Xerox sees business services growth
As Xerox Corp. seeks to distance itself from competitors Canon Inc., Hewlett-Packard Co. and Ricoh Co., the Norwalk company best known for its printers and copiers is projecting strong 2013 earnings as it continues to emphasize its services business.
Today, Xerox’s business services unit accounts for more than half of its revenues, with CEO and Chairman Ursula Burns projecting that arm of the company will account for two-thirds of all Xerox revenues by 2017.
The shift is “not only driven by the fact that we are growing that portion of the business but because the market’s transitioning, our customers are transitioning,” Burns said Nov. 13 in an appearance on CNBC. “They want more from us than just a point solution – they want us to actually help them change the way they get business done.”
Xerox expects 2013 earnings to increase about 10 percent and for revenues to grow between zero and 2 percent, the company said Nov. 13 at its annual investor conference held in New York City.
For the third quarter, which is the most recent period Xerox has released earnings, the company reported revenues fell 3 percent to $5.4 billion compared with the third quarter of 2011, while net earnings fell 12 percent to $288 million.
The company also said at its investors conference that it would take an estimated $100 million charge in the fourth quarter related to restructuring efforts focused on increasing efficiency in its services business.
Xerox has confirmed it will lay off 2,500 employees during the fourth quarter, primarily from its services unit, out of a global workforce of about 146,000.
Burns expressed confidence that Xerox’s global reach would help the company to distance itself from traditional competitors in the document printing and management sector, as well as new competitors in the business services arena.
“Our traditional competitors in the hardware business are HP and Ricoh and Canon, but now we have, with this diversified portfolio we have a large number of smaller, less capitalized competitors mixed in with a few large competitors,” she told CNBC, noting that Xerox’s services business works in industries including transportation, health care and customer care, among others.
“So this diversified portfolio has us competing against very many different providers, but we actually differentiate ourselves because we are global, we have a very, very strong brand (and) we are large — so our scale gives comfort to our clients (and) we use innovation to change fundamentally the way the work gets done,” she said.
As Xerox shifts increasing emphasis to its services business, analysts say IBM Corp. — which itself underwent a drastic evolution from the hardware business to services — is likely to emerge as a competitor.
David Souder, a professor in the management department of the University of Connecticut School of Business, said the key for Xerox is to focus on what makes it unique.
In the 1990s and 2000s, “The thing that really made it work for IBM was that they were installing their hardware for companies and they had to customize it and in customizing it they came to understand their clients’ needs very well, and so they can still do that customization piece and do it better than anyone else even though the hardware is coming from other vendors,” Souder said.
Going forward for Xerox, Souder said, “the key to making that transition really successful is to have something really unique that nobody else can replicate. Other companies can make the hardware — IBM knew how to use it … It’s about focusing on where you add value uniquely compared to your competition.”