PALO ALTO, Calif.--Dec. 11, 2001--Xerox says they will create an independent company from its Palo Alto Research Center (PARC). This initiative sets the stage for strategic partners to share in the benefits of PARC's renowned innovation while ensuring that Xerox maintains access to the center's research and technology. Xerox announced last year that it would seek strategic, non-competitive partners for PARC, one of several elements in Xerox's turnaround plan to focus on core growth areas. The company confirmed today that active discussions are under way with key potential investors. The new company is expected to begin operations after Jan. 1 as a wholly owned Xerox subsidiary. In this structure, PARC will continue to generate a stream of inventions, creating opportunities for Xerox and future investors to commercialize PARC-developed technology. "Establishing an independent entity builds the foundation for our plans to seal strategic partnerships with external companies, ultimately allowing Xerox to fully capitalize on the PARC research it needs while opening the wealth of PARC-generated innovation to new avenues of opportunity,'' said Herve Gallaire, president, Xerox Innovation Group. It is expected that PARC employees will transfer after the first of the year from Xerox to the new company. An external search for a chief executive officer of this company is under way. "The current PARC organization will be the nucleus of the new company, but we intend to augment it with business development and management functions,'' said Gallaire. "We have developed a model that will preserve the culture and innovative capacity of PARC.'' Founded in 1970, PARC is one of seven Xerox global research centers that contribute to Xerox's approximately $1 billion annual commitment to research and development. Even while Xerox has focused on driving down costs, the company has maintained its R&D investment at about 6 percent of revenue. The Xerox Innovation Group drives invention, innovation and integration throughout the corporation. It also manages intellectual property, patent licensing, business development, and new technology ventures and spinoffs.