Copier and printer giant Xerox Corp. is climbing out from under the microscope of financial scrutiny with a clear focus on the future and growth. With its April settlement with the Securities and Exchange Commission, and its June restatement of revenues, which resulted in a revenue shortfall of about $1.4 billion, behind it, Xerox is moving swiftly to improve productivity and efficiency while keeping the pedal to the metal in research and development. Driving this turnaround is Chairman and CEO Anne Mulcahy, who is simultaneously enthusiastic about her companys perseverance, yet not the least bit complacent. eWEEK Executive Editor Michael R. Zimmerman caught up with Mulcahy at Xeroxs Rochester, N.Y., R&D facility earlier this month to close the loop on the financial issues, get her reactions to competitive threats and much more.
eWEEK: Is it correct to say that the accounting problems the Securities and Exchange Commission had with Xerox werent so much about how you were reporting revenue, but rather, when you were reporting revenue, with regard to leasing?
Mulcahy: Thats an accurate statement. It was timing.
eWEEK: Was there ever an issue of reporting revenue twice with regard to leasing?
Mulcahy: No. There was never any issue with regard to a legitimate dollar of revenue.
eWEEK: Has that been at the core of Xeroxs argument from the beginning?
Mulcahy: We had an accounting methodology that we were using that certainly our accountants had approved, felt strongly about. It was a bundled leasing methodology, and our previous accountants continue to stand by their accounting judgments. But we have settled with the SEC, we have changed our accounting methodology, and were moving forward.
eWEEK: How far out will the revenue shortfall that was a result of your restatement earlier this year extend?
Mulcahy: Its a difficult question to answer because although there is some revenue from the restatement that flow forward, they dont all flow forward. And weve changed our accounting methodology going forward so that were not recognizing as much revenue in the current period. So theres this kind of offsetting approach on the revenue side.
The vast majority of it happens in the first couple of years. Its not a long process at all. And weve restated now so everythings apples to apples in terms of comparisons, so theres no unbalanced comparisons.
eWEEK: Last month the U.S. Attorney General in Connecticut launched an investigation into Xerox as well. Can you give me an update on where that stands now?
Mulcahy: I can in the sense that we dont have a lot to update. The fact is that lots of companies are certainly being investigated by U.S. Attorney offices. They usually dont become public because the thing that drives a public announcement is an indictment, which we have not had.
eWEEK: Is this treading on old turf?
Mulcahy: It totally is. Absolutely. Im not concerned. I dont think this is really focused on the company, and its certainly not focused on anything new.
eWEEK: So the attorney hasnt contacted you or Xerox?
eWEEK: How did you respond to the news of this latest investigation on a personal level, when here the SEC thing is all taken care of and behind you?
Mulcahy: I wasnt happy (laughs). But youre probably aware that we found out from a Wall Street Journal call, its not something we had previous [knowledge of]. By the way, this might have run its course, and we may never have known simply because the vast majority of these never result in indictment. So this one broke prematurely. I dont think they were very happy about it. We certainly werent happy about it. It would not be unusual after an SEC settlement for the D.A. to look at a companys settlement. But it became a story and a media frenzy for a period of time. And thats frustrating because the company is really doing very well, making a lot of progress, focused on the future and its really not terribly constructive. Everything were focused on is about rebuilding value for the future.