xerox_logo_2009.jpg
While Xerox (news, site) may have made a first quarter loss this year, no one seems particularly bothered. That’s because it also reported a 33% increase in sales while the losses can be explained by the closure of the Affiliated Computer Service (ACS) deal giving Xerox real clout in the business process outsourcing market.

The ACS deal, which saw Xerox handing out US$ 6.4 billion, was only closed eight weeks before the end of the quarter and in the future is expected to see the document management software and hardware giant doubling its services revenues.

In all, sales of services accounted for US$ 1.8 billion representing 40% of its total revenue, a significant shift from 2009, when services represented just 23% of revenue.

Total first-quarter revenue of $4.7 billion was up 33 %, but taking ACS into the company's 2009 results that figure is 5%. Other notable figures include:

  • Sale of document systems was up 6%
  • Installation of Xerox equipment up 17%
  • Revenue from services grew 3%

Our results reflect improving demand for Xerox's document technology in developing markets and from small and mid-size businesses,” Xerox Chief Executive Ursula Burns said.

Corporate Spending Helps Xerox

While these are only first quarter results and include the revenue hit Xerox took by buying into ACS, there are couple of points that are worth noting here.

The first is that while Xerox has never been cited by analysts as a barometer of economic recovery, it does have a considerable reach across the corporate IT sector and in that respect all the signs are that corporations are spending again.

The other thing worth noting is that Burns is steadily pushing Xerox into the services market and has indicated that she hoped that its revenues will be split equally between hardware and the services market by the end of this quarter.

This quarter will also be the first full quarter with ACS on board, so it should be fairly clear at that stage how successful the ACS acquisition has been and how the business services market is performing generally.

Xerox And ACS

ACS provides information technology services to industries including telecommunications, retail, financial services and education and after the takeover it is expected to operate as a stand-alone firm.

It is impossible to properly estimate ACS’ share of that market before the acquisition, it was -- and continues to be -- the largest provider of managed services to government with over 1,700 federal, state, county and local government contracts.

ACS has been branded as ACS, A Xerox Company, and continues to be led by Lynn Blodgett who was elected by the Xerox Board of Directors as an executive vice president of the corporation. Blodgett will report to Xerox CEO Ursula Burns.

According to technology marketing consultancy IDC (news, site) at the time of the closure of this deal is a real game changer.

Xerox is working aggressively toward becoming more focused on information management and business processes and less reliant on printed documents…With this acquisition, Xerox becomes a significant player, and has an opportunity for growth, in the growing business process outsourcing market,” said Angele Boyd, group vice president/general manager, document solutions, IDC at the time.

Where now?

Earlier this year, Burns said that Xerox will be looking at further acquisitions over the course of the year, but not as large as the ACS deal.

"Acquisitions in the last few years are the core piece of our strategy," she said. But deals in 2010 and 2011 are likely to be half the size or less of ACS, she said; "It's the kind of deal you only do every few years."

The company also said it’s on track to save at least US$ 100 million this year, as projected, and the number may climb to US$ 150 million.