Xerox Is Primed For Growth as Conduent Spin-Off Looms

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Xerox copier

Xerox logoInnovation has been part and parcel of Xerox’s journey since it launched in 1906 as The Haloid Photographic Co., a US manufacturer of photographic paper and equipment. The leap to the first automated machine to make copies for the commercial market took two decades, but by 1959 the Xerox 914 was so successful that by the end of 1961, Xerox had reached nearly $60 million in revenue.

In 2015, the Norwalk, Conn.-based Xerox reported revenues of $18.2 billion and net income of $1.1 billion. Now in 2016, its next chapter involves cutting itself in two in order to grow. Xerox is now getting ready for its next adventure as two separate companies – Conduent Inc., a $7 billion company that’s a leader in business process services, and the new Xerox, an $11 billion company and the most well-known name in document technology and related services.

In January, CEO Ursula Burns announced a spin-off of its business processes services unit, separating it from the legacy hardware side in order to create two separate publicly-traded companies.

The BPO spin-off, called Conduent, this week announced it will trade on the New York Stock Exchange (symbol: CNDT) while Xerox will continue to trade on the NYSE as XRX. Once the separation occurs, as expected by year-end, Conduent will become a Fortune 500-scale business process services company with expertise in transaction-intensive processing, analytics and automation, employing 93,000 employees worldwide. And Xerox will remain the leader in Document Technology, or Burns calls it, DocTech.

“You can think about these two businesses in the following way: The Technology business is a strong cash-generating business. It’s in a very strong annuity-based model. While we will be investing more actively in the Document Technology business, it will not substantially or significantly change the ability for us to generate cash in the DocTech business,” Burns commented on Xerox’s second quarter earnings call. “In the BPO business, its cash generation ability is a little bit weaker than the Tech business. We’ll be investing more actively in that business as we separate and they go into Conduent.”

“Our separation into Xerox and Conduent will create two independent, Fortune 500-scale, publicly traded companies with distinct and compelling investment propositions and differentiated financial profiles, growth drivers and business prospects,” stated Conduent CEO Ashok Vemuri.

In a year of change and realignment, the core Xerox brand continues to “create the future” and iterate its products and in a recent technology leap introduced their Direct to Object Inkjet Printer—capable of printing any 3D object. “The printer leverages Xerox image quality algorithms that direct the tiny stainless steel nozzles—half the width of human hair—to accurately spray ink on objects as small as bottle caps and as large as football helmets,” reports the company.

“This innovation opens up a path for creating customized products instantly at a time when the consumer’s appetite is all about personalization,” said Brendan Casey, VP Xerox Engineering Services. “Imagine a sports fan coming home from a game with a helmet or ball that was personalized right at the stadium, or a retailer offering on-demand personalization on hundreds of different store items.”

Xerox is poised for ongoing growth with continuous innovation in small office productivity with new multifunction printers, teaching machines to see and supporting its PARC team developing innovative electronics technologies. One such innovation: the new Shop and Ride app.

Xerox is powering the local shopping app, which is based in Hoboken, New Jersey, to bring digital couponing to mass transit riders. Beacon technology placed in local bus shelters and at merchant sites communicates with the app so riders are notified of existing offers in the area or at a particular store.

As Xerox CMO John Kennedy told Forbes, the goal now is to focus each company on what it does best and can do with its respective assets and strengths, as “we are focused on preparing both companies for new messaging and new campaigns to get them off to a fast start in 2017.”

“The challenge for Conduent,” he added, “will be to introduce it in a way that is differentiating and drives client and prospect interest to attract growth opportunities.”

“On Xerox, the team is focused on sharpening Xerox’s profile and messaging now that it’s part of the legacy portion of the business. Xerox hasn’t merchandised that aspect of the business too much, however it’s been doing incredible work continuing to innovate and redefine businesses. Reinvigorating excitement and interest in that part of the business is job number one.”

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