Xerox said to split in two; Icahn gets board seats

“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”, she said.

Xerox announced on Friday that it will now split into two publicly traded companies in a move that formally separates its hardware (document technology) and IT service (business process outsourcing) businesses.

Xerox also just disclosed its latest quarterly earnings, wherein it reported EPS of $0.32, against the $0.28 consensus estimate.

In line with this strategy, the company said in August a year ago it had signed a definitive agreement to acquire RSA Medical, a provider of health assessment and risk management for members interacting with health and life insurance companies. The well-known business and digital printing company will divide itself into two entities: one centered around hardware and another for services.

Icahn revealed an initial 7.1% stake in Xerox back in November following the decision by CEO Ursula Burns to initiate a strategic overview, calling the company undervalued.

The document technology company, which will make printers and copiers, will have annual revenue of United States dollars 11 billion, while the business process outsourcing company will have USD 7 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. So popular was the concept and the technology that in many markets users didn’t ask for a photocopy but a “xerox” of a document. Document technology dropped 13 or 10 percent in constant currency. As part of the planned separation, Xerox said it would implement a three-year cost savings plan, that aims to save $2.4 billion over three years when combined with savings from ongoing programs. With an 8.1% stake in the company, Mr. Icahn’s hedge fund is now the second-largest shareholder after index giant Vanguard Group.

Xerox, like AIG, disappointed investors throughout 2015. Under the proposed plan, Icahn will get three seats on the services company’s board, The Wall Street Journal reported. The CEO said she expects the transaction “to be completed by the end of 2016” and pledged to keep investors informed about key milestones in the upcoming months.

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.

Xerox profits have fallen in all but three of the last 15 quarters.

In a surprising revelation, Burns hinted she distanced herself from the strategic review process despite her additional role as chairman of the board.