Xerox 2005 Annual Report Download - page 25

Xerox Corporation
17
Markets
we show our customers how to improve their processes by using
digital workflow. Within the Eligible Offset market we offer leading
digital technology,led by our market-making Xerox iGen3®tech-
nology and accompanied by the industry’s broadest migration
path to digital, which meets the increasing demand for short-run,
customized and quick-turnaround offset quality printing.
Our products include high-end printing and publishing systems,
digital multifunctional devices (“MFDs”) (which can print, copy,
scan and fax), digital copiers, laser and solid ink printers, fax
machines, document-management software, and supplies such
as toner, paper and ink. We provide software and workflow
solutions that can help businesses easily and affordably print
books, create personalized documents for their customers
and scan and route digital information. In addition, we provide
arange of comprehensive document management services,
such as operating in-house production centers, developing online
document repositories and analyzing how customers can most
efficiently create and share documents in the office.
Our business model is an annuity model, based on increasing
equipment sales and installations in order to increase the number
of machines in the field (“MIF”) that will produce pages and gener-
ate post sale and financing revenue streams. We sell the majority
of our equipment through sales-type leases that are recorded as
equipment sale revenue. Equipment sales represented 29% of
our 2005 total revenue. Post sale and financing revenue includes
equipment maintenance and consumable supplies, among other
elements. Weexpect this large, recurring revenue stream to
approximate three times the equipment sale revenue over the
life of a lease. Thus, the number of equipment installations is
akey indicator of post sale and financing revenue trends. The
mix of color pages is another significant indicator of post sale
revenue trends because color pages use more consumables
per page than black and white. Thus, color pages generate
approximately five times the revenue and profit per page as
compared to black and white. In addition, market development,
particularly within the Eligible Offset market, is key to increasing
pages and we have leading tools and resources to develop this
large market opportunity.
We serve a $112*
billion market.
*The document industry is transitioning from the older
technology of light-lens devices to the new digital systems,
from black and white to color, and from paper documents
to electronic documents. More and more people are creating
and storing documents digitally, and using the Internet allows
the easy exchange of electronic documents. We believe these
trends play to the strengths of our product and service offerings
and represent opportunities for future growth within the
$112 billion market we serve.
$20
$17
$8
$67
Services: Our value-added services deliver solutions, which not only optimize
enterprise output spend and infrastructure, but also streamline, simplify and digitize
our customers’ document-intensive business processes.
Eligible Offset: We are creating new market opportunities with digital printing as
a complement to traditional offset printing. (This is an estimate for this “Eligible
Offset” market.)
Production: We are the only manufacturer in the market that offers a complete
family of monochrome production systems from 65 to 180 impressions per minute
and color production systems from 40 to 110 pages per minute (“ppm”).
Office: We are well placed to capture growth by leading the transition to color
and by reaching new customers with our broadened offerings and expanded
distribution channels.
$120
100
80
60
40
20
This estimate, and the market estimates which follow, is
calculated by leveraging third-party forecasts from firms
such as International Data Corporation and InfoSource in
conjunction with our assumptions about our markets.
($ billions)
Xerox Annual Report 2005