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Product Performance Positioning Xerox for Growth, CEO Mulcahy Says

Press release from the issuing company

NEW YORK--Nov. 25, 2002-- Building on a foundation of strong operational and financial improvements and a portfolio of 17 new digital products launched in 2002, Xerox Corporation is well-positioned for sustainable profitability and market share growth in 2003 and beyond. That was the message delivered today by Xerox Chairman and Chief Executive Officer Anne M. Mulcahy at the company's annual investor conference here. According to Mulcahy, Xerox has consistently delivered on its 2002 commitments to capture productivity gains, improve efficiencies across the company, and strengthen its balance sheet - posting a $2.3 billion cash balance and reducing nearly $3 billion in debt by the end of the third quarter. Meanwhile, the company has made significant investments to fuel growth across its key office, production and services businesses - transforming Xerox into a fast, flexible technology and services enterprise focused on bringing unmatched value to customers. "We are feeling very bullish about our future. Now that we've implemented successfully a business model that delivers sustainable profitability, we are focused on delivering growth and share," Mulcahy said. "This year we have launched five technology platforms - 17 new products - winning more than 100 awards to date. “Today's strong installs will lead to tomorrow's strong post-sale results." In addition to Xerox's breakthrough high-speed digital printing press, the DocuColor iGen3(TM), in 2002 Xerox launched four other office and production platforms such as the Document Centre 500 Series of digital multifunction systems, which bring new levels of productivity at lower prices to office environments. These product families are aimed precisely at the document market segments that are growing fastest, she said, and are "helping us increase share in the marketplace." According to Xerox's analysis, the market for digital production color is growing at 13 percent per year worldwide, office multifunction devices at 6 percent, and office color at 15 percent. Also expanding significantly is the global services market, targeted for 15 percent compound annual growth, as enterprises seek more efficiency to compete and meet the demands of the digital economy. Xerox Global Services addresses those needs by blending technology, expertise and global reach to help clients streamline document-intensive processes and simplify how work gets done. Complementing the product and services portfolio: An aggressive brand campaign that began during the Olympics and will extend into 2003, and broader indirect channel sales coverage through telebusiness and other channels to efficiently reach more customers and capture more sales. Direct sales territories - more than 90 percent full, the chairman reported - continue to focus on the high end of the market. Xerox intends to excel against an expanded set of operational imperatives in 2003, Mulcahy said. She noted the company will continue to focus on precise execution to build equipment revenue growth and market share, accelerate productivity improvements through the deployment of Six Sigma, leverage cash flow through the disciplined management of the balance sheet, and motivate and develop employees. "We're pleased with our progress, but we are not taking our foot off the pedal," she said. By 2005, Xerox's objectives are to achieve annual revenue growth of around 5 percent, gross margins above 40 percent, and selling and administrative costs in the low 20 percent range. Research and development investments are expected to remain at 5 percent to 6 percent of revenue. In total, this will contribute to 11 percent to 12 percent return on sales. Xerox strategies will continue to be anchored by advanced imaging and document systems; solutions that tailor Xerox devices to solve customer problems or improve document-related work processes; and services that couple technology with document, content and knowledge management expertise. "We've made and kept a lot of commitments," Mulcahy said. "We are totally focused on delivering value to our customers in the three markets we serve."