Xerox Dumps SOHO Business

Next time you’re strolling down the aisles of CompUSA, don’t expect to see
Xerox Corp. inkjet printers on display. The venerable printing giant
Thursday said it would jettison its small office/home office business
segment as part of an effort to re-focus on its core business and turn the
company around.

Xerox President and Chief Operating Officer Anne M. Mulcahy said the company expects to save more than $100 million through the move, though charges associated with exiting the business could be as much as $200 million. About 700 of the unit’s 1,500 workers will be cut.

The company said between 200 and 300 of the affected employees will be retained for support and services to existing customers.

“This was a difficult but necessary decision that is consistent with our
resolve to execute an effective turnaround by focusing on core office and
production growth opportunities,” said Paul A. Allaire, Xerox chairman and
chief executive officer. “While Xerox was engaged in active discussions with
potential equity partners, the slowdown in the economy and its impact on the
PC and SOHO markets prevented these companies from making what was once
considered a compelling investment in Xerox’s SOHO business.”

The company said that over the next six months it will discontinue its line
of personal inkjet and xerographic products, which are mostly sold through
retail channels. However, the company said it will continue to provide
service, support and supplies for customers that own Xerox SOHO products.

“By exiting the SOHO business, Xerox will generate significant cash savings
and improved earnings that are incremental to our previous expectations to
return to profitability in the second half and for the full year,” Mulcahy said.

According to Xerox, the profit in the inkjet printer business was not in the
printers themselves, but in the recurring sales of consumable supplies. But
with the economy slowing the production of those printers became a
liability. In the first quarter of 2001, Xerox recorded an $82 million
pre-tax loss in its SOHO business. And the company expects the second
quarter loss to be similar.

“In a short period of time, the market for inkjet has changed dramatically,
and recent data indicates that the slowdown will continue,” Mulcahy said.
“Xerox is therefore making the right decision at the right time. We will be
better positioned to build the new Xerox around our core strengths in the
production printing and network office environments, focusing on high-growth
opportunities in color, solutions and services.”

Xerox said service and support centers for customers who own Xerox SOHO
products will remain open, and the company will continue to manufacture and
market supplies during a phase-down period. The company will sell its
current inventory of products.

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