Xerox Ousts CEO After Plunge in Stock, Profit

Xerox Corp.’s Richard Thoman was ousted Thursday as chief executive and director after little more than a year as CEO, a period marked by tumbling profit and the loss of more than half of the stock price.

Chairman and former CEO Paul Allaire will step back into the job while the company searches for a replacement, and he will remain chairman for at least two more years. The board named Anne Mulcahy president and operating chief and nominated her to fill Thoman’s board seat.

Thoman stumbled in a January 1999 plan to reorganize 15,000 salespeople along product lines rather than geography. The company said it retrained too many workers at once, which cut into sales. At the same time, the company reorganized billing centers, forcing salespeople to return from the field to iron out billing problems instead of selling machines and service contracts.

“He was a brilliant face to Wall Street. He really wooed the analyst community. After that, the guy couldn’t run his own command,” said Doug Garr, a former speech writer for top executives at IBM Corp., which Thoman, as chief financial officer, helped through painful restructuring in the early 1990s. Garr is the author of “IBM Redux: Lou Gerstner and the Business Turnaround of the Decade.”

Xerox shares fell $2 to close at $25.50 on the New York Stock Exchange. Since Thoman was named CEO on April 6, 1999, the stock has dropped 55%.

The board “felt it best for the company to move forward,” Xerox said in a statement. The board accepted Thoman’s resignation Thursday, spokeswoman Christa Carone said.

In a letter to employees, Thoman said that much had been done to improve the company’s bottom line but that much work remained. “My major regret was that the timing of these transformations has taken longer and has had a greater financial and human impact than I would have liked.”

Mulcahy, 47, will join Allaire’s office of the chairman, as will Vice Chairman William Buehler and Chief Financial Officer Barry Romeril. Her election as director is expected at the company’s shareholders meeting Thursday.

Thoman, who is married and the father of six children, was lured from IBM in June 1997 to be Xerox’s president and chief operating officer.

He was groomed for the CEO job and was named to the post in April 1999. At that time, he was credited with cutting costs and boosting revenue by entering new markets.

Allaire wrote to senior executives in December, supporting Thoman after the company said fourth-quarter earnings would be well below analysts’ estimates. Fourth-quarter profit fell by 52% to $294 million. A first-quarter charge of $463 million to cover the elimination of 5,200 jobs and other changes gave the company a final loss of $243 million in the period.

In March, Stamford, Conn.-based Xerox said it would cut 5,200 jobs, or 5.3% of its work force, after three quarters of falling profit and a drop in its stock price from a high of about $63 last May. The company has cut 10,000 jobs--about 10% of its payroll--since 1998.

Last month, the company said first-quarter profit from operations fell 41% to $203 million, or 28 cents a share, from net income of $343 million, or 48 cents. Sales rose 3% to $4.43 billion, contrasted with a 6.1% decline in the fourth quarter.