Shareholder Letter


Fellow Shareholders:
In my letters to you over the last several years, I have updated you on the steps we have taken to position Xerox for the future. Since the acquisition of Affiliated Computer Services five years ago, we have taken Xerox from a company focused primarily on document and information management to one that supports critical business processes for enterprises of all sizes, including over 90 percent of the Fortune 100. While the composition of our portfolio has changed significantly, our core mission has not. Xerox has always been focused on helping companies and governments innovate and engineer the way they work for greater productivity, efficiency, work capacity and personalization.

Rethinking the Way Work is Done

“Invented just over 75 years ago, xerography dramatically scaled the way organizations could communicate.”

Xerox is best known for the innovation we brought to the sharing of information. Invented just over 75 years ago, xerography dramatically scaled the way organizations could communicate. It solved a major barrier to the way organizations shared information, yielding a range of operational benefits. It remains a core communication technology in every business, government office and educational institution today. Since then, Xerox innovation has been at the core of today’s digital world – from the invention of some of the earliest personal computers to being instrumental in 3-D print-head technology.

And today, that same mission to apply technology and innovation to improve business process and workflow is relevant to a range of functional domains across almost every industry. Consider the following:

  • Xerox is the claim process provider for the top 20 U.S. health insurance providers, including all 12 Blue Cross Blue Shield plans, touching 2 out of every 3 insured lives.
  • Xerox is a market leader in the U.S. for transportation-related services including automated tolling and parking.
  • Xerox is the processor for hundreds of billions of dollars in accounts payables and receivables for blue-chip clients, automating their order-to-cash life cycle.
  • Xerox is the leading quality and care performance analytics software provider to more than 1,900 hospitals.
  • Xerox is the administrator for global HR teams running industry-leading health, welfare and defined benefits plans for over 14 million employees and retirees.
  • Xerox is the teacher’s aide supporting learning on-the-go so that educators and students can print and share from mobile devices.

In each of these examples, we are working side-by-side with our clients to innovate and engineer business processes that are automated, agile and lean.

“As I look at today’s business environment, it is clear that the world is rich with opportunity for Xerox to help organizations rethink the way they are operating.”

As I look at today’s business environment, it is clear that the world is rich with opportunity for Xerox to help organizations rethink the way they are operating. Organizations of all sizes, all around the world, are faced with the challenge of doing more things while simultaneously satisfying a growing list of more vocal stakeholders. For example, businesses aspire to operate at a greater scale, but they also need to provide increasingly personal experiences. Their available information and data are expanding, and yet there is a need for more powerful and actionable insights. Their markets are demanding more transparency and openness, and yet information and processes must be more secure than ever.

These pressures create operational tension that requires organizations to continually transform the way they perform work. At Xerox, we are applying our expertise in business process, imaging, user-experience and analytics to help clients become more productive, efficient, secure and precise across a wide range of domains and industries.

Here are some examples that put this into perspective:

  • Managing communicable diseases requires the highest levels of coordination across multiple players to ensure prevention, protection and recovery for those at risk. Our Maven® Disease Surveillance and Outbreak Management Software helps to manage this complex coordination for health professionals through an offering from one of our recent acquisitions, Consilience Software. Maven streamlines the many steps required to identify, monitor, possibly quarantine and treat those infected (or possibly infected). A shared platform coordinates activities among government health agencies, medical providers and people at risk. During 2014, Maven played a key role in managing Ebola cases and contacts in the U.S.
  • The U.S. trucking industry must contend with a range of safety, weight and credential requirements – all of which vary state by state. HELP, Inc., a non-profit, public-private partnership dedicated to motor-carrier safety, turned to Xerox to support PrePass. PrePass saves the trucking industry time, fuel and money by enabling qualified motor carriers to electronically comply with state requirements – eliminating the need to stop at weigh stations. HELP and Xerox also offer electronic prepayment of truck tolls on 78 roads, turnpikes, tunnels and bridges in 15 states.
  • The management of information and documents has never been so important as it is in today’s “always-on” workplace. Grohe, a global supplier of luxury bathroom fixtures based in Germany, selected Xerox to manage the way it prints, shares and processes documents. With our market-leading managed print services, Grohe strengthened document security and reduced print costs by 25 percent while decreasing printing devices from 500 to 280. Throughout Grohe’s locations in North America, Germany, United Kingdom, Japan, the Netherlands, Austria, Portugal and Switzerland, Xerox delivers customized document production, IT infrastructure planning and implementation, device maintenance and supplies replacement.
  • Many cities are burdened with antiquated, coin-operated parking systems that frustrate drivers and can impede business in urban areas. The City of Indianapolis selected ParkIndy, a public-private partnership between the city and Xerox, to modernize its old coin-operated parking meters to help make parking stress free, improve traffic and increase business for local merchants. As one of the first U.S. cities where all meter payments can be made by credit card or phone, Indianapolis has seen substantial growth in the number of motorists choosing ParkIndy’s convenient payment methods. The new system requires less maintenance, is solar powered and reduces emissions as a result of improved traffic flow. In addition, Xerox uses analytics to improve compliance and provide policy recommendations to the city. Xerox has successfully implemented and operated intelligent parking systems for more than 25 cities in the U.S.
  • “We are helping the world work better in today’s highly connected, agile economy.”
  • Buck Consultants at Xerox launched SavIncent™, a new financial wellness program that improves employees’ financial health and retirement readiness. SavIncent is a unique program that links financial education and activities to a company’s retirement savings plan. Employees who complete various elements of the program are rewarded with employer contributions to their savings plan, thus motivating them to improve their financial health.
  • Xerox worked with the South Carolina Department of Social Services to improve the delivery of government assistance to nearly half a million South Carolinians. Benefit recipients access benefits from the Supplemental Nutrition Assistance Program (SNAP) with convenient electronic benefits transfer cards. We are also delivering a Web-based data warehouse to aid the state’s fraud unit in detecting suspicious behavior. Xerox is a leader in government card services with programs that make it easier for nearly 25 million people in 29 states to get cost-effective and convenient access to their benefits.

Multiply those examples by hundreds more and you begin to see how we are helping the world work better in today’s highly connected, agile economy – and the extraordinary opportunities for growth.

Performance in 2014

We delivered a solid financial performance in 2014. Here are some highlights:

  • Net income from continuing operations of $1.1 billion.
  • Operating cash flow of $2.06 billion.
  • Operating margin of 9.61 percent, up 0.6 points year-over-year.
  • Revenue of $19.5 billion.
  • GAAP earnings per share from continuing operations of 90 cents.
  • Adjusted earnings per share of $1.071, up 3 cents year-over-year.
  • Returned $1.4 billion to shareholders through stock repurchases and dividends, a 40 percent increase from 2013.

As proud as we are of our results, we know that even stronger results are required to build more value for our company and for you. That is why we continue to lead an aggressive agenda to better strengthen our offering portfolio, improve productivity and target segments where we are best positioned to compete and differentiate. Here are some examples illustrating the steps we are taking along those lines:

  • We announced the pending divestiture of our Information Technology Outsourcing business to Atos, an international leader in digital services. This will allow us to focus our Services business squarely on business process outsourcing and document outsourcing, and provide additional capacity to invest further in these businesses.
  • Our Canadian operations closed its largest ever, multimillion-dollar managed print services deal with the government of Canada.
  • We added new talent and fresh perspectives to our leadership team through internal promotions and external hires.
  • We launched a new structural and go-to-market model for our Services business and aligned our delivery resources along functional capabilities such as customer care, human resources, consulting and analytics, and transaction processing, essentially reorienting our entire Services organization – 100,000 people around the globe – while continuing to run and drive operational improvements across the business.
  • We brought to market over 40 new products and workflow solutions that increase productivity, mobility, security and sustainability – and remind the market of our innovation power. Our continued focus on Document Technology gave us the proud distinction of being the equipment share leader for the fifth consecutive year.
  • We invested nearly $350 million in acquisitions and strategic partnerships in attractive markets like business process and software platforms and services to maximize our strengths and expand our global reach. For example, through our acquisition of ISG Holdings, Inc., we established a leadership position in the workers’ compensation claims processing market. We also invested in HealthSpot and will be their exclusive business process outsourcing provider as they endeavor to offer groundbreaking telehealth to patients at convenient neighborhood locations.
  • “We continue to lead an aggressive agenda to better strengthen our offering portfolio, improve productivity and target segments where we are best positioned to compete and differentiate.”
  • We continued to build our innovation ecosystem and were awarded 1,114 U.S. patents in 2014. Close to half of our patent filings were in services software and included innovations to improve automation of labor intensive work, analytics to extract actionable insights from data, and personalization to increase relevance of products and services like customized packaging and 3-D printing. We even introduced an intelligent virtual customer care agent that can diagnose and resolve customer inquiries in the same way – if not better – than a human agent would.

As a result of this kind of work, we are on track to drive greater growth and margin in our Services business, while simultaneously strengthening our leadership in Document Technology. I have great confidence in our future potential, and I can assure you that all of us at Xerox are taking a targeted approach to capture the rich opportunity in front of us.

Ready for the Future

In closing, we enter 2015 with a sense of momentum and heightened confidence. We clearly see that tomorrow’s enterprise will be nothing like today’s. And, while it is difficult to predict with certainty what the future business climate will be like, I do know that businesses and governments, large and small, will continue to face a growing list of challenges they will need to conquer. And, people will continue to need better transportation, healthcare, education, mobility and customer service.

Xerox is here to help. As I mentioned earlier, helping organizations rethink the way they work has been a core mission since our founding. We will always be known as the company that helped change the way the world shares information. But over time, our goal is to be recognized as the company that is helping to change the way the world parks... shops... learns... publishes... gets benefits... receives medical care... I could go on and on. We not only perform this work on a massive scale – and benefit our clients in the process – but we also touch billions of people by improving key moments in their lives every day.

I know I speak for the Xerox team – 140,000-plus strong – when I say that today’s business challenges are made for our unique combination of capabilities. We are playing to our strengths and ushering in a period of growth for our business and for creating more value for our clients, our people and you.

Ursula M. Burns Signature

Ursula M. Burns

Chairman and Chief Executive Officer


  1.    1We have discussed our results using non-GAAP measures. Management believes that these non-GAAP financial measures provide an additional means of analyzing the current periods’ results against the corresponding prior periods’ results. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company’s reported results prepared in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are set forth on the Financials page.