Xerox Corp. (NYSE: XRX) has become one of those ancient tech companies, not entirely unlike Dell Inc. (NASDAQ: DELL), that has overstayed its welcome in the market, as it struggles against much larger, more well-funded and more innovative companies. It is time for the Xerox board to consider its options to get some money back to shareholders, either through a sale of the company or its assets, or via a leveraged buyout.
The proof of investor disappointment in Xerox is it share price. Over the past year, it is off slightly, while the S&P 500 is up 12%. Over a period of two years, the stock is down 30%. The cause of each result is the Xerox financials. Revenue in 2012 dropped 1% to $22.4 billion, but net income fell 8% to $1.2 billion. Ursula Burns, Xerox’s chairman and chief executive officer, commented:
Strong growth in services and the consistent profitability of our document technology business generated significant operating cash flow and contributed to fourth-quarter earnings that met our expectations. Throughout 2012, we focused on scaling our services business and adjusting our business model to align with growth opportunities in the $600 billion market we serve. Our fourth-quarter results reflect steady progress. We increased our services segment margin by 0.9 points while growing business process outsourcing revenue by 8 percent, IT outsourcing by 15 percent and document outsourcing by 2 percent. In document technology, our fourth-quarter segment margin of 12.3 percent improved, reflecting effective execution in reducing our cost base and maximizing profitability.
Of course, a quick look at Xerox earnings does not support her optimism at all.
Xerox, under Burns, has proved to be one of those tech companies that has worn out its welcome in the market. “For more than a half a century, Xerox has been a leader in document technology and services,” the Xerox public relations staff wrote recently. Toward the end of that half a century, Xerox has produced commodity products and services. Only the rare outsider from Wall St. or the experts who keep track of the world’s great tech companies believes otherwise. It is time for Xerox to find a better way to serve its shareholders, who would like to get some of their money back.