Financial and industry press and analysts gathered in-person and virtually for Xerox Investor Day 2022, where the company’s top executives laid out where Xerox is headed in the coming years. Under the subheading “Now and Next,” Xerox outlined its key strategies for new business and innovation, as well as how they intend to grow the core office and production print (along with accompanying solutions and services) areas of the business. Focusing on the recurring themes of a stable foundation and strategic growth, executives touted their current progress, financial outlook, and strategies.
On the business front, Xerox has been through more than its fair share of tumult over the past few years: a couple of CEOs, a failed sale to (and subsequent messy divorce from) Fujifilm, a spurned LBO of HP Inc., a global pandemic that saw its core print business drop by half, a supply chain crisis that limited its access to key parts—and that’s just since 2018! Yes, its stock price is down about 50% from its peak in late 2019 when it was the best-performing tech stock of the year. Still, Xerox has fared remarkably well financially with positive free cash flow every quarter and consistent investment in core and new businesses.
The executives made it clear that the office and production print businesses are still critical to Xerox. They provide the cash for continuing operations and new-business forays, such as the 2021 acquisition of extended reality services platform CareAR (a business roughly valued at $700 million), and a host of startups and joint ventures spawned by Xerox’s Palo Alto Research Center (PARC) incubator. Xerox execs acknowledge that not all of those will make the transition to viable businesses, but the ones that do will provide Xerox with a much-needed financial boost to offset its flat-to-slightly-growing (according to Xerox) print business. Plus, it’s nice to see the company actually doing something with the innovations cooked up by the certified geniuses at PARC instead of letting others commercialize them as (arguably) happened with the computer mouse and graphical user interface.
Innovation Is the Mantra
The key buzzword used to emphasize product development and decisions for investment is “innovation.”
“We are using innovation to drive growth in Print and Services, IT and Digital Services, as well as in our new disruptive businesses—CareAR and FITTLE—and in several transformative endeavors at PARC,” said Vice Chairman and CEO John Visentin in his opening remarks, which provided a high-level strategic overview and look at the financial projections for the next two years. He reaffirmed Xerox’s commitment to sustainability—net zero carbon by 2040—and reassured investors of the continuation of free cash flow, stock buybacks, and dividend payments that current strategy had delivered.
Steve Bandrowczak, President and COO, then gave an update on the “Project Own It” initiative within the company to improve operational efficiencies. That program has driven savings of $1.8 billion since 2018, according to Bandrowczak, with an additional $300 million in savings expected this year.
Print Is Still Central to the Strategy
Officers Tracey Koziol and Joanne Collins Smee each provided updates on their respective areas of print and IT services. Koziol noted that Xerox is the market leader in several key print segments, and is gaining market share from rivals. In the office space, she noted software was the “secret sauce” and called out Xerox ConnectKey apps and the new Workflow Central (winner of a BLI 2022 Pick Award for Outstanding Workflow Productivity Platform) as examples. Koziol also mentioned initiatives in supporting zero-trust environments and the company’s advanced managed print services offerings as differentiators. On the production print side, she emphasized that Xerox’s “beyond CMYK” technologies, such as neon inks and foil embellishments, have been driving growth for both Xerox and its print service provider partners.
When it comes to IT and security services, Collins Smee noted that Xerox will focus on the SMB market, which Xerox feels in underserved. “We believe this is a space we are made for,” she said. “Most providers don’t want to service these smaller clients.” She stated that Xerox and its dealer partners are already a part of those customer’s ecosystems, and that there is a desire to replace the multiple vendors they use now for IT with a single provider. When pressed during the Q&A session about how Xerox expects to be profitable in this space where others are not, Collins Smee said that Xerox was being “incredibly disciplined” in the acquisitions it is making to add to its reach and capabilities. Visentin added that the company was not going to try to be “all things to all people” when it comes to its IT services offerings, and that they are ensuring they can deliver and can replicate on a broader scale—and that the business is profitable now.
Fit as a FITTLE
Next up, Xerox’s financial services arm—rebranded as FITTLE—was presented by President Nicole Torraco. She explained that the business aims to reach out beyond Xerox equipment and services to not just other office equipment brands (Lexmark, for example, has already signed on) but also in other industry segments. The unit’s outperformance in all industry-leading key performance indicators has reassured big players such as Office Depot to sign up.
Call Someone Who CareARs
The staid print and leasing businesses may be Xerox’s steak, but the sizzle comes from the relatively new CareAR division. Xerox acquired the CareAR visual augmented reality service platform in early 2021, and subsequently put it and its DocuShare and XMPie software platforms into a single business unit: CareAR Holdings (headed by Bandrowczak). He believes CareAR is poised to “revolutionize the services industry” with its AR-based, industry-agnostic platform that lets a remote technician provide real-time visual guidance to a customer or (more often) field service tech working on a piece of equipment in the field.
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| The CareAR platform delivers augmented-reality instructions to field technicians in real time. |
“The Great Resignation is impacting the service industry,” Bandrowczak said. “Experienced technicians are not being replaced at the same rate.” The CareAR solution allows a master technician to guide several field techs in the repair of complex equipment—and not just in the printing space. Bandrowczak stated that the company has already fielded requests for CareAR’s solutions to service ATMs, jet engines, medical devices such as MRI machines, and more. Of course, the technology can also be employed to help service print equipment, and Xerox announced that its future hardware products will be CareAR-ready.
PARC as a Star Incubator
For decades, Xerox’s PARC research arm was a place where brilliant ideas were born—and then died. When they took over, Visentin and Bandrowczak made it a priority that PARC research and technology would have a path to market. Now under the guidance of Xerox Chief Technology Officer Naresh Shanker, PARC is getting its moment in the sun. The idea is that PARC will continue to be an incubator for next-generation technologies but, instead of invention for invention’s sake, ideas will be proven to be commercially viable or shelved. Products will be brought to market via startups that are fully funded by Xerox or spun off into a joint venture with additional revenue coming from licensing of PARC-developed technologies that could aid other companies.
Shanker presented several compelling examples of PARC innovations in pilot stages or those coming to market, such as the Eloque AI-driven IoT solution for monitoring the health of bridges and alerting about possible failure points. This solution is currently in use in Australia’s Victoria province. Similarly, the Novity predictive-analytics platform can be used in manufacturing plants to warn about issues that could cause costly unplanned downtime.
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| Xerox ElemX Liquid Metal 3D Printer |
Perhaps furthest along are the innovations PARC has made in additive manufacturing (3D printing). The company’s ElemX liquid metal “printer” uses aluminum wire—not combustible metallic powder—to create production-grade parts at the rate of 400 drops per second. Shanker noted that the US Navy is working with the Elem Additive Solutions team towards the objective of placing an ElemX device on one of its aircraft carriers so parts can be made on the fly as needed, rather than having to be transported to the ship (which, being a ship, could be in the middle of any ocean at any given time). Just as intriguing is the upcoming Elem Additive Solutions software, which will tell operators if a given part can be 3D printed, and (if so) whether it is more cost-effective to do so or to have the part manufactured via a traditional route.
Keypoint Intelligence Opinion
Xerox executives certainly packed a lot of information into a 2.5-hour span and gave attendees a lot to think about. The key takeaway is that while Xerox is still a printing company at its core, it has enough technology beyond the print arena to sustain it as print continues its slow but steady decline. After all, total revenue has fallen 45%, from $12.7 billion in 2014 to $7.1 billion last year. Flat projections for revenue and operating profit are predicted for this year. The claims of gaining market share are valid, but they only cover the low-end printer space to serve remote working. So, now that the effects of the pandemic are starting to ease, and past issues of intensified competition and price declines have stabilized for now, will the new technology ventures help Xerox reverse the financial cycle they’ve suffered?
In fact, it’s possible to envision a day where Xerox doesn’t even sell the copiers synonymous with its name. Given that print-related sales, services, and leasing still account for the lion’s share of the company’s revenue, that day is still a ways off. Financials aside, with a name so synonymous with the print industry, it’s going to take a strong, long-term strategy to reposition Xerox’s business offering in the marketplace. Over the next few years, the company will need to make the necessary in-roads in these established digital industries.
The “best kept secret” mentality that John Visentin alluded to during the Q&A session might eventually see the trickle-down of change in the consumer mindset…but is this really sustainable considering the rate of change in the digital sector? Plus, Xerox executives could take another path to “maximize shareholder value” by selling or spinning off one of the non-print businesses. But any analyst, customer, or potential customer who thinks of Xerox as solely a printing company needs to read this article again from the top.
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