Fujifilm, Xerox split appears to be permanent
The imaging industry’s messiest breakup doesn’t look like it’s heading for a reconciliation any time soon
Industry watchers and customers hoping for a resolution between the on-going conflict between Xerox Corp. and Fujifilm Holdings over the failed merger didn’t get much encouragement from the company’s top executives. Last week, Xerox CEO John Visentin emphasized in the company’s second-quarter earnings report his desire to “return Xerox to the forefront” as tech company. Further, the company’s board authorized a $1 billion stock buyback, a sure sign management is looking to stay put.
Our success will depend on operating with a relentless focus on optimization. Actions include improving the effectiveness and efficiency of our supply chain and go-to-market channels. Equally important is ensuring we provide a great experience for our customers and address their evolving business needs.”
In the earnings call following the announcement, Visentin emphasized Xerox would not be auctioned off – saying the process was too time-consuming – but the company would consider a sale if it enhanced shareholder value. He also reiterated Xerox intends to let its technology agreement (TA) with Fujifilm lapse in 2021, but that doesn’t necessarily mean the Fuji Xerox joint venture will be dissolved. he explained:
Not renewing the TA does not dissolve the joint venture. We have a 25% ownership position in Fuji Xerox that is governed by separate Joint Enterprise Contract. As I have said, we will do what is best for Xerox. This is true of the work we are doing to improve our supply chain to be more competitive. This means we need to source products, parts and supplies from the best and most competitive suppliers
Fuji Xerox is one of our suppliers, today providing 59% of our cost production and we will continue to work with them in areas where they are competitive. We manufacture a portion of the remaining 41% ourselves and have high-quality suppliers for the rest. But we are rethinking the way we choose our suppliers.
Vinsentin added Xerox had not seriously considered other manufacturing partners in the past.
On the other side of the planet, Fujifilm Holdings CEO and chairman Shigetaka Komori told the Asia Nikkei Review the Fuji Xerox combination was not “indispensable” for Fujifilm’s future growth. (Indeed, according to the most recent annual report, Document Solutions – while comprising a large share of income at 1,047 billion yen – declined in sales volume by 3%, while Imaging Solutions and Healthcare and Materials divisions are showing double-digit growth.)
According to the Nikkei report, Komori says “Fujifilm can grow without the acquisition, which does not mean we will lose our future,” indicating the Japanese company may give up on the buyout bid.
The primary element standing in the way of the combination is price. Activist investors Carl Icahn and Darwin Deason fought the merger on the basis it undervalued Xerox stock. Komori, however, stated firmly: “We would not go as far as to raise our terms of acquisition, set in January, to realize the deal…The terms we offered in January are the ceiling.”