Xerox will spend up to US$100m to split company

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Xerox will spend up to US$100m to split company
Ursula Burns, Xerox

Breaking up Xerox will cost the firm between US$80 million and US$100 million next year, according to the company's top executive.

But Ursula Burns, chief executive of the printer vendor, said the overall separation bill will come in lower than expected. Xerox reduced its total separation cost projections from between US$200 million and US$250 million earlier to between US$175 million and US$200 million.

Xerox expects to incur between US$40 million and US$50 million in tax-related separation costs next year, Burns said. The company additionally expects costs relating to the loss of efficiencies from the split to come in between US$40 million and US$50 million next year, though Burns said those costs will be offset by the company's strategic transformation program.  

“This is a credit to the good cost management of our team continuing the separation process,” Burns said on a call with investors on Friday.

Xerox also announced the progress it has made on its three-year strategic transformation program, which it announced in January in tandem with the split.

The plan is expected to cost Xerox US$300 million during the 2016 fiscal year ending 31 December, of which US$71 million was incurred during the second quarter, ended 30 June. Xerox said the restructuring is expected to save the company US$2.4 billion, with US$700 million realised this year.

Xerox reported net income of US$155 million, or 15 cents per share, during its second quarter. Net income for the year-ago quarter came in at just US$12 million, or 6 cents per share.

The company reported US$4.39 billion in revenue, down 4.5 percent from US$4.59 billion from the year-ago quarter.

Burns said the company will be more active in mergers and acquisitions during the second half of the fiscal year, and is looking to spend US$100 million targeting distribution companies for its document technology business and smaller, "tuck-in" acquisitions for its services business.

In the first half of the year Xerox spent US$18 million on acquisitions.

Speculation about the sale or merger of either one of the future standalone companies is high following a report about a potential merger between Xerox with printer company RR Donnelley & Sons earlier this month. Subsequent reports said Xerox turned down the offer.

Burns passed on the opportunity to comment on the potential sale of either company, post-split, on a call with analysts Friday morning, stating that the new leaders of each company would be able to best address their potential merger or acquisition.

“I think that we should wait post-split for the new leaders of those two companies to talk about what those plans are as they proceed forward,” she said.

Xerox has taken several steps recently to separate its US$7 billion business process services organization from its US$11 billion document technology company.

Xerox announced previously that its business process organisation company would be named Conduent, and said former iGate CEO Ashook Vemuri would lead the company.

Also in June, Xerox announced that the document technology company will retain the Xerox Corp. name and named Jeff Jacobson, the current president of the document technology business, to be the CEO of that company.

Xerox announced that Burns will continue in her current role as chairman and chief executive officer of Xerox until the separation, and serve as chairman of the Xerox board following the split.

For the remainder of the year, Xerox said it is on-track to finish the separation of the two companies and to meet its guidance of 45 to 55 cents earnings per share. 

This article originally appeared at crn.com

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