Xerox to Quit the Small-Office Business

Xerox Corp. said Thursday that it is exiting the small-office equipment business, which accounts for 3% of revenue but is draining profit. It will eliminate as many as 1,050 jobs in the process.

The move is intended to help the No. 1 copier company steer clear of steep financial losses without abandoning any of its core businesses in the office printing industry. The job cuts represent about 1.2% of its overall work force.

Xerox, based in Stamford, Conn., said it will discontinue its line of low-cost personal copiers, inkjet printers and multi-function machines sold primarily through retailers. It will still provide service and supplies to its existing customers, however.

Heightened competition from rivals, led by Hewlett-Packard Co., and a slowdown in projected sales of home computers and inkjet printers in the United States, makes the so-called small-office, home-office business “a far less attractive opportunity,” said Anne Mulcahy, Xerox’s president and chief operating officer.

“Xerox is not in a position to wait for an economic recovery in these markets,” she said.

“The company’s turnaround program is on track and we are making significant progress in restoring the strength of our business. It would be imprudent to put the progress at risk by continuing to invest” in the small-office market.

Since last fall, Xerox had been seeking investors or partners for the money-losing business, without success.

Xerox has been scrambling for more than a year to cope with cutthroat competition, a botched sales force reorganization, sluggish sales and a sharp drop in its stock price, which has started to rebound recently.

In Thursday trading on the New York Stock Exchange, Xerox shares fell 11 cents to close at $8.30.

The company’s departure from the small-office sector means shutting plants in two towns near Rochester employing about 500 people. An additional 200 jobs will be eliminated at an office building in a Rochester suburb.

Xerox also is shutting inkjet printer operations at its flagship Irish plant in Dundalk, a move that could cost 350 more jobs.

Xerox said the small-office market is expected to grow by just 3% a year to $46 billion by 2003, while projected growth for inkjet printers has fallen to 7% a year from earlier expectations of 19%.

Exiting the business will generate more than $100 million in cash savings in the second half of 2001 and improve second-half profit by about 10 cents a share, Mulcahy said.