Xerox announces it will split

Famous as the brand behind the copy machine, the now-struggling Xerox will divide itself into one company grouping its hardware operations and another that will house its services business, according to the Journal.

“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.

Xerox said it also begins today a three-year program to shave $2.4 billion in costs.

Chuck Schumer said he got in separate conversations with Xerox Chairwoman and CEO Ursula Burns and billionaire shareholder Carl Icahn. “These two companies will be well positioned to lead in their respective rapidly evolving markets and capitalize on the opportunities that now exist to expand margins and increase market share”.

Icahn disclosed a 7.1 percent stake in the printer and copier maker in November and called its shares “undervalued”.

The news comes just days after insurance giant AIG announced a deep restructuring following months of pressure from Icahn and fellow investor John Paulson, who pushed the company to split into three.

Based in Norwalk, Conn., Xerox has more than 140,000 employees worldwide. Document Technology would have had about $11 billion in revenue.

When the news broke, shares in Xerox jumped to an all-day high of $9.97 before closing at $9.23, the same price that it opened the day at.

Speaking on the issue of the two new entities possibly attracting potential buyers, Burns confirmed that Xerox Corp’s (XRX.N) board members and top executives were prepared to discuss with anyone if they are interested.

“This is absolutely a good thing for the reseller community”, said Steve Jenkins, president of Xerox partner Precision Document Solutions of Carrollton, Texas, likening it to the split a year ago of Hewlett-Packard into HP Inc. and Hewlett Packard Enterprise.

Areas that Xerox hopes to address include the healthcare services industry, global developments in the services market, and the significant shifts in how individuals are putting technology to use around the globe. Revenue fell 7.6% YoY to $4.65 billion, below views for $4.74 billion. “When we started, our mission was to automate work processes”, she said. On a GAAP basis, net income was $285 million, or $0.27 per diluted share, compared to $349 million, or $0.30 per diluted share, for the same period past year.

“We think this is a major move and will greatly enhance shareholder value”, Icahn said.

Xerox has been grappling with declining annual revenue for four consecutive years.