Xerox Split Overshadows Positive Q4 Earnings News
Xerox beat the Street in the fourth quarter, but the company's forthcoming split is the talk of the town.Xerox today announced its fourth-quarter 2015 financial results, but during an earnings call this morning, the company's announced split took center stage. In October, Xerox had kicked off a sweeping structural review to determine the future of the company, said Ursula Burns, chairman and CEO of the document printing giant. "It became clear through this analysis that the benefits of separation outweighed the benefits of maintaining the current structure," she said, noting that the decision to split into a document technology company and another firm focused on business process outsourcing (BPO) was unanimously approved by the company's board of directors. The document technology portion of Xerox's business, with its 40,000 employees, generated $11 billion in revenue during fiscal year 2015. The BPO side—"already a leader in a growing market," according to Burns—racked up $7 billion in sales with 104,000 employees. Explaining the rationale behind the decision to split up Xerox, Burns said both the document technology and BPO sides of the business are "each facing different market and client realities," echoing some of the factors that influenced HP's decision to separate into two companies.
While Xerox's document technology segment is beset by a "modest secular decline in its markets," the BPO business operates "in a growing, but rapidly evolving market." Sales in the segment were down 13 percent in the fourth quarter, according to the company. The BPO is being roiled by cloud-based software-as-a-service (SaaS) delivery models, robotic process automation and increased customer demand for analytics-driven operational insights, said the CEO.