COMPANY PROFILE

Xerox Corporation

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TABLE OF CONTENTS

Company Overview………………………………………………………………………………….3

Key Facts…………………………………………………………………………………………………3

SWOT Analysis………………………………………………………………………………………..4

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Xerox Corporation TABLE OF CONTENTS

COMPANY OVERVIEW

Xerox Corporation (Xerox or “the company”) offers business process and document management. The company operates in 160 countries across the world. Xerox is headquartered in Norwalk, Connecticut and employed 139,650 people as of December 31, 2011.

The company recorded revenues of $22,626 million during the financial year ended December 2011 (FY2011), an increase of 4.6% over FY2010.The operating profit of the company was $1,796 million in FY2011, an increase of 69.3% over FY2010.The net profit was $1,295 million in FY2011 compared to $606 million in FY2010.

KEY FACTS

Xerox CorporationHead Office 45 Glover Avenue Norwalk Connecticut 06856-4505 USA

1 800 275 9376Phone

Fax

http://www.xerox.comWeb Address

22,626.0Revenue / turnover (USD Mn)

DecemberFinancial Year End

139,650Employees

XRXNew York Ticker

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Xerox Corporation Company Overview

SWOT ANALYSIS

Xerox Corporation (Xerox or “the company”) offers business process and document management. The company’s strong market position in document technology with formidable presence in the multifunctional peripherals market provides operational strength to the company. However, trends indicate that the document technology is substituted with digital media impacting the demand for Xerox’s products and services.

WeaknessesStrengths

Lackluster performance in the technology division

Market position in document technology with formidable presence in the multifunctional peripherals market Business model transformation into services business Annuity model and strong cash generation

ThreatsOpportunities

Trends indicate structural declines in document technology

Color to drive the production printing environment

Macro economic headwinds impacting business spending

Enhancing presence in the SMB segment Services poised to capture growth in cloud, mobility and analytics Intense competition

Strengths

Market position in document technology with formidable presence in the multifunctional peripherals market

Xerox is a market leader in several aspects of its document technology business. The industry estimates indicate that the company is a leader in copiers, laser printers and document publishing equipment, Additionally, Xerox has the leading market share for digital publishing in the US and Europe, due to its robust spending on research and development. In the equipment business Xerox is the market leader and in 2011 it continued to gain share.The industry estimates also indicate that the company is a market leader in managed print services business as well. Xerox attributes market share gains to offering a more extensive and affordable portfolio of color products and by expanding the company’s distribution to serve more small and midsize businesses around the world. The company is a global brand in the worldwide document processing market.

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Xerox Corporation SWOT Analysis

The company’s presence in the multifunction peripherals (MFP) market is a further extension to its leadership positioning in the document technology market. This is of specific significance as the MFP is likely to evolve as the de facto hardcopy device for the office as the hardcopy market’s transformation shifts to more software (leveraging the MFP architecture) and services (such as managed print/document/IT services) aspects. The company’s broad portfolio of offerings caters to a range of clients which positions Xerox as a leader in MFP market. The company’s MFP product line comprises 17-90 ppm models which targets a variety of channels and customer types.The MFP line includes a range of monochrome and color MFPs with a varied range of speeds catering to small as well as large enterprises. MFPs are offered in three families; Phraser model have A4 configurations; WorkCentre models are a mix of A3 and A4 configuration and inculcates both the printer and copier perspectives; A3 ColorQube family is based on the company’s exclusive solid ink technology which equips Xerox with a unique value proposition in the color market based on parameters such as total cost of ownership and environmental advantages. Xerox has effectively used the halo of its leadership legacy in the US printer and copier markets to effectively drive market leadership in the US MFP market as well. The company is likely to further cement its leadership in document technology as it enhances shipments of MFP products.

Xerox also gained market leadership as it reinvents itself as a service led company. MFP plays a crucial role in this approach, as these products lay a foundation to integrate workflows and business process while supporting broader document based solutions beyond print. Xerox as part of the MFP offering also offers Extensible Interface Platform (EIP), through which the company offers a set of tools that enable developers to create customized document management solutions that are accessible from the MFPs. By leveraging this EIP architecture, Xerox expects to integrate solutions like mobility, scanning, document management, and security with the back-office systems to create more streamlined workflows across both horizontal and vertical accounts. Another key factor is its broad and deep channel mix which comprises direct as well as indirect channels. The company’s positioning in the MFP market highlights its strong presence in the document technology business and also indicates that the company is translating this into MFP which is likely to emerge as a new trend in the document technology. This will ensure Xerox’s technology leadership despite evolution of its core document technology business.

The leadership in the document technology provides operational strength as the market position will add positively to the bottom line and cash flow as the company invests to drive its services business. The printers business is extremely competitive with competitors like HP trying aggressively to take share from Xerox. The company’s ability to defend and grow its market share amid such a scenario indicates the appeal its products enjoy in the marketplace which is a testimony to the company’s product development capabilities. For instance, the company’s market position in digital printing in the US and Europe was enhanced as 27 new products that Xerox launched in 2011 had color output capability, in line with the client preference.

Business model transformation into services business

The company has taken initiatives to transform its business into services business from a technology company. The acquisition of ACS in 2010 has transformed Xerox into a services business. The company derived 47.9% of its revenues from services business and 45.3% from technology business.

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Xerox Corporation SWOT Analysis

Furthermore, services business has grown at a faster pace compared to the company’s technology business. Services business grew by 12.5% in FY2011 while the technology division declined by 0.9%. The company expects to invest up to $300 million to expand its service operations and has spent approximately $200 million in acquisitions in 2011. The company’s leadership in managed print services complements its service offerings. Xerox’s MPS continuum complements and provides opportunities to expand existing BPO and ITO services. Within BPO accounts, Xerox MPS helps to improve workflow and enhance employee productivity. In ITO accounts, MPS complements the client IT services that the company is currently offering and positions Xerox as a complete IT services provider.

The transformation is significant for the company to enhance sustainable growth prospects. Furthermore, stability in services segment will offset potential variability in equipment operating trends.The company anticipates its services segment to be the growth driver which facilitates financial flexibility to weather the impact of slowing technology business. Unlike some of its peers like Lexmark, Xerox has services business to fall back on.

Annuity model and strong cash generation

The fundamentals of Xerox’s business are based on an annuity model that drives significant recurring revenue and cash generation. Approximately 83% of the company’s 2011 total revenue was annuity-based revenue that includes contracted services, equipment maintenance, consumable supplies and financing, among other elements. Annuity revenue model reduces business risk and provides visibility into revenues. Additionally, the annuity business also aided strong cash generation. Over the past three years Xerox consistently delivered strong cash flow from operations, driven by the strength of its annuity-based revenue model. The company’s free cash flow margin averaged about 10% during 2009-11. A free cash flow margin over 5% indicates sound cash generating capabilities. Strong cash generation indicates the company’s ability to fund expansions internally. Cash flows also provide a cushion during economic uncertainties which have a potential to adversely impact the growth prospects.

Weaknesses

Lackluster performance in the technology division

The company’s technology division has been witnessing a lackluster growth. In FY2011, revenues from technology division declined by 0.9%.The downtrend continued into FY2012. In second quarter of 2012, the technology division revenues declined by 7%. The division has been impacted by the macro economic headwinds and has been a drag on the company’s growth prospects. Xerox derived 45.3% of its revenues from technology division in FY2011. Further declines in the segment will adversely impact the company’s operational performance.

Opportunities

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Xerox Corporation SWOT Analysis

Color to drive the production printing environment

Color printing is gaining ground and has been a driver of growth in the production print environment. The retail value of digital printing (excluding office, home and large format printing) in the US and Western Europe was $63 billion in 2011 when considering all production printing environments from copy shop and small in-plant to large commercial printers and data center service bureaus. According to the industry estimates, the revenues will grow by about 4% annually between 2011 and 2016. The estimates suggest that the growth rate for color impressions in production copying and digital printing has accelerated compared to the previous forecasts. The growth rate is expected to be about 18.5% compounded annual growth rate (CAGR). The color share of all the US impressions is expected to grow from 23% in 2011 to 48% in 2016. Western Europe is estimated to show an even stronger shift towards color, with an average annual growth of 20.4% for impressions made on color devices. The European market is already more inclined towards color print and by 2015 more digital impressions in Western Europe will be done on color devices than on black & white devices. This represents a large shift for a market in which black & white accounted for 80% of impressions only five years ago.

Xerox has made significant inroads with the color technology. According to the company, Xerox has the broadest portfolio of color printing technology in the industry. Cost and quality improvements are driving the transition from black-and-white to color. With only 27% of Xerox pages printed on color devices, the company expects tremendous opportunity to grow color pages and associated revenue. During 2011, Xerox launched 27 new products, with an emphasis on broadening its color portfolio for both production and office markets and expanding its channels of distribution for these products. The company experienced a 6% increase in color annuity revenue, 4% increase in color equipment sales revenue. The company is well poised to drive the top line growth from this segment.

Enhancing presence in the SMB segment

Xerox is enhancing its SMB footprint to drive growth from this market. To this end, the company acquired companies during 2011 that expand its distribution capacity for Xerox technology to small and midsize businesses and in under-penetrated markets. In total, the company made nine acquisitions to expand distribution in SMB space in 2011. In February 2011, the company acquired Concept Group. This acquisition expanded the company’s reach into the SMB market in the UK. In April and May 2011, Xerox acquired Premier Office Equipment and Midwest Business Solutions, both based in Iowa. In December 2011, the company acquired the Merizon Group Incorporated, which operates MBM, a Wisconsin-based office products distributor. These acquisitions further the company’s strategy of creating a nationwide network of locally based providers focused on improving document workflow and office efficiency for small and midsize businesses. Xerox has lesser penetration in the SMB segment and the focus on this segment will drive higher revenues from technology. The company has differentiated itself in the SMB market space by launching products that target this customer base instead of going for one size fits all approach. The strength of Xerox brand and global footprint position the company well to penetrate more of the small and midsize business opportunity, especially in developing markets. The industry estimates indicate in several areas such as managed print services, SMBs are fuelling the growth as the adoption at SMBs outpaces that of large enterprises.

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Xerox Corporation SWOT Analysis

Services poised to capture growth in cloud, mobility and analytics

The services division at Xerox is looking to expand by capturing growth in three key growth segments of cloud, mobility and big data. The company partnered with IT solutions provider BoxTone in first quarter of 2012 to develop an end-to-end, cloud-based mobile device management (MDM) solution, which supports a full range of devices and can be scaled to meet the enterprise mobility requirements of SMBs to MNCs. The company offers enterprise cloud solutions and expanded its cloud offerings to SMBs. Additionally, the company offers mobile solutions that will drive growth as enterprise mobile adoption gathers pace.The industry estimates indicate strong growth in cloud computing and mobile adoption which will add positively to the company’s initiatives in these markets. According to the industry estimates, the global market for cloud computing will increase from $41 billion in 2011 to more than $240 billion in 2020. The enterprise tablets market is estimated to grow at a CAGR of about 50% during 2011–16. The enterprise smartphone market is also estimated to witness strong growth with enterprise smartphone shipments will likely to surge from 20 million units per year in 2010 to 54 million per year in 2016.

Xerox is also keen on tapping opportunities in the analytics segment by combining this with its BPO services.The company is developing proprietary methods for predictive analytics applied to business processes. In first quarter of 2012, Xerox introduced ProfitSight, a comprehensive, cloud-based spend and procurement analytics offering based on Rosslyn Analytics’ RA.Pid platform. Such initiatives will enable it to tap into large opportunity offered in the analytics space. The industry estimates indicate that the US is expected to see 8.6% growth in spending on 2012.The Asia Pacific region (excluding Japan); Central and Eastern Europe, the Middle East and Africa and Latin America are forecast to drive the highest growth opportunities in 2012. In these three regions, about 15 countries are estimated to register a double digit growth. Overall, the industry is estimated to grow between 9-10% in 2012.

In the technology space, cloud, mobility and analytics are three large opportunities and Xerox is positioning itself to leverage on these trends to enhance growth in the services segment.The company has an uphill task trying to capture growth opportunities in the services space as it competes with large and entrenched players. However, by focusing on emerging segments such as cloud, mobile and analytics which offer significant room for growth for relatively new and smaller players will enable Xerox to establish presence in the services segment.

Threats

Trends indicate structural declines in document technology

The document technology is increasingly threatened by the adoption of paperless workflows. This is made possible as advancements in information technology have replaced traditional means of sending and storing information by digital media. As a result, Xerox and other document industry firms are bearing the brunt of a slowdown in demand for paper-related systems and products. With the advent of smartphones and mobile devices documents are being phased out. As it is increasingly becoming easier to read documents on smartphones and tablets the need for printing has declined.

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Xerox Corporation SWOT Analysis

Furthermore, green initiatives adopted by several organizations have been focusing on driving paper less offices and have been discouraging printing.These trends indicate that the document technology is substituted with digital media impacting the demand for Xerox’s products and services.

Macro economic headwinds impacting business spending

Growth at Xerox is highly correlated to the large business growth. The macro economic uncertainty and sluggish growth levels at several countries has been impacting the business budgets adversely. Technology, specifically document technology is considered highly discretionary and printing is the most dispensable part of a business. As Xerox derives growth from color printing which is more of a luxury rather than a necessity for businesses, the company’s revenues are likely to be more impacted by the cyclical aspects. In 2011 Xerox’s revenue was hampered by market conditions.The ongoing uncertainty in business environment especially in the US and Europe will negatively impact the growth prospects for the company.

Intense competition

Xerox faces intense competition from the services and technology businesses. In the services segment, the company competes with entrenched players like IBM, Accenture and Cognizant Technologies.These companies differentiate themselves based on scale, strong consulting practices and strong vertical capabilities. While several of the company’s peers have built competitive advantages, Xerox is relatively new to this segment. Although the company acquired a strong player like ACS and thus entered the services space, the company has to learn the services business model which it is relatively new to. Furthermore several of its peers are large companies with capabilities to capture market share from smaller players.

In the document technology business also, the company faces significant competition from Hewlett Packard, Lexmark and Canon among others. Specifically, Lexmark and Canon have been investing in broadening the product portfolio and geographical presence much in the same way as to replicate Xerox.The company’s competitive advantages could be eroded as the competitor’s catch up. Intense competition could lead to price wars impacting margins and will pressure market share growth especially in mature businesses like document technology.

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Xerox Corporation SWOT Analysis

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