Investopedia: Today's Xerox Not Just A Copy Of The Past

Institutional Wall Street is a funny place. Not only do these highly educated professionals badly misuse words like "catalyst" on a routine basis, but they cannot seem to decide what they really want. Companies are under near-constant pressure to convince the Street that they can find new sources of growth and continually transform their business to stay current with the markets. On the other hand, when a company is actually in the midst of a transformation, a lot of investors flee to the hills and wait for a "catalyst" to return.

That would seem to be the case for Xerox (NYSE:XRX) today. Although the company has gone to considerable lengths to build a process outsourcing and IT outsourcing business to counterbalance the tradition printing/copying business, Wall Street seems to still talk about them primarily as an old-line, slow-growth machinery company.

The Quarter That Was  
To some extent, Xerox is not doing itself a lot of favors in shaking up that image. Although reported revenue growth came in at 42% this quarter, organic growth was more on the order of 2%, as the company's "technology" business (that is, printers, copiers and the like) was basically flat versus last year.

More positively, there was some improvement in profitability. Gross margin came in at 33.6 for the quarter, and operating margin expanded about one full point on a pro forma basis. Better still, bookings in the service business were up 13% on a very difficult comp.

At What Pace Change?
Unfortunately, management guided earnings down a bit for the first quarter and did nothing to really encourage analysts or investors to expect a much better 2011. So even though the company has products like the iGen3 that leave it in good shape as the market moves to digital printing and is also targeting small and mid-sized businesses more than before, it is going to be a slow road to progress. 


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