Uxbridge, UK November 29, 2004 – Xerox, the global leader in document management, technology and services, continues to execute with precision on a business strategy that is driving revenue growth in key markets, increasing earnings, and delivering shareholder value.
“That momentum will continue to accelerate in 2005,” said Xerox chairman and chief executive officer Anne M. Mulcahy in advance of the company’s annual investor conference. Mulcahy will join other Xerox executives in reviewing the company’s accomplishments, opportunities for future growth and objectives for 2005 and 2006.
“Through effective and consistent execution, Xerox is delivering on all fronts by improving revenue trends, increasing profit margins, expanding our portfolio and distribution channels, and generating significant cash from operations,” said Mulcahy. “We’ve created an efficient, competitively advantaged, customer-focused business that will continue to win in the marketplace and add value for all our stakeholders.”
For full-year 2005, Mulcahy said she expects revenue to grow three per cent and earnings in the range of 90 cents to $1 per share. This progress will continue the following year with expectations of five per cent revenue growth and a 15-20 per cent increase in earnings per share for full-year 2006.
Xerox’s revenue growth strategy is aligned around creating new opportunities to expand its share of the $102 billion document market with new technology and service offerings for office and production environments, including affordable colour printing for businesses of any size and accelerating the transfer of pages now printed on offset presses to digital systems.
Third-quarter revenue from Xerox’s targeted growth areas – office digital, production digital and value-added services – grew seven per cent year-over-year and now represents about 74 per cent of the company’s revenue. The major declining areas of Xerox’s business, like older light lens copiers, were down 44 per cent in the quarter and now represent only about six per cent of total revenue.
With about five per cent of the company’s revenue invested in research and development each year, Xerox has created the industry’s broadest portfolio of document management technology and services. The company launched 40 new systems this year including colour and black-and-white digital presses, production copier/printers, office multifunction systems and printers that have earned more than 125 awards worldwide.
Offered at competitive prices, Xerox’s digital technology continues to fuel growth with about two-thirds of all equipment sales in the third quarter coming from products launched in the past two years. This technology is increasingly coupled with Xerox service offerings, contributing to double-digit annual growth from the company’s value-added services including consulting, imaging and content management for businesses small to large.
“In today’s demanding business world, every dollar counts. That’s why providing a solid return on investment for every technology-related purchasing decision is paramount for our customers,” said Mulcahy. “At Xerox, we're competitively advantaged to provide this return on investment by integrating our document management services with technology that improves productivity by simplifying work processes. We call it ‘Smarter Document Management,’ and it’s proving to be the value proposition that differentiates Xerox from our competitors -- attracting new customers and strengthening our relationships with existing ones. We’re in a class of our own and do not want for opportunity.”
Xerox’s unparalleled innovation in colour technology -- from production printers like the Xerox iGen3 Digital Production Press and DocuColour series to the company’s proprietary solid ink Phaser office colour systems -- continues to deliver significant growth with colour revenue up 20 per cent through the end of the third quarter. Revenue from colour is expected to grow at about the same rate in 2005.
For Xerox, revenue per colour page is more than five times greater than revenue per black-and-white page. With about three trillion total pages printed each year, advancements in digital colour printing are driving rapid increases in colour page volume, which is expected to grow at a compound annual rate of more than 20 per cent.
In the production printing market where Xerox has placed more than 12,000 systems from its DocuColour 2000 series, more colour pages are printed on Xerox technology than on any competitor’s devices. The Xerox iGen3 is driving even greater page volume with commercial printers transferring some jobs once produced on offset presses to the iGen3. And, the ability of the iGen3 to create personalised, short-run, high-quality colour applications has created new business opportunities for customers, who on average print more than 400,000 pages per month on their iGen3 systems.
At the same time, Xerox is accelerating the use of colour printing in office environments through new colour-capable multifunction systems that combine the convenience and costs of a black-and-white device with the added benefit of colour. Xerox has also increased its share in the colour printing market by expanding its line of Phaser solid ink printers, which use fewer materials to produce colour prints resulting in 90 per cent less waste than comparable colour laser printers.
“In addition to improving revenue trends, Xerox continues to strengthen its balance sheet through a lean and flexible business model that is generating significant operating cash flow,” said Mulcahy. Xerox has generated $900 million in operating cash flow through the third quarter of this year and is on track to deliver $1.5 billion for the year. The company expects to generate about $1 billion to $1.5 billion of operational cash flow in 2005.
Through the third quarter of this year, Xerox has reduced debt by $1 billion year over year. With further debt reductions expected next month, the company will have cut its debt in half since year-end 2000. Xerox ended the third quarter with $3.4 billion in cash, a year-over-year increase of $1.1 billion.
Mulcahy cited Xerox’s continued commitment to Lean Six Sigma process improvements as a driver of productivity and cost competitiveness, with the company achieving more than $100 million in profit from Lean Six Sigma projects that drive revenue, reduce costs and speed up work processes while improving quality.
“Our success in Lean Six Sigma has become another defining competitive advantage for Xerox,” added Mulcahy. “Not only has it strengthened Xerox’s bottom line but we’re also applying Lean Six Sigma methodology to help our customers reduce document costs and improve the efficiency of their operations. Like us, customers want a positive bottom-line impact and they’re partnering with Xerox to get it.”
Xerox reiterated it remains on track to meet expectations of fourth-quarter earnings in the range of 20 cents to 22 cents per share, contributing to full-year earnings in the range of 83 cents to 85 cents per share.
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About Xerox Europe
Xerox Europe, the European operations of Xerox Corporation, markets a comprehensive range of Xerox products, solutions and services, as well as associated supplies and software. Its offerings are focused on three main areas: offices from small to large, production print and graphic arts environments, and services that include consulting, systems design and management, and document outsourcing.
Xerox Europe also has manufacturing and logistics operations in Ireland, the UK and Holland and a research and development facility (Xerox Research Centre Europe) in Grenoble, France. For more information, visit www.xerox.com.
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