Xerox Corporation (NYSE:XRX) Unable to photocopy its past

Posted by Steve Raasch June 19, 2013 0 Comment 1441 views

Very few people use the word “photocopy” when they want to Xerox something. The word Xerox itself has come to mean photocopy and are almost always used in the same breath. Xerox Corporation (NYSE:XRX) has been a pioneer in the photocopying field and over the years, diversified into allied products. At the moment, the company trades at an evaluation that is seemingly low, pays an attractive dividend and is a biggie in the market. It has some major competitors, but can it withstand the rivalry and hold its stand? On the face of it, Xerox is just 8.8 times the current financial years projected earnings and looks pretty cheap. In addition to that, it pays a dividend yield of 2.5% that has never dipped since the 2008, when it was first introduced.

Look below the surface

However, its necessary to delve a little deeper than just was is visible on the surface. The path of the printing/copying business is riddled with potholes. Low spending, low margins and product life-spans that are too lengthy are the major contributors to its woes. In 2012, XRX’s operating margins narrowed significantly and this year’s projections are no different. Over the next few years, the company is expecting that its revenues to switch from services rather then from equipment sales. The recession brought with it reduced spending from the government as well as from the private sector. And new office equipment is the first to be ticked off the budget list for most corporations.

The changing face of the market

Organizations are freezing spending on office equipment and resultantly freezing-up the market that relies on this business as well. Xerox used to rely very heavily on the U.S Government business and that too has moved from a deluge to a dribble.  At the moment, the company seems like a “must avoid” and is operating with just too many red flags. Margin declines, a high debt load and almost plateaued or dropping revenues are the main ones. The company will have to up its game and maintain some equilibrium in its balance sheet. It will have to evolve in order to stay at the fore of the business.

About Steve Raasch

Steve Raasch is a breaking news reporter for GDP insider. During his nearly two decades of editorial experience, Steve has covered a variety of topics including small business, health, personal finance, advertising, workplace issues and consumer behavior. Steve is very passionate about his work. Steve earned a master of arts degree in international relations from the Johns Hopkins University School of Advanced International Studies in Washington.

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