STAMFORD, Conn., March 6, 2001  -- Xerox (NYSE: XRX) has agreed to sell half of its stake in Fuji Xerox Co. Ltd. to Fuji Photo Film Co., Ltd. for 160 billion Yen in cash, more than $1.3 billion based on recent exchange rates. The transaction brings to nearly $2 billion the amount Xerox has raised in asset dispositions since December, representing a critical milestone in the company's turnaround plan. Under the agreement, Fujifilm's ownership interest in Fuji Xerox is increased from 50 percent to 75 percent. While Xerox's ownership interest is decreased to 25 percent, the company retains significant rights as a minority shareholder. All product and technology agreements between Xerox and Fuji Xerox will continue, ensuring that the two companies retain uninterrupted access to each other's portfolio of patents, technology and products. With its business scope focused on document processing, Fuji Xerox will continue to provide color office product technology to Xerox and collaborate with Xerox on research and development. Xerox maintains its agreement with Fuji Xerox to provide high-end production publishing and solid ink products. "With this transaction, Xerox greatly enhances its liquidity and has made significant progress on its turnaround pledge to generate more than $2 billion in asset sales," said Paul Allaire, Xerox chairman and chief executive officer. "The agreement also preserves the benefits of a model American-Japanese business partnership as Xerox and Fuji Xerox continue to collaborate on and exchange the most innovative technology in the document processing industry." In October of last year, Xerox announced a three-pronged turnaround plan that includes the sale of assets generating $2 billion to $4 billion; cost reductions exceeding $1 billion, and a sharpened focus on its strategic core businesses - especially document services, high-end printing solutions and color across the product line. In December, Xerox completed the sale of Xerox (China) Ltd. and Xerox (Hong Kong) Ltd. to Fuji Xerox for $550 million cash. "Today we have not only delivered on a key element of our asset sale strategy but also reached a major milestone in restoring our financial strength. Our cost reduction efforts are being aggressively implemented and remain on target to achieve the desired results. The company's core product and service offerings continue to lead the industry in technology and quality," Allaire said. "In short, we are executing on each element of our turnaround plan." The agreement will result in an after-tax book gain of approximately $310 million and is expected to close by the end of March, subject to the completion of Japanese regulatory requirements.