Xerox Report Points To A Refined Marketing Message

Xerox reported its first quarterly cash dividend in six years Monday. Analysts believe the positive news points to healthy business practices and finally finding the correct marketing message after many unstable years.

Shareholders of record on Dec. 31 will receive a dividend of 4.25 cents per share on Jan. 31, 2008. The company says it's on track this year to deliver between $1.18 and $1.20 earnings per share.

With an established business focused on large corporations, Xerox plans to make an aggressive push into the small and mid-size business market. "In the coming year, we will dedicate more marketing funds, increase our online activity and expand our channel distribution to reach small-and-midsize businesses with compelling and practical offerings," says Xerox Chairman and CEO Anne M. Mulcahy in a prepared statement.

Through its acquisition of Global Imaging Systems, Xerox has spent the past year building its presence among smaller businesses. The Stamford, Conn. company focuses on the small and medium-sized business market through 22 regional U.S. companies that sell and service document management systems.



A company in transition, Xerox introduced color printers and services, improving its balance sheet, and introduced about 100 new products in the past three years.

"Xerox has gone through a significant transformation, from a company extremely device- and hardware-focused, to one centered on a balanced portfolio that includes services," says Crawford Del Prete, senior vice president/research at IDC, Framingham, Mass. "That transformation puts a company's identity up for grabs, and employees need to redefine the message they send to existing and potential customers."

Success really comes down to marketing and messaging, Del Prete says. For Xerox, the dividends signal good news for the company's strength and performance in the past 10 years since moving away from branding efforts tied to copiers, and onto printing and services. That's when the company began to phase out stand-alone copiers, integrating the technology in a few printers.

Xerox spokesperson Michael Moeller argues that marketing efforts contribute only a small portion to the board of director's decision to reinstate dividends. "The board's decision really has to do with increased sales and reduced operational expenses," he says.

Xerox confirmed it's on track to generate $1.5 billion in operating cash flow this year and expects to generate about $1.6 billion in 2008. Since launching its stock buyback program in October 2005, Xerox has repurchased about 129 million shares, totaling $2 billion of its $2.5 billion program.

In the last year, credit rating services began raising Xerox's bonds to investment grade. Moody's Investors Service last week raised ratings on Xerox's $7.6 billion debt to Baa2 from Baa3, noting the company's solid competitive position, stable profitability, and solid free cash-flow generation.

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