Xerax sayz Asia no problemo!
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Wednesday October 7 10:23 AM EDT
Xerox Sees Asia Harming It Less Than Others
By Neil Winton, Science and Technology Correspondent
LONDON (Reuters) - U.S. copier maker Xerox Corp (XRX - news) said Wednesday the Asian economic crisis was bound to have an impact on profits, but it would suffer less harm to its bottom line than some rival high-tech companies.
The Stamford, Connecticut-based company said its businesses in the U.S, and Europe remained so far unscathed from any Asian fall-out, and it was too early to say whether they would be hit next year.
In an interview, Richard Thoman, Xerox president and chief operating officer, said Xerox would be seeking to form alliances and buy some small companies but it planned no big takeovers.
''Asia is bound to have a negative impact (on the bottom line). Because of the comparisons it's bound to be worse than last year, but in our case it is bound to be less than an H-P (Hewlett-Packard and IBM).
Last month at a conference in Paris, Hewlett-Packard, the world's second-largest computing company behind IBM, said its sales in South Korea had collapsed to about $400 million a year from $1 billion. The company feared similar falls in Indonesia, Malaysia, Russia, Brazil, Argentina, Chile and Venezuela. Thoman said because of Xerox's business plan it would suffer proportionately less than the competition.
''A number of our Asian markets are run by Fuji-Xerox, which is a 50-50 joint venture. The global brand has about $30 billion of revenue but only $20 billion appear under Xerox. In a sense we have half the risk most companies have because we have half the Fuji-Xerox business,'' Thoman said.
In its 1998 second quarter, Xerox reported a 17 percent increase in operating profit. Before a charge of more than $1.1 billion for a sweeping restructuring begun in April, Xerox's operating profit rose to $395 million from $337 in the same period of 1997. Revenues grew nine percent to $4.7 billion.
''There have been declining businesses in Korea and Japan and other places and they are clearly seeing a very tough trend there. In this market we have half the risk that an H-P and an IBM have.''
''Clearly Latin America, Brazil are in trouble. But the signs are it is better than we feared. Basically our European business has held in pretty well, our U.S. business is doing pretty well, so as best we can tell up till now things are pretty good.''
Did Xerox see any signs that the economic crisis might hit the U.S. and Europe next year?
''No we don't. Because in our business orders can be cancelled, there's really no way of guaranteeing anything. But we are relatively unique in that somewhere around 60 percent of our revenue is in the form of recurring (leasing) revenue.''
Thoman said the businesses of copying and printing were converging.
''A printer is a copier is a printer with a scanner attached to it in the digital world and so the differences between copiers and printers really go away.''
Xerox would seek alliances and small acquisitions.
''We will be buying companies, but I don't think they will be gigantic ones. There will be more alliances, like the one with IBM, and software companies.''
Last month Xerox and IBM announced a joint venture which sought to bridge the previously separate worlds of paper and digital communications.
''There will be selective acquisitions, but not big block- busters,'' Thoman said.
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