Xerox Revamps Itself

The venerable copier maker Xerox has revealed that its earnings have come in below expectations as it transitions to becoming a services company from a manufacturing company model.

The company is making the transition as customers increasingly opt to keep their documents digital instead of printing them out or copying them, especially since the growth of mobile devices allows users to access their documents easily.

Xerox’s revenue fell by nine percent to $2.14 billion in the first quarter of 2013.

“Europe remains weak. The U.S. remains stable, but weak. We have not seen a pickup in the U.S.," Xerox CEO Ursula Burns said on the earnings conference call with investors.

Still, Burns was optimistic about the company’s future in the long run, despite flat revenue projections.

"We did see a slowdown, a bit of a slowdown, in some developing market economies. But our business model is fairly resilient in the developing markets," she said.

This recently ended quarter, the company had a net income of $296 million or 23 cents per share. Burns said Xerox was on track to reach an EPS of for the year and reach an operating cash flow of $2.1 billion to $2.4 billion.

The situation is somewhat ironic in that Xerox is responsible for the digital document revolution. The company’s Palo Alto (News - Alert) Research Center (PARC) pioneered graphical user interfaces, Ethernet, object-oriented programming and laser printers--all major components of modern computing in the 1970s, but the company failed to market these technologies, leaving them to other firms like Microsoft and Apple.

Xerox even invited Steve Jobs (News - Alert) and some Apple engineers in 1979 to PARC to see demonstrations of these technologies, which ended up inspiring the Macintosh. Jobs later admitted in a 1995 interview that the company could have dominated the modern computer industry. In hindsight, it’s one of the biggest blown opportunities in computing.

With the shift to working on digital documents exclusively, Xerox is trying to reposition itself as a services company, particularly in healthcare and business process outsourcing. Xerox purchased Affiliated Computer Services (News - Alert) for $5.5. billion in 2009 to help ease the transitions

Currently, sales of copiers and printers still make up 40 percent of its revenue.