Thread regarding Xerox Corp. layoffs

July 24, 2015

Second-Quarter Results; Focusing Efforts to Improve Performance

Xerox Team:

Let me begin my quarterly state-of-the-business letter by thanking you for all your hard work during the second quarter. Today we announced our second-quarter financial results and here are some of the top-line numbers:

• Adjusted earnings per share of 22 cents – in line with our expectations.

• Total revenue of $4.6 billion – down 3 percent in constant currency.

• Operating margin of 8.2 percent – down 1.6 percentage points year-over-year.

• Cash flow from operations of $349 million – keeping us on track to deliver on our commitment of at least $1.7 billion in cash for the full year.

In general, our earnings met expectations. Here is a closer look at our results.

Mixed Results on Revenue and Profit

In our Services segment, revenue was up and margin was down. At $2.6 billion, we grew revenue modestly, up 1 percent for the quarter at constant currency. Document Outsourcing performed well this quarter with revenue growing nearly 4 percent at constant currency; revenue from business process outsourcing declined 1 percent. The total value of contracts signed during the quarter was up 20 percent year-over-year and the sales pipeline for Services contracts grew from the first quarter. These are good signs for the future and indicators that the new Xerox Services operating model is beginning to deliver growth.

Margin was 7.5 percent, down 1 percentage point, due to the ongoing work with our legacy Health Enterprise platform implementations in our Government Healthcare business, slower-than-planned savings from productivity improvements in our capability organizations and investments in our go-to-market industry business groups.

In our Document Technology segment, revenue and margin were both down. At $1.9 billion, revenue was down 7 percent in constant currency, a greater-than-expected decline. The majority of this shortfall was caused by ongoing economic weakness in developing markets and declines in sales of supplies. A bright spot was the strength of our high-end color product portfolio where installs were up 16 percent in the quarter.

Document Technology second-quarter operating margin was 12.1 percent, down 2.3 percentage points from last year and consistent with our expectations.

During the quarter, we used our strong cash flow to make investments in acquisitions, share repurchases and you. We acquired Healthy Communities Institute, a leader in cloud-based public health data, and Conestoga Business Solutions, a provider of office equipment and services. As planned, we repurchased $395 million in shares of Xerox stock in the quarter, bringing the total to $611 million in the first-half of 2015. We are increasing our share repurchase program from $1 billion to $1.3 billion, delivering even more value to our shareholders. And, we implemented salary increases as a result of our 2015 annual pay review process.

Breadth and Depth Of Our Offerings

Across the businesses in the second quarter, there was strong evidence of how we are continuing to use our innovation to improve how work gets done. Here are some notable accomplishments.

• We brought new managed print services innovations to our clients and partners with next generation offerings and workflow automation solutions that provide more security, speed and productivity.

• We bolstered our production color product portfolio with several cutting-edge products like the Rialto 900 Inkjet Press, the Versant 80 and the Color 800i / 1000i Presses. And, earlier this month, we launched the new iGen5, which extends the iGen product line as one of the most productive digital presses on the market.

• We completed the sale of our Information Technology Outsourcing business to Atos. This will allow for greater focus and investment capacity in our core Business Process Outsourcing portfolio.

• We announced our competencies and expertise in robotic automation. Robotic automation is transforming how business processes are performed all over the globe, enabling benefits that include immediate scalability, improved accuracy and higher productivity. Our products with the robotic automation technology include ClearSight Automated Intelligence and ClearSight Case Management.

More Focus, Better Execution

We began 2015 knowing we would face significant challenges, especially as currency weakened around the globe and we made strategic investments to drive growth in Services and to lead in attractive Document Technology markets. These are reasons why we previously had to lower our earnings guidance to Wall Street. As the year progressed, we have faced higher-than-expected costs in our legacy Government Healthcare Health Enterprise platform implementations and mounting economic pressures in developing markets.

While our strategy and direction are consistent, and our fundamentals are strong in many areas of the company – we have to improve our performance in others.

In Services, we are making progress to improve the business, but we need to continue to drive revenue growth with our new go-to-market model and improve our margins. Therefore, we are planning for restructuring to accelerate our cost reductions. We will eliminate approximately 3,000 Xerox Services jobs during the balance of the year through attrition and reductions-in-force. You can expect your leaders to provide more information as it becomes available. You can be certain that any reduction-in-force will be done as thoughtfully and strategically as possible.

In Document Technology, we remain focused on leading in the most attractive segments of the market. We must be vigilant on costs in order to mitigate revenue weakness and to improve our financial performance.

The first half of the year presented its fair share of challenges and we believe the second half will, too. However, I am confident in our strategy and direction, and most of all, I’m confident in you. I know that together, we can execute well and deliver on our commitments. It’s all about focus.

As always, we have a lot to talk about and I’m sure you have many questions. Bob Zapfel, president of Xerox Services, and I will be hosting a Webcast on August 4 at 11 a.m. (EDT). We’ll be coming to you live from Connecticut Business Systems – a Xerox Company – in Wethersfield, CT. I hope you will join us.

Thanks for all you do for Xerox.

Sincerely,

Ursula M. Burns

Chairman and Chief Executive Officer

How do you know we'll have a layoffs, and also, what kind of reorg you are talking about?

Why Q2, why not Q1 or Q3. It's just your gut feeling, so label it as such