Xerox fleshes out turnaround plan
Tuesday, February 12, 2019
Xerox has outlined a three-year plan to transform the business, initially focusing on restructuring and improving profitability before focusing on growth in adjacent and new markets, including packaging and 3D printing.
Chief executive and vice-chairman John Visentin provided more details of Project Own It, which aims to streamline the business, strip out costs, flatten the management structure, simplify its supply chain and increase accountability and focus on profitability.
“We had a complex operating model, were difficult to do business with, had a supply chain that could be improved, and our R&D and software was lost in the product business,” he said. “Previous strategic transformations have never transformed through to the bottom line. What’s different this time? Everything.”
Project Own It will be driven by president and chief operating officer Steve Bandrowczak and chief digital officer Naresh Shanker, who previously worked together to reorganise and split HP.
The initiative is expected to deliver savings of $640m (£498m) in 2019, $450m in 2020 and $375m in 2021, freeing up cash that Xerox plans to reinvest in the business. However, it expects revenues, which fell 4.2% to 9.83bn in 2018 to continue to decline for the next two years, falling 5% this year and 3% next year, with figures stabilising in 2021 with growth beyond that.
Two layers of management will be stripped out of the business with reduced organisation costs representing a quarter of the Project Own It savings. There was no detail on the number of roles involved.
The business will also cut its supplier base and number of sites by more than half as part of the process. It currently has 555 locations, which it plans to reduce to 261, with a reduction in floorspace of 26% to 580,000sqm. In January this year it had already closed 35 locations. Some 8,000 suppliers will be reduced to 3,000.
At the same event Xerox said that it planned to target growth in new markets including packaging and 3D printing and lower the cost of machines for special effects toner and inkjet printing.
“We have a brilliant capability for colour with metallics, fluorescents, white and clear and we are looking at expanding that,” said chief commercial officer Joanne Collins Smee. “We’ve had an incredible response to the Iridesse and we are now looking at how we introduce that to the entry level of the market.”
She added that print market research firm InfoTrends predicted the market for digital print enhancements (such as metallics, fluorescents, white and clear ink) was growing at a rate of 20% year-on-year, and its research had found customers were willing to pay a premium of between 24%-89% for such work.
The firm didn’t provide any concrete guidance on its plans to lower the cost of entry to inkjet production, but she did highlight that the firm increased the productivity of its Brenva cut sheet inkjet press by 50% last October.
The plans were revealed on Friday 8 February at an investor day, shares closed up 1.36% on Friday at $29.09 following the event.