from the year-ago quarter.

Conduent provides business process services with capabilities in transaction-intensive processing, analytics and automation in the U.S. and Europe. It operates through three segments: Commercial Industries, Government Services and Transportation.

The company is headquartered in Florham Park, N.J., and has a call center that employs more than 600 at the former Medley Centre in Irondequoit. At a ceremonial ribbon cutting for the center in early 2018, Conduent’s chief people officer Jeff Friedel said the company had planned to add another 350 employees before year’s end.

Related: Conduent’s arrival signals start of new era for the medley centre

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Xerox posts revenue decline, earnings increase

Xerox Corp. on Thursday reported mixed first quarter results that beat Street estimates for earnings but fell short of revenue expectations.

For the quarter ended March 31, Xerox reported revenues of $2.21 billion, a more than 9 percent drop from 2018 first-quarter sales of $2.44 billion. Revenues missed Street estimates by $60 million.

Equipment sales for the quarter dropped more than 10 percent, while post-sale revenue fell 9 percent.

Net income for the quarter was $133 million, up significantly from $23 million in the year-ago quarter. Adjusted net income was $219 million. Adjusted earnings per share for the quarter were 91 cents, compared with 68 cents a year ago. Analysts had expected earnings of 81 cents.

Xerox ended the quarter with $723 million cash on hand, compared with $1.08 billion in the same quarter last year.

“Our transformation initiatives are yielding results, which give us confidence to raise our full-year earnings guidance despite revenue declines. We are investing in our core business as well as new technologies that create value for our stakeholders and position us for long-term growth,” said Xerox Vice Chairman and CEO John Visentin.

Xerox revised upward its full year guidance to adjusted net income of $912 million, with earnings ranging from $3.80 to $3.95 per share.

Xerox officials said the company was on track to drive gross savings this year of $640 million or more under Project Own It, Xerox’s transformation initiative to create a simpler organization. Restructuring costs related to Project Own It were $112 million during the first quarter.

In March, Xerox officials announced plans to restructure the document company into a holding company, which will be voted on at Xerox’s annual shareholder meeting May 21.

Shares of company stock (NYSE: XRX) closed Wednesday at $33.69 and had fallen by more than 4 percent to $32.19 midday Thursday.

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Scheme to defraud Xerox ends with fifth guilty plea

A fifth Florida man has pleaded guilty to charges involving a scheme to defraud Xerox Corp. of more than $20 million in toner supplies.

Robert Fisher of Daytona, Fla., pleaded guilty before US District Court Judge Elizabeth Wolford Friday in connection with a 63-count indictment. He pleaded guilty to charges of conspiracy to commit wire fraud and faces a potential maximum of 20 years in prison and a $250,000 fine. The pleading follows guilty pleas in the same case by Kyle, Jason and David Haynes, and Bryan Day, all of Florida.

According to Assistant US Attorney Richard A. Resnick, Fisher’s company, RBM Imaging, was an authorized reseller of Xerox office equipment, and the Haynes brothers and Bryan Day owned an office furniture business.  The Haynes group has admitted that they set up a sham company to buy 63 printers from Fisher and then falsely represented to Xerox that they were making millions of prints and so needed more than the usual amount of toner. Many of the printers were never taken out of their cartons, but the group obtained $25 million in toner from Xerox and sold it for $11 million, sharing profits with Fisher.

Xerox typically charges end-users by the print, retaining ownership of the toner and its cartridge until the prints are made; they prohibit sales of the toner directly.

In pleading guilty, Fisher also agreed to pay the Internal Revenue Service $192,495, plus interest and penalties for false tax returns he filed for 2008-2013, and to forfeit assets that have already been seized by the government.

Fisher is scheduled to return to court May 3.

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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 to reorganize into holding company

Xerox Corp. plans to reorganize its corporate structure into a holding company, documents filed with the Securities and Exchange Commission Wednesday show.

Following the restructuring, Xerox will become a direct, wholly-owned subsidiary of a new holding company. The purpose of the reorganization is to provide Xerox with “strategic, operations and financial flexibility,” the document states.

The business operations, directors and executive officers of the company will not change as a result of the reorganization.

The reorganization is intended to be implemented via a tax-free transaction for U.S. federal income tax purposes that will result in each holder of Xerox common stock owning the same number of shares of common stock in the new holding company and holders of preferred stock also owning the same number of shares in the new holding company, the SEC document states.

The filing states that it is expected that shares of the new holding company’s common stock will trade on the New York Stock Exchange under Xerox’s current ticker XRX.

The reorganization is subject to shareholder and regulatory approval and is expected to be implemented in mid-2019. Xerox officials in the filing said additional details will be included in a proxy statement related to the document company’s 2019 annual meeting and mailed to shareholders when available.

Shares of company stock were on the decline Thursday morning from Wednesday’s close at $30.85.

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Xerox announces three-year growth plan

John Visentin
John Visentin

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.

xerox logoRevenue 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.

John Visentin
John Visentin

“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 credit rating downgraded, stock plunges

xerox logoXerox Corp. shares (NYSE: XRX) fell to a near six-year low this week as Moody’s Investors Service downgraded the document company’s senior unsecured debt ratings to Ba1 from Baa3, among Moody’s lowest long-term obligation ratings and considered to have substantial credit risk.

Xerox stock closed Monday at $21.29 per share; by midday Tuesday shares had further fallen to $21.26.

Moody’s cited uncertainty about Xerox’s ability to stabilize and grow its revenue base over the next few years given the secular decline in copier and printing demand, as well as intense global competition.

Despite major product launches in 2017, Xerox reported seven consecutive quarters of year over year revenue declines on a constant currency basis since the spin-off of the business process outsourcing segment, Moody’s noted.

“Moody’s believes that, given persistent secular pressures and the company’s track record of declining organic revenues, potential strategies targeting improved profitability, streamlined operations or rationalized product offerings will come with execution risks related to achieving planned results, further top line erosion, or incremental costs over the next 12 to 18 months before benefits are realized,” said Carl Salas, Moody’s senior credit officer.

In January, Xerox and Fujifilm Holdings Corp. 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.

Xerox and Fuji have long had a partnership in Japan, known as Fuji Xerox Co. Ltd. Xerox has a 25 percent stake in the company. Xerox Vice Chairman and CEO John Visentin, who was named CEO in May following the ouster of then-CEO Jeff Jacobson, had vowed to terminate that agreement when it is up for renewal in 2021.

Moody’s officials on Friday said they believe there is uncertainty related to manufacturing arrangements and Asia-targeted marketing strategies after the current agreement with Fuji Xerox expires.

“Moody’s also believes that without the continuation of the Fuji Xerox agreements on terms that are at least similar to the current agreement, there could be additional operating and financial pressures given the need to enter into new arrangements with alternate partners or the need to fund significant investments to replace a portion or all related manufacturing and marketing functions,” officials said in a statement.

Moody’s noted that the negative outlook “reflects the persistent pressures on the company’s core copier and printing business as well as execution challenges, especially if new management’s operating and strategic plans include sizable restructuring charges, incremental investments, or relaxation of historical capital allocation policy.”

Xerox previously had been downgraded by Fitch Ratings in August.

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Xerox reports drop in sales in first full quarter since shakeup

xerox logoXerox 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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Fujifilm wins appeal in Xerox merger deal

Fuji XeroxXerox Corp.’s merger woes aren’t over yet.

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

“Plaintiffs failed to show bad faith or a disabling interest on the part of the majority of the directors of Xerox,” the ruling stated.

In January, Xerox and Fujifilm 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.

At the time of the announcement, then-Xerox CEO Jeff Jacobson had become a target for major shareholders Carl Icahn and Darwin Deason, who had called for his termination, saying he was “neither qualified nor capable of successfully running this company.”

In the weeks that followed, Icahn and Deason urged shareholders to kill the merger with Fujifilm, stating that “unless we do something, this latest Fuji scheme will be the company’s final death knell.”

By March, the document giant had faced two lawsuits brought by Deason claiming, among other things, that Jacobson had pursued a deal with Fujifilm that his board neither wanted nor approved, and that Jacobson orchestrated the deal in order to keep his job.

The April lawsuit stated that in March 2017, the Xerox board of directors—each of whom were named as defendants in the suit—authorized Jacobson to pursue a “100 percent all cash” transaction with Fuji. When Fuji found itself in the middle of an accounting scandal, the pursuit was shelved.

According to Deason’s lawsuit, Jacobson abandoned the pursuit of the all-cash transaction and “threw a hail Mary,” resulting in the transaction as it stood in January that did not require Fuji to spend any cash to acquire control of Xerox.

Xerox and Fuji have a longstanding history; the two companies in 1962 entered a 50/50 partnership 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, and it was through the subsidiary that Fuji acknowledged the accounting errors.

Judge Barry Ostrager of the state Supreme Court in New York County granted an injunction on April 27 blocking the Xerox merger with Fuji. He ruled that the defendants “breached their fiduciary duties as directors in approving the proposed transactions and that Fuji aided and abetted such breach.”

As a result, Xerox ended the acquisition agreement, stating it was 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.

In May, Xerox announced that Jacobson and several board members had resigned, and John Visentin was named CEO. In June, Fuji sued Xerox for breach of contract, seeking $1 billion in damages. Visentin later said Xerox would cut all ties with Fuji and would not renew its Fuji Xerox contract when it expires in 2021.

In Tuesday’s reversal, the court found that Jacobson “neither misled nor misinformed the board.”

“The board, which engaged outside advisors and discussed the proposed transaction on numerous occasions prior to voting on agreeing to present it to the shareholders, did not engage in a mere post hoc review, nor was the transaction unreasonable on its face,” the ruling added.

The ruling also said the lower court “should have also dismissed the claims alleging aiding and abetting a breach of fiduciary duty as against Fuji,” stating “their claims being unsupported by specific factual allegations.”

Tuesday’s decision “will allow us to discuss with Xerox the fulfillment of the original agreement. All Xerox shareholders ought to be able to decide for themselves the operational, financial and strategic merits of the transaction to combine Fuji Xerox and Xerox,” according to a statement from Fuji.

Xerox officials have not expressed publicly a desire to renegotiate a merger deal with Fuji and did not immediately respond to a request for comment on Wednesday.

Shares of company stock (NYSE: XRX) were up at $27.15 in heavy midday trading Wednesday.

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