Xerox CEO Discusses Path Forward, Fuji Xerox, and Suppliers

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Xerox today reported its second-quarter results (see here), and this morning held a conference call discussing results and strategy, with newly appointed Xerox CEO John Visentin stressing that this is a new beginning for Xerox, and that Xerox will be focusing on several key initiates: optimize operations for simplicity, which is key for customers; improve profitability; make Xerox easier to do business with; come to market faster with new products; and focus on increasing revenues and profitability.

Visentin stated that capitalizing on Xerox innovation is key, noting that Xerox has not fully looked at the potential of its technology, such as XMPie and DocuShare. The CEO also stated that Xerox has new technology that could be disruptive in markets such as 3D printing: “We have print heads that could change the 3D-printing industry,” he noted, as well as inks that could change the package-printing, also noting: “I see a lot of innovation in our software business.”

“We have valuable and differentiated offerings that are under-utilized as well as some new technologies, including work that’s underway in our labs that has the potential to disrupt industries,” said Visentin. “And as we develop and deploy these technologies we must think differently about business models.

“Is our role to be the systems integrator and provider of the entire offering? Or for some of these technologies, are we better off following the model of Intel and the PC industry and focus on high value technology elements, and sell them broadly across and industry? What I saw in our labs tells me Xerox has the potential to go beyond our current core market and achieve scale by providing a critical technology element for several high-growth emerging areas where we do not participate today.”

Fuji Xerox Venture

Visentin also noted that there will be no public auction of Xerox, noting that such an auction would be time-consuming and costly. However, noted Visentin:  “If someone wants to come in with a strategic offer we would need to evaluate it and bring it to the board.”

Visentin continued, noting that Fujfilm’s $1 billion breach-of-contract filed last month in New York “… was the first communication I received from Fujifilm or Fuji Xerox and it was a surprising tactic from a company that is also our supplier. The letter to Fujifilm stated that we currently do not intend to renew our TA agreement with Fuji Xerox when it expires in 2021. I want to clarify what that means. First, Fuji Xerox is a joint venture between Xerox and Fujifilm and the TA establishes the technology and brand licensing relationships between the two companies.

“Not renewing the TA does not dissolve the joint venture. We have a 25-percent ownership position in Fuji Xerox that is governed by separate Joint Enterprise Contract. As I have said, we will do what is best for Xerox. This is true of the work we are doing to improve our supply chain to be more competitive. This means we need to source products, parts and supplies from the best and most competitive suppliers.

“Fuji Xerox is one of our suppliers, today providing 59 percent of our cost production and we will continue to work with them in areas where they are competitive. We manufacture a portion of the remaining 41 percent ourselves and have high-quality suppliers for the rest. But we are rethinking the way we choose our suppliers.

“The company in the past has not seriously pursued other suppliers. But recently, we were successful in partnering with a supplier for a new product. Just because a supplier has had business with Xerox in the past does not guarantee future business. They will have to earn our business. With all of our suppliers, we execute comprehensive contracts for each product. And these contracts assure continuity of parts and supplies-over the product’s life. As for Fuji specifically, we have not seen any disruption in our supply chain.

“I am confident in the continuity of supply of Xerox equipment, parts and supplies and we have time to work (16:40) changes in our supply chain to be more competitive and to better serve our customers and partners.”

Xerox CFO William F. Osbourn, commenting on Xerox’s results for the second quarter, commented: “We’re not seeing the degree of turnaround in revenue that we believe should follow our significant production introductions. We need our market share to recover over multiple quarters.”

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