Xerox 2006 Annual Report Download - page 25

Marketing and Distribution
Our brand is a valuable resource and
continues to be recognized in the
top ten percent of all U.S. brands.
We manage our business based on the principal
business segments described above. However, we have
organized the marketing and selling of our products and
solutions according to geography and channel types. We
sell our products and solutions directly to customers
through our worldwide sales force and through a network
of independent agents, dealers, value-added resellers and
systems integrators. Increasingly, we use our direct sales
force to address our customers’ more advanced
technology, solutions and services requirements, while
expanding our use of cost-effective, indirect distribution
channels, for basic product offerings.
We market our Phaser line of color and
monochrome laser-class and solid ink printers through
office information technology industry resellers, who
typically access our products through distributors. In
2006, we increased the product offerings available
through a two-tiered distribution model in Europe and
DMO. Through a multi-phased rollout, we will continue
to increase offerings through this lower-cost distribution
channel for our Office portfolio.
We are increasing our use of partners to improve our
market coverage. Through alliances with Premier
Partners and Fuji Ennovation, we expanded coverage to
market our DocuColor series to commercial printers. Our
alliance with Electronic Data Systems (“EDS”) is
designed to integrate EDS’ information technology
(“IT”) services with our document management systems
and services to provide customers with full IT
infrastructure support.
In Europe, Africa, the Middle East, India, and parts
of Asia, we distribute our products through Xerox
Limited, a company established under the laws of
England, and related non-U.S. companies all of which we
refer to as Xerox Limited. Xerox Limited enters into
distribution agreements with unaffiliated third parties
covering distribution of our products in some of the
countries located in these regions, and previously entered
into agreements with unaffiliated third parties covering
distribution of our products in Iran, Sudan, and Syria.
Iran, Sudan, and Syria, among others, have been
designated as state sponsors of terrorism by the U.S.
Department of State and are subject to U.S. economic
sanctions. We maintain an export and sanctions
compliance program and believe that we have been and
are in compliance with U.S. laws and government
regulations for these countries. In addition, we had no
assets, liabilities, or operations in these countries other
than liabilities under the distribution agreements. After
observing required prior notice periods, Xerox Limited
terminated its distribution agreements related to Sudan
and Syria in August 2006 and terminated its distribution
agreement related to Iran in December 2006, and now has
only legacy obligations such as providing spare parts and
supplies to these third parties. In 2006, we had total
revenues of $15.9 billion, of which approximately $9.6
million was attributable to Iran and less than $0.7 million
in total was attributable to Sudan and Syria. As a result of
the termination of these agreements, we anticipate that
our revenues attributable to these countries will decline.
In January 2006, Xerox Limited entered into a five-
year distribution agreement with an unaffiliated third
party covering distribution of our products in Libya.
Libya is also designated as a state sponsor of terrorism by
the U.S. Department of State. The decision to enter into
this distribution agreement was made in light of recent
U.S. federal government actions that have lifted the
countrywide embargo previously imposed on Libya. Our
sales in Libya through this distribution agreement will be
subject to our export and sanctions compliance program
and will be according to the U.S. laws and government
regulations that relate to Libya.
Service
As of December 31, 2006, we had a worldwide
service force of approximately 12,000 employees and an
extensive variable contract service force. We are
expanding our use of cost-effective remote service
technology for basic product offerings while utilizing our
direct service force and a variable contract service force
to address customers’ more advanced technology
requirements. The increasing use of a variable contract
service force is consistent with our strategy to reduce
service costs while maintaining high-quality levels of
service. We believe that our service force represents a
significant competitive advantage in that the service force
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