Friday, May 23, 2014

Xerox Aims To Fix Services Problems

The operating margin of Xerox Corporation has been sliding as of late and, according to Xerox CEO Ursula Burns, reversing that backslide is the number one priority of the company. In a recent statement at the company's annual shareholders meeting, Burns said, "The focus of my management team is to buck and change that trend."

The meeting, which was held at the Norwalk, Connecticut corporate headquarters of Xerox, had Burns answering multiple questions from the shareholders on topics that ranged from Burns 2013 paycheck to how the closing of stores like Staples and Office Depot are affecting the company.

According to Burns Xerox's services-related businesses, which handles everything from insurance claim to bill payment processing to staffing call centers, is expected to be the driving force behind increasing growth at the company. In total, services account for $0.57 of every $1 that the company takes in. By 2017, that number is expected to increase to $0.66.

Unfortunately for Xerox, that services business has faltered in recent months. It did grow by 3% in 2013 but was still a few percentage points shy of Xerox's projected expectations. In addition to that, the company also decided to decrease its projections for profits in 2014. The excuse for this, according to Xerox, is said to be more-than-expected spending on new Medicaid and health insurance exchange platforms.

The weaker operating margin is also due, in part, to services according to Burns. The operating margin of Xerox, which is a common measure of profitability and operating efficiency, was 8.9% in 2013, a continual decrease from 9.5% in 2012 and 10% in 2011. To fix the problems Xerox is looking into options like acquisitions and "sharing infrastructure and talent over to services to make sure we can run services better," Burns added.

In addition to these woes, services has also seen a the management ranks go through some changes over the past couple of months. The reason for this, according to Burns, is to tackle operational problems. This meeting for Xerox came as shareholders have seen success in 2014. Xerox's stock has averaged around $11.30 per share for the past three months, which is up from the 2013 average of $9.46 and the 2012 average of $7.50. Xerox also managed to increase its quarterly dividend by 8.7% in January to 6.25 cents per share.

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