• Business Week, Financial Times , Friday, December 19, 2008 11:15 AM

It seemed like a good idea when FedEx bought Kinko's for $2.4 billion, way back in 2004, but the marriage has become a case study in the challenges of meshing disparate corporate cultures, according to writer Christopher Palmeri. Kinko's profits have fallen from more than $100 million in 2004 to $45 million in 2007; revenue is flat at $2 billion. A perception that customer service is poor, a malaise that predates the FedEx takeover, is one roadblock to growth the company is trying to get around.

Some longtime customers are upset that the Kinko's sign will be removed from stores starting next year. The chain will be called FedEx Office. Marketing consultant Andy Sernovitz says he got more frustrated reader responses to a blog item he wrote about the name change than to any other.

Brian D. Philips, the CEO of FedEx Office, says the FedEx Office name will create more opportunities for growth. "Kinko's is known as copies," he says. "Nine-cent, black-and-white copies you got in college. FedEx is a very elastic brand ... Copies are a small part of our business."

FedEx, meanwhile, is cutting the pay of 36,000 of its 290,000 employees, ranging from 5% for mid-level salaried workers up to 20% for CEO Fred Smith, Financial Times says. It will also eliminate merit-based increases for U.S. salaried employees in 2009 and suspend matching contributions to 401(k) retirement accounts for a year .

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