Despite Promised Turnaround, Revenue Down for Xerox’s Latest Quarter

Activist investors Carl Icahn and Darwin Deason fought for months to stop a proposed acquisition of Xerox by Fujifilm. Icahn in particular criticized former Xerox management for supposedly mismanaging Xerox and missing key opportunities.

But today, several months after the resignation of much of the Xerox board and former Xerox CEO Jeff Jacobson, and the installation of Icahn-backed management, Xerox reported that revenue had dropped 5.8 percent to $2,352 million for its third quarter that ended on September 30th, versus the third quarter a year ago. Earnings per share (EPS) were also down, at 34 cents, down 33 cents year-over-year.

Net income declined to $89 million, or 34 cents per share, versus $179 million, or 68 cents per share, for the third quarter a year ago, with Xerox stating that this was due to higher taxes. Printer and copier revenue also fell 3.8 percent to $511 million.

On the bright side, cash flow for the third quarter rose, and the company increased its 2018 share repurchase target to $700 million from $500 million. It’s forecasting full-year free cash of  between $900 million and $1 billion.

Xerox stated: “Revenue will take time to improve and requires action plans that are in process.” One of these plans is project “Own It,” which entails simplifying Xerox business processes.

In a Financial Times interview, Icahn, who owns about 15 percent of Xerox shares along with Deason, stressed patience: “John Visentin (newly appointed Xerox CEO) is doing a tremendous job cutting waste. You need patience to make it work. We were not opposed to a deal with Fuji . . . there are a lot of synergies but there was no way we were going to get into a position where we owned 49 per cent of a company and Fuji owned 51 per cent. A deal makes sense but it just makes more sense for them.”

Xerox CEO John Visentin commented: “Work remains on the priority to drive revenue. Actions are underway to streamline the organizational structure, expand our channel presence, and further differentiate our products and services to provide
greater value to customers.”

Last week, Fujiflm won a key legal appeal, with the court reversing an injunction that blocked the proposed acquisition of Xerox by Fujifilm, a deal that would have entailed Xerox being merged with Fuji Xerox, with Fujifilm gaining control of the new company. Icahn and Deason had argued that the deal undervalued Xerox, with Icahn later stating that he would be open to an offer of $40 per share for Xerox.

Xerox also reported that it had cut 900 people from its global workforce, and had reduced severance pay. The Rochester Democrat and Chronicle also reported that Xerox reduced health benefits for its non-union retirees.

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