On December 8, Xerox held an online Investor Conference to provide details on its business strategy and long-term financial model as a standalone company. Xerox expects to complete the planned separation of Conduent Incorporated on December 31st of this year. “Today, we unveil the new Xerox, a company dedicated to helping our customers innovate how they communicate, connect and work to drive greater productivity,” said Jeff Jacobson, CEO of Xerox following the separation. “Our strategy builds on our solid financial foundation to drive strong cash generation and margin expansion while improving our revenue trajectory over the long term. We remain committed to delivering attractive, balanced returns for our shareholders.”
During the conference, Xerox outlined actions to position itself for continued leadership in the digital print technology market including:
- Accelerated productivity and cost initiatives. The company continues to drive its three-year strategic transformation program to deliver at least $1.5 billion in productivity gains and cost savings for the standalone entity. The program will further accelerate Xerox’s operational excellence and cost competitiveness.
- Renewed focus on growth markets. Xerox will invest in areas of strength and growth such as document outsourcing and colour production, and will execute strategies to increase its participation in under-penetrated markets, including small- and medium-sized businesses. As a result, the company will shift its revenue mix toward growing markets to increasingly offset declines in mature areas.
- Game-changing global product launch and market expansion. Further solidifying its market leadership and supporting its revenue objectives, Xerox is gearing up for “the largest new product launch in its history.” The launch will enhance its connected office portfolio with secure, smart, multifunction devices with high performance apps, on-the-go print capabilities and cloud-connectivity. It will also support channel expansion, particularly in the $20 billion multi-brand reseller space, by providing partners with a broader set of products, solutions and vertically integrated tools, technology and service delivery processes.
- Ongoing commitment to shareholder returns. With a leadership position in equipment revenue and the stability of a largely annuity-based business and cash flow, the new Xerox will be well positioned to deliver attractive, balanced shareholder returns. Demonstrating its ongoing commitment to shareholders, Xerox also announced an expected annualized per share dividend of 25¢ after the separation.
Xerox also highlighted its investment proposition and long-term financial goals. The new Xerox expects to:
- Expand operating margins to be in the range of 12.5% to 14.5% in the near term by delivering at least $1.5 billion cumulative gross productivity and cost savings by 2018 from its strategic transformation program.
- Increase contribution from strategic growth areas to 50% of total company revenue by 2020 and to outperform the market over the long term.
- Continue to generate robust, free, cash flow supported by annuity-driven revenues.
- Maintain a strong balance sheet and investment grade rating.
- Provide a strong return of capital through dividends and share re-purchases along with targeted M&A.
- Provide guidance for the fiscal year 2017 at its fourth quarter 2016 earnings that will be announcement in late January.