Xerox Corp will split into two companies, one holding its legacy printer operations and the other its business process outsourcing unit, it said on Friday, in a bid to be more nimble after years of trying to integrate the businesses.
Xerox, which over the years diversified into a business services and document management company, is now under pressure to reinvent itself again, shedding some of the new businesses that it acquired or grew into such as business process outsourcing and related services. Xerox expects the two companies to save a combined $2.4 billion over the next three years because of the split.
CEO Ursula Burns said Xerox had seen value in keeping its businesses together, but according to the Wall Street Journal, Xerox and Icahn ultimately agreed on splitting the company into two pieces. "As standalone companies, they will have compelling investment cases and be better positioned to capitalize on growth opportunities and expand margins and market share".
While there has been speculation that activist investor Carl Icahn, had pressured the Xerox board to split the company after accumulating an 8.1 percent stake last November, Burns denied this.
A month later, Carl C. Icahn started amassing a stake in Xerox that reached 8.13 percent by December. He will name three members to the board of the business services company and can also select someone to observe and advise the search for a CEO of that company. This happened late past year, so it's too soon to tell whether this is a boon to either resulting entity, HP and Hewlett-Packard Enterprise.
Xerox also increased its quarterly dividend 11 percent to 7.75 cents per share, payable on April 29 to shareholders of record on March 31.
So, what's Xerox's strategy behind the split into two separate companies?
Xerox declined to comment on the report. However, the company's revenue is down by eight percent year-over-year.
Xerox announced in October that it planned to conduct a review of its operations in the hopes of boosting shareholder value. Most of the local workforce is in the document technology business, which has struggled with declining sales.
Xerox shares rose 4.6 percent to $9.65 (roughly Rs. 655) in premarket trading on Friday. The ACS acquisition was a way to shift the company's focus from document handling to a range of services for business and government customers. Using that technology, Xerox brought its first automatic commercial copier to market two decades later and sold shares to the public in 1961. We asked George Conboy of Brighton Securities how a company might achieve such steep savings. "We're happy that he is in support of it, but he had nothing to do with the initiation, the contemplation, the analysis, or any discussion around the deal", she said.
