Xerox Changing Colors to Get in Black

Company slashes costs, sells assets and plans three printers and a reseller agreement with Scitex

Anne Mulcahy wants to transform Xerox Corp. from the "document company" to the "color document company." Now all she has to do is persuade customers and Wall Street to buy it.

Mulcahy, the Stamford, Conn., copier and printer giants president and chief operating officer, recently announced a renewed effort to develop color imaging products and the services to wrap around them. The company plans to enable users to shift from black-and-white printers to color as easily as they went from monochrome monitors to color CRTs in the early 1990s.

But the message, which included the announcement two weeks ago in New York of three printers, a reseller deal with Scitex Digital Printing Inc. and a new color management technology, was meant for those on Wall Street as much as for global customers.

The beleaguered copying company is coming off two quarters in the red and carrying upward of $17 billion in debt, $2.6 billion of which must be paid off this year. Its stock has hovered between $5.40 and $5.80 since the color announcement, well below its 52-week high of $29.75 and almost invisible compared with its $64 price in May 1999.

That said, Xerox is moving forward with aggressive cost-cutting moves, which have included cutting its 90,000-plus work force by 2,000 in the fourth quarter of last year and another 4,000 this quarter. It is also actively selling assets.

One Xerox watcher said the company is making the right short-term moves with regard to cutting costs, selling assets and embracing color. Whether it can transform its corporate culture to be more nimble is another issue.

"Theyve been executing their turnaround plan, but, long term, Xerox has to undergo a fundamental change," said Connie Moore, vice president at Giga Information Group Inc., in Washington. "They have moved into digital products, but they still have very much a box mentality and view the world from a paper perspective. They have to move into electronic information."

Despite its serious financial and market challenges, Xeroxs Mulcahy remains upbeat. "This really was an opportunity to tell our story in the context of a very, very positive business event, to build the confidence that were moving forward with some great opportunities for the future," she said.

As for the financial particulars, Mulcahy stuck by her and Xerox Chairman Paul Allaires earlier statements that the company will return to profitability in the next half of the year. She restated that Xerox will be able to make the $2.6 billion debt payment on time this year.

Other asset management initiatives are still under construction. For example, the company last fall announced plans to seek joint partnerships for managing its Palo Alto Research Center in California. At the time, Mulcahy said Xerox was seeking no more than two partners. Now the company is not wed to the number of partners and the partnership includes not only PARC but also Xerox research centers in Cambridge, England, and Grenoble, France.

As for its new products, Xerox unveiled two color printers, the $5,999 Phaser 2135, which prints color documents at a whopping 21 pages per minute, and the $11,499 DocuColor 2006 Printer/Copier, which prints color documents at 6 pages per minute and black-and-white files at 26 pages per minute. It also unveiled a modular, continuous-feed color printer thats due next year and is code-named FutureColor.