The spinoff is in part the result of pressure from billionaire investor Carl Icahn.
The Wall Street Journal (WSJ) has reported that Xerox Corp (NYSE:XRX) is about to be split in two, amidst the declining profits and sales since a long time. Under the breakup, Icahn will get to name three of the nine directors on that company’s board.
Xerox, the 109-year-old tech giant synonymous with the photocopier, announced on Friday that it is giving up on its strategy to combine services with its traditional office machine business and would instead split itself into two companies.
In an effort to remain not just relevant but vital in an ever-evolving business economy, Xerox announced plans this morning to split into two companies, each of them publicly traded. The document technology segment was $1.9 billion, down 13 percent. Revenues were down $4.7 billion – an eight or five percent year-over-year decrease in constant currency.
Icahn did not participate in the Friday conference call, but in a statement issued by Xerox said, “An independent BPO company with fresh, focused leadership and best-in-class corporate governance will greatly enhance shareholder value”. Document Technology margin was 11.8 percent.
The separation would unwind what had been Ms. Burns’s signature deal, one that she started pursuing shortly after being named Xerox’s CEO in 2009. The activist investor may delegate a committee adviser for the search of a new CEO.
During Friday’s session, Xerox reached an intraday high of $9.87 and an intraday low of $9.83. Xerox generated $878 million in cash flow from operations during the fourth quarter and ended 2015 with a cash balance of $1.4 billion. Burns said in October that the board had made a decision to do a comprehensive review of “structural options for the company’s portfolio“.
The split represents a reversal of her $6 billion acquisition of Affiliated Computer Services in 2010 which led to Xerox’s entry into business services.
The company provides global services from claims reimbursement and automated toll transaction to customer care centres and HR benefits management.
Based in Norwalk, Conn., Xerox has more than 140,000 employees worldwide. We asked George Conboy of Brighton Securities how a company might achieve such steep savings. Icahn’s tweets referred to the division of PayPal (PYPL) from eBay (EBAY) that he prompted a year ago and which became complete in July.
Separately, recently, TheStreet Ratings objectively rated this stock, according to its “risk-adjusted” total return prospect over a 12-month investment horizon.
The two businesses will be Document Technology (including production printing) with sales of circa $11bn (£7.7bn), and Business Process Outsourcing with turnover of around $7bn.