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Opinion: Xerox acquisition positions Fuji Xerox for not just survival, but growth Opinion 

Opinion: Xerox acquisition positions Fuji Xerox for not just survival, but growth

The merger announcement between Xerox and Fuji Xerox last week started the next chapter of the nearly six decades-long joint venture between U.S.-based Xerox and Japan’s Fujifilm. The merger had been long expected, and had been accelerated with the insistence of shareholder activists Carl Icahn and Darwin Deason.

The combination is expected to improve the profitability and competitiveness of Fuji Xerox, according to Fujifilm Holdings management:

Gaining control of U.S. copier pioneer and long-term partner Xerox will be ‘a game changer’ for Fujifilm Holdings, enabling the Japanese company to develop products much faster at lower cost and distribute them around the world, its chairman and CEO Shigetaka Komori said in an interview with the Nikkei Asian Review on Thursday.

“The combination will create synergies and produce cost savings worth $1.7 billion a year,” Komori emphasized in the interview at Fujifilm’s Tokyo headquarters.

The article noted, the merger, if it passes regulatory and shareholder approval, puts the coper maker on the same scale of HP and vaults it over Canon and Ricoh.

While Tokyo markets approved of the announcement, credit agency Moody’s Investors’ Services has said it may downgrade Fujifilm’s A1 debt rating.

“The review for downgrade reflects the potential that Fujifilm Holdings’ business profile will weaken, due to its larger exposure to the declining document business,” Moody’s said on Thursday.

Industry expert Jeff Hayes of Keypoint Intelligence noted: “Xerox has struggled to grow its document technology and related business over the last four years with 2017 revenue ($10.3B) down 19% compared with 2014 ($12.7B). Spurred by activist shareholder Carl Icahn, who owns approximately 9.7% of Xerox shares, Xerox spun off its business process outsourcing business in 2016 to focus on its core. Mr. Icahn has been vocal recently about seeking significant changes to Xerox’ board of directors, senior management, and the Fuji Xerox joint venture with an eye on a potential sale of Xerox in the future.”

Hayes noted, prior to the combination, Fuji Xerox and Xerox had coordinated R&D spending and product developments, but the merged company should enjoy greater integration as well access to Fujifilm Holding’s deep technology bench of inkjet, materials, imaging and artificial intelligence. About 10,000 Fuji Xerox jobs will be eliminated, about one-fifth the global headcount.

“The re-alignment of the office and production printing industry continues. While some may view the timing of this decision to sell as defensive in nature, InfoTrends believes Xerox is making a smart move to combine assets with long-time partner Fuji Xerox under a strong parent company with deep financial and technology resources,” says Hayes. “Xerox and Fuji Xerox need to further drive down costs in the extremely competitive office technology market. Both companies also need to accelerate their product development to fully participate in the growing digital production printing industry (packaging, decorative, sign graphics, 3D).”


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