Xerox Turns to Services for Future Growth - Page 2

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The XGS announcement, set to take place in New York, is important for Xerox, which has been pounded by Wall Street over an S.E.C. investigation into questionable accounting practices, as well as other business practices.

Earlier this week Xerox reported that two divisions of the Securities Exchange Commission -- the Division of Corporation Finance and Office of the Chief Accountant -- are looking into changes the company has made in how it accounts for equipment leasing revenues.

The news is only the latest in a growing litany of financial woes for Xerox this year, which have included such notables as the restatement of its financial results for the last three years, a drawn out battle with outside auditor, KPMG LLP, over accounting practice differences, the firing of KPMG, the resignation of its CFO, Barry Romeril, and two sequential quarters of net losses.

Despite these financial land mines, the company has pressed on. In addition to meeting goals set last year, such as reducing cost by $1 billion, Xerox has also shut down slow growth businesses like its inkjet printer unit, (which the company had been trying to sell).

The company sold half of its stake in Fuji Xerox Co. to Fuji Photo Film Co., Ltd., for $1.3 billion, and in June, announced it had received $500 million in revolving credit from Bankers Trust Co.

By the end of the third quarter Xerox reported said cash reserves had climbed to $2.4 billion, up from $2.2 billion in June.

"Strategically, I think Xerox has the capability and will work to migrate to a more consultative type of services and solution," said IDCs Boyd. "They had XBS for a long time, they have expertise in that area. They have PARC [Xeroxs Palo Alto Research Center] which has a lot of understanding and workflow."

According to Dolan, Xeroxs services operations are already making a significant contribution to the bottom line. The company estimates that it will bring in $2.8 billion in services revenue for 2001. The goal is to take an even bigger bite out of the services market, which is expected to hit $47 billion by 2004.