Our reportable segments are consistent with how we manage the business and view the markets we serve. Our reportable segments are Technology, Services and Other.
In 2010, as a result of our acquisition of ACS, we realigned our internal financial reporting structure and began reporting our financial performance based on two primary segments – Technology and Services. The Technology segment represents the combination of our former Production and Office segments excluding the document outsourcing business. The Services segment represents the combination of our document outsourcing business, which includes Xerox’s historic business process services, and ACS’s business process outsourcing and information technology outsourcing businesses. We believe this realignment improves our view of the expanded markets we now serve and will help us to better manage our business which is primarily centered around equipment systems and outsourcing services. Our Technology segment operations involve the sale and support of a broad range of document systems from entry level to the high-end. Our Services segment operations involve delivery of a broad range of outsourcing services including document, business processing and IT. Our 2009 and 2008 segment disclosures have been restated to reflect our new 2010 internal reporting structure. Refer to Note 2 – Segment Reporting in the Consolidated Financial Statements for further description of these segments.
Revenues by segment for the three years ended December 31, 2010 were as follows:
|
(in millions) |
Total
|
Segment
|
Segment
|
|
2010 |
|
|
|
|
Technology |
$10,349 |
$1,085 |
10.5% |
|
Services |
9,637 |
1,132 |
11.7% |
|
Other |
1,647 |
(342) |
(20.8)% |
|
Total |
$21,633 |
$1,875 |
8.7% |
|
2009 |
|
|
|
|
Technology |
$10,067 |
$949 |
9.4% |
|
Services |
3,476 |
231 |
6.6% |
|
Other |
1,636 |
(342) |
(20.9)% |
|
Total |
$15,179 |
$838 |
5.5% |
|
2009 Pro-forma(1) |
|
|
|
|
Technology |
$10,067 |
$949 |
9.4% |
|
Services |
9,379 |
1,008 |
10.7% |
|
Other |
1,636 |
(447) |
(27.3)% |
|
Total |
$21,082 |
$1,510 |
7.2% |
|
2008 |
|
|
|
|
Technology |
$11,714 |
$1,288 |
11.0% |
|
Services |
3,828 |
302 |
7.9% |
|
Other |
2,066 |
(245) |
(11.9)% |
|
Total |
$17,608 |
$1,345 |
7.6% |
(1) Results include ACS’s 2009 estimated results February 6 through December 31. Refer to the “Non-GAAP Financial Measures” section for an explanation of this non-GAAP financial measure.
Our technology segment includes the sale of document systems and supplies, provision of technical service and financing of products.
|
Year Ended December 31, |
Percent Change |
||||
|
(in millions) |
2010 |
2009 |
2008 |
2010 |
2009 |
|
Equipment sales |
$3,404 |
$3,137 |
$4,079 |
9% |
(23)% |
|
Post sale revenues(1) |
6,945 |
6,930 |
7,635 |
—% |
(9)% |
|
Total Revenue |
$10,349 |
$10,067 |
$11,714 |
3% |
(14)% |
Technology revenue of $10,349 million increased 3%, including a negligible impact from currency and reflected solid install and related equipment revenue growth including the launch of 21 new products in 2010. Total revenues included the following:
Technology segment profit of $1,085 million increased $136 million from 2009, reflecting an increase in gross profit due to higher revenues and lower bad debt expense, as well as cost and expense savings from restructuring actions.
Technology revenue of $10,067 million decreased 14%, including a 3-percentage point negative impact from currency. Total revenue included the following:
Technology profit of $949 million decreased $339 million from 2008. The decrease is primarily the result of lower gross profit reflecting decreased revenue partially offset by lower costs and expenses reflecting the benefits from restructuring and favorable currency.
Our Services segment comprises three service offerings: Business Process Outsourcing (“BPO”), Document Outsourcing (“DO”) and Information Technology Outsourcing (“ITO”).
Services total revenue and segment profit for the year ended December 31, 2010 increased 177% and 390%, respectively, primarily due to the inclusion of ACS. Since these comparisons are not meaningful, results for the Services segment are primarily discussed on a pro-forma basis, with ACS’s 2009 estimated results from February 6 through December 31 included in our historical 2009 results (see “Non-GAAP Financial Measures” section for discussion of this non-GAAP measure).
Services revenue of $9,637 million increased 177%, or 3% on a pro-forma(1) basis, including a negligible impact from currency.
Services operating profit of $1,132 million increased $901 million or $124 million on a pro-forma(1) basis from 2009, driven primarily by BPO growth and lower G&A expenses.
Our BPO and ITO revenue pipeline including synergy opportunities grew 25% over the fourth quarter 2009. The sales pipeline includes the Total Contract Value (“TCV”) of new business opportunities that could potentially be contracted within the next six months and excludes business opportunities with estimated annual recurring revenue in excess of $100 million. The DO sales pipeline grew approximately 17% over the fourth quarter 2009. The DO sales pipeline includes all active deals with $10 million or greater in TCV.
Signings (“Signings”) are defined as estimated future revenues from contracts signed during the period, including renewals of existing contracts. Services signings were an estimated $14.6 billion in TCV in 2010 and increased 13% as compared to the comparable prior-year period. TCV represents estimated total revenue for future contracts for pipeline or signed contracts for signings as applicable.
Signings were as follows:
|
(in billions) |
Year Ended December 31, 2010 |
|
BPO |
$10.0 |
|
DO |
3.3 |
|
ITO |
1.3 |
|
Total Signings |
$14.6 |
Signings growth was driven by strong signings in both our BPO and DO businesses. In 2010 we signed significant new business in the following areas:
Services revenue of $3,476 million decreased 9% including a 2-percentage point negative impact from currency. Services revenue for 2009 and 2008 primarily reflects revenue from DO services. The decrease in revenue is primarily due to lower usage, primarily in black-and-white devices.
Services operating profit of $231 million decreased $71 million from 2008. The decrease was primarily due to lower gross profit reflecting a decrease in revenues partially offset by lower cost and expenses reflecting benefits from restructuring and favorable currency.
Other revenue of $1,647 million increased 1%, including a negligible impact from currency. Increases in GIS’s network integration and electronic presentation systems and Wide Format sales offset a decline in paper sales. Paper comprised approximately 58% of the Other segment revenue.
Other segment loss of $342 million was flat with 2009, as higher gross profit reflecting an increase in gross margins from the mix of revenues was partially offset by higher interest expense associated with funding for the ACS acquisition.
Other revenue of $1,636 million decreased 21%, including a 2-percentage point negative impact from currency, primarily driven by declines in revenue from paper, wide format systems, and licensing and royalty arrangements. Paper comprised approximately, 60% of the Other segment revenue.
Other operating loss of $342 million increased $97 million from 2008, primarily due to lower revenue, as well as lower interest and equity income.
(1) Refer to the “Non-GAAP Financial Measures” section for an explanation of the Pro-forma non-GAAP financial measure.