Xerox reports sales decline and plans to split company

Xerox will create new publicly traded companies to house its copy machines and business services separately. One certainty is that Xerox’s second-largest shareholder, Carl Icahn, will be given three board seats on the smaller company’s nine-member board.

In November, Mr Icahn said he had taken a 7.13 per cent stake in Xerox, in the belief that the shares were undervalued. (XRX – Get Report) stock is down by 0.65% to $9.15 in after-hours trading on Thursday, after a report said the company is planning to split in two.

Just over three years later, amidst the increase in activist investors that are pushing the older companies into slicing and dicing themselves up to drive their value, Xerox has now decided it will spin off that services business. The overall employee number will shrink, though, in line with previous years, because “every year, it becomes possible to do more with less”, she said. However, the biggest question raised by Xerox’s move is how the document technology side of the business will now evolve going forward, she noted. Last year, the business generated around $7 billion in revenue.

Not familiar with Xerox’s business process services?

For the year, the analysts expect earnings per share to be up 4 percent to 99 cents versus 90 cents the year prior. Xerox was then already in the midst of a broad-based review of structural options for the company’s business portfolio and capital allocation.

There seems little doubt, however that Xerox’s dramatic third-quarter shortfall of $4.3 million last October – a ten percent drop versus year ago – exerted strong pressure of its own.

The company statement also confirmed that Lazard and Goldman Sachs will be the company advisers.

“We strongly believe that an independent BPO company with fresh, focused leadership and best-in-class corporate governance will greatly enhance shareholder value, and we are proud to be a part of that process”, said Mr. Icahn in a statements.

The Business Process Outsourcing business, which earned approximately $7 billion for Xerox last year calendar year – more than 90 percent of that amount annuity based – will be focused on potential growth markets including transportation, healthcare and commercial and government services. The stock has a market capitalization of $9.34 billion and a price-to-earnings ratio of 30.07. The shares closed down -0.05 points or -0.54% at $9.23 with 90,78,040 shares getting traded. In December 2014, it sold its informational technology outsourcing arm, previously part of ACS, to France’s Atos SE for more than United States dollars 1 billion.