Xerox 2006 Annual Report Download - page 7

And we believe it’s the tip of the iceberg. More and more large customers are turning to us
for help in simplifying their document-intensive work processes; bridging the divide between
paper and digital documents; managing their infrastructure; and creating digital systems
that allow them to easily store, search and retrieve their digital files.
We call this Smarter Document Management™. It’s a market where Xerox is uniquely
advantaged – drawing upon our heritage in understanding how people work with documents
and adding our rich portfolio of digital applications and technology.
During 2006, we acquired Amici LLC for $175 million. Amici is the market leader in
e-discovery technology, which involves the identification, filtering, production and storage
of relevant data from paper or electronic documents, such as e-mail, text files, memos,
databases, presentations and spreadsheets. Projected to grow at an annual compounded
rate of close to 40 percent, e-discovery services could be a nearly $2.5 billion market
in the United States alone by 2009. Now a part of Xerox Litigation Services, Amici helps
position us to go after this burgeoning market.
The fourth plank in our growth strategy is to aggressively attack the small and medium
business (SMB) market. It’s a $44 billion opportunity where our presence has been modest.
Segments of the market, however, are growing – especially in developing countries, in color
and in multifunction devices.
Here, too, we are making excellent progress. Last year we introduced four products
targeted to this segment and earlier this year we launched seven more. At the same time,
we continue to expand our distribution channels. We recently announced our most significant
investment in resellers and inde-
pendent agents since launching
these sales channels several years
ago. That means there will be more
“feet on the street” selling Xerox
systems and services and greater
Xerox brand visibility in the SMB
market. Our strategy is straight-for-
ward: more technology plus more
distribution equals more growth.
We’re attacking a $117 billion
market opportunity through our
focus on these growth strategies.
We can compete for every dollar
of it – and we are.
Our people
Our success is dependent on contributions from Xerox’s 54,000 worldwide employees who
impress me every day with their passion for creating great experiences for our customers.
They’re led by a deeply committed executive team with a fierce will to win. We have a wealth
of talent across our enterprise and spend significant time developing this talent – spreading
that wealth throughout our operations and preparing our next generation of leadership.
Our recent appointment of Ursula Burns to president of Xerox and a member of the Board of
Directors reflects this commitment. Ursula joined Xerox in 1980 as an engineering intern and
earned her stripes through product development and business division management roles
to her most recent position as head of Business Group Operations with full responsibility for
Xerox’s research and product groups through to manufacturing and distribution. She’s been
instrumental in fine tuning Xerox’s business model so we’re more cost competitive, and
accelerating our time to market with the launch of more than 100 products in the last three
years. Ursula now brings her deep knowledge of our business to the president role, where
she’ll work closely with me and our leadership team to aggressively drive our well-defined
XEROX ANNUAL REPORT 2006
5
Gross Margins
(Percent)
’02 ’03 ’04 ’05 ’06
42.8
42.6
41.6
41.2
40.6
’02 ’03 ’04 ’05 ’06
4,437
4,249
4,203
4,110
4,008
Selling, Administrative
and General Expenses
($ millions)
2006