Xerox Corporation (NYSE: XRX) is the world's largest supplier of dry-paper photocopier machines and associated supplies. Corporate headquarters are in Stamford, Connecticut, though the major portion of the company is located in and around Rochester, New York, the area in which the company was founded. The company is so identified with its product that the term "Xerox machine" is often used to refer to photographic duplicators produced by other companies.
Originally named Haloid and beginning as a manufacturer of photographic paper and equipment, the company came to prominence in 1959 with the introduction of the first one-piece, dry-paper photocopier utilizing the process of xerography, the Xerox 914. The company expanded substantially throughout the 1960s, making millionaires of some long-suffering investors who had nursed the company through the slow research and development phase of the product. In many ways, this time resembled the early years of microcomputer giants Apple Computer and Microsoft. Proceeds from the introduction of this new industry allowed the company to open a famous research center, the Xerox Palo Alto Research Center or Xerox PARC.
Business model shifts
Xerox shifted its business model in the 1970s and 1980s as patent expiry removed exclusivity from their copier technology, and diversification plans largely did not succeed. Many technologies developed largely by PARC were ignored by Xerox and made their way into other companies' products—for instance, Ethernet, the WIMP interface, and laser printers. Plans to enter the computer market were destroyed by bad timing (for example, releasing an 8-bit CP/M based system, the Xerox 820, just as IBM readied its more advanced PC). Similarly, Xerox developed a line of advanced typewriters just as the typewriter began to lose out to computer-based word processing. Meanwhile, the company's manufacturing costs were far in excess of those of their Japanese photocopier competitors, its design and manufacturing quality became questionable, and its internal culture had become problematic.
The company was revived in the 1980s and 1990s, through a massive improvement in quality design and realignment of its product line. Development of "digital photocopiers" in the 1990s and a revamp of the entire product range—essentially high-end laser printers with attached scanners which were able to be attached to computer networks—again gave Xerox a huge technical lead over its competitors. Xerox worked to turn its product into a service, providing a complete "document service" to companies including supply, maintenance, configuration, and user support. However, the company struck trouble in an echo of its earlier difficulties when its competitors caught up and it again lost its technical lead.
Xerox abandoned its slogan, "The Document Company," and sought to reposition itself as a knowledge company. In this spirit, it purchased the printer division of Tektronix in 1999. It also markets software such as DocuShare and FlowPort, and offers consulting services.
In early 2002 Xerox, like Enron, WorldCom, Global Crossing, and Tyco, was revealed to have hidden billions of dollars in past losses through creative accounting practices—though unlike those companies it is still operating.
Copiers are often rented (with eventual ownership to the customer after an agreed upon length of time) rather than purchased outright. If a customer leases equipment in this rent-to-own way, with a contract that involves servicing and supplies, how should Xerox account for the transaction's income?
Conventional accounting divides the rental payments into two parts—separating the payment for the copier per se from the payment for servicing, etc. According to these conventional rules, Xerox was entitled to book the whole of the return on the first of those streams, just as if it had sold the copier outright. But payments for servicing and supplies are supposed to be booked separately, on a cash basis.
In 1998, Xerox changed its own rules, and started booking the whole income stream immediately. Furthermore, it neglected to tell investors that it had made a change. So what they saw was a jump in income. Wall Street thought the new management team was working wonders, and the stock price doubled within months. The income-accelerating gambit just described was only one of several games played with the books, but it will convey a flavor of the others.
Of course, fool's gold becomes tarnished quickly, and Xerox stock took a beating as the nature of the accounting games became public. In 2002, the Securities and Exchange Commission charged Xerox with massive accounting fraud, and the company paid a $10 million fine.
- See also: Accounting scandals.
Although it is a global brand, Xerox has a slightly unusual corporate structure in that it maintains a joint venture, Fuji Xerox, a 50-50 partnership with the Japanese photographic firm Fujifilm, to sell in the Asia-Pacific region, and had a similar operation, Rank Xerox, throughout Europe, though this operation is now fully owned by Xerox.
Xerox received a 100% rating on the first Corporate Equality Index released by the Human Rights Campaign in 2002. They have maintained this rating in 2003 and 2004.
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