Another tough quarter for Xerox but some bright spots

Xerox had yet another bad quarter as equipment revenue fell 13% YoY. I can’t remember the last time Xerox had a good quarter. It’s been years. But the upcoming split offers hope.

Here are some interesting takeaways from these earnings.

Entry-level color MFP installs were up 16%. Xerox says this includes activity from Document Outsourcing and Xerox-branded products shipped to Global Imaging Systems (GIS). If you include OEM sales, the number is much lower at a 4% increase. This tells me their channel programs are working for low-end color and GIS must be doing pretty well in this area.

On the other side, low-end black and white installs fell 12% compared to last year Q3. But only by 6% if you include all of Xerox and not just Document Outsourcing and GIS. Cleary there’s a shift from BW to color in the Xerox channel, which is a good thing if the gains in color match or outpace the losses in monochrome. If.

Xerox also showed a 6% install increase in mid-range color installs – another bright spot. This however is overshadowed by the 25% install decrease in the same category for BW MFPs, which Xerox blamed on fewer large-account installs. This has to stop and should be a top priority. Losses in BW are to be expected as customers continue to choose color MFPs instead but losses of this size tell me many of these customers are going elsewhere.

Xerox did cash in on the Drupa event, seeing a 6% increase in high-end color installations. This area has been a major focus from the printer OEM and their efforts are clearly paying off. Acquisitions and significant internal investments are working.

On the BW production side, a group that has suffered double digit installation decreases for a while now and which has been a big part of the Technology Group’s revenue losses over the last several years, the drop was the lowest I’ve seen since I can remember. (-1%). This might be the biggest gem in this story for Xerox. Stopping the ongoing monochrome production losses would be a huge stabilizing force to Xerox.

So, overall, pretty crummy earnings but certainly some good highlights.

Xerox has struggled over the last several years. However, they’re far from rolling over and dying. They’ve taken beatings on Wall St. before and I imagine by now they have a pretty thick skin when it comes to earnings. Pretty soon, the split will be complete and they can focus all of their efforts on print.

~Andy Slawetsky

Click here to read the Xerox press release

Xerox’s Zeno Office Solutions takes swanky new building

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