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Xerox Split Announced By Suffering OEM
Whenever a huge Original Equipment Manufacturer restructures itself, us industry watchers have a field day. In fact, information about the restructure usually tends to keep coming out for a good number of months before and after the restructure.
Consider the last great parting of the Red Sea in the world of printing – HP’s split which was finalised in November of last year. We started reporting on the impending split a few months before the fact and continued with stories based on the split till the end of the year. Our last report on the split was how HP Inc. new life was beginning with various patent based innovations. Before that, we focused on the revival strategy that HP Inc. was going to follow.
Now, to the joy of all reporters of the global printing industry, we have yet another OEM deciding to implement a restructure leading to two new companies. This story, folks, is about the Xerox split!
Rumours about a possible Xerox split have been doing rounds in the inner circles of the printing sector for some time now. The rumours were fuelled by none other than the Chief Executive of Xerox, Ursula Burns, who had in October last year revealed that the OEM was undertaking a strategic review of its operations.
However, those rumours have now been confirmed by Burns who announced at the end of January that there will indeed be a Xerox split. The OEM that has a turnover of around $18 billion will be split into two entities. The Xerox split will result in an organisation for Document Technology that will include production printing and Business Process Outsourcing. The Document Technology organisation will have a turnover of around $11 billion while the Business Process Outsourcing will have a turnover of approximately $7 billion.
According to Burns, the two entities manifesting out the Xerox split will be able to take the leadership position “in their respective rapidly evolving markets”. Needless to say, the Xerox split will also allow these new organisations to push for greater market share and profit margins owing to streamlined setups and efficient finances.
The Xerox split is expected to take anything around six months but the OEM itself hasn’t provided any timelines yet. Instead, Burns only mentioned the phrase “shortest possible timeframe” in her announcement. Similar to the timeframe, the OEM has not revealed any names of leaders of the two new organisations explaining that these have yet to be determined.
Simultaneously, the OEM will be continuing with its previously set goals for the current year. More importantly, the Xerox split will be accompanied by a three year long “Strategic Transformation Programme”. As per the company, this programme will allow it to save a massive $2.4 billion.
Burns also explained the reasons of the Xerox split. It was the need for the OEM to drive shareholder value towards a positive direction. Her statement is particularly notable in the face of the fact that the share value of the OEM has been steadily declining owing to poor sales and profit numbers. However, with the announcement, Xerox’s share value increased by 2 percent to come and rest at $9.42.
Another reason for the Xerox split is the requirements of American investor Carl Icahn who built up 8.1 percent stake in the company. Being the second largest investor in Xerox, Icahn could push through the restructuring process. The restructure will see Icahn receiving three board seats in the organisation that would be responsible for Business Process Outsourcing business.
HP Thailand Looking For Greater Indochina Market Capitalisation
We go from an OEM looking to split in the near future to an OEM that has already split. Only time will tell what happens with the Xerox split but we are already seeing the results of the HP split. There was a lot of speculation focused around Don Weisler and how he’s going to turn the fortunes of HP’s printing focused business around i.e. HP Inc.
He seems to be doing a good job at it too and we have already reported on a number of steps being taken by the fledgling company in its bid to deal with a declining market. In the majority of cases, HP Inc. seems to be relying on emerging markets to drive its renaissance. The recent news is that HP Inc. is looking to grab a greater market share of the emerging markets in the Indochina region.
Despite the names, this region neither includes China nor India but instead three countries, namely Myanmar, Cambodia, and Laos. Each of these countries is expected to display speed development in the next decade or so, if geopolitical hints are anything to go by. For example, Myanmar is expected to move into relatively stable times with its democratically inclined political reforms while Cambodia is expected to show economic resurgence.
Essentially, these markets are becoming more welcoming and HP Inc. wants to be there when they truly turn into diamonds. In fact, the Managing Director of HP Inc. (Thailand), Pavin Vorapruck specifically stated that the Indochina market has “high potential for growth” primarily because of their “high GDP growth”.
The expansion into these high potential markets is based on HP Inc.’s Device as a Service (DaaS). DaaS is expected to cater to small to medium scale enterprises. HP Inc. (Thailand) has already begun work on DaaS mainly because the Thailand unit of the OEM will be the main hub through which these markets will be accessed.
The purpose of DaaS is to help people use their personal computers to not only acquire and manage various personal computer technologies but also refresh and update them.
The Thai branch is the digital hub of the Indochinese region and this is something that HP Inc. wants to leverage. As a result the Thai branch of the company will be providing all kinds of support for the marketing venture in the form of products, consultant work, and even marketing.
HP Inc. (Thailand) has also started a restructuring process this year which will result in three separate business units, namely computing, printer manufacturing, and Graphics Solutions Business (GSB). The computing business unit will be responsible for notebook and desktop computers, the printer manufacturing business unit will be responsible for providing printer, and the GSB unit will be responsible for digital printing services.