Xerox Corp (NYSE:XRX) To Revamp Its Structure To Enhance Shareholder Value
Stung by decelerating sales, Xerox Corp (NYSE:XRX) is considering a reboot. The company has hinted about strategy and portfolio review aimed at unlocking more value for shareholders. A split of the company is thought to be in the cards.
After delivering a mostly lackluster 3Q2015, Xerox Corp (NYSE:XRX) feels the time has come for it to reconsider its future. Among other things, Xerox is planning to review its portfolio of businesses as well as capital allocation options. Xerox is battling revenue declines both at its printing/document management unit and services division. To shake off some burdens, Xerox recently moved to offload its outsourcing operation to Atos.
Xerox’s challenges continued to manifest in 3Q with revenue tanking 10% to $4.33 billion. On an adjusted basis, earnings came in at $0.24 per share, slightly above the consensus estimate.
Xerox Corp (NYSE:XRX)’s printing/document management division has been a source of great pain for the company. Revenue in the division has been falling and that was true in 3Q. Documents technology revenue fell 12% to come in at $1.8 billion.
Revenue in Xerox’s services division declined 8% to $2.4 billion. The best performance that Xerox has posted in its services unit in recent times is flat growth.
A breakup could be possible
With a reboot necessary to return Xerox to its former glory, the board is exploring various options to return to sales growth. It is not exactly known what management intends to do to turn around the company, but a breakup could be in the cards. Xerox could separate the documents business from the services operation.
A number of Xerox’s peers are either doing strategic review of their operations or have already made up their mind to break up. Hewlett-Packard Company (NYSE:HPQ), for instance, is set to separate its enterprises business from the printer and PC business. Lexmark International Inc (NYSE:LXK) is also exploring strategic options.
In Xerox’s industry universe, players are exploring a reboot.
For 4Q2015, Xerox Corp (NYSE:XRX) has guided adjusted EPS of $0.28 to $0.30. For fiscal 2015, the company is expecting adjusted EPS in the band of $0.95 to $1.01.
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