Xerox 2010 Annual Report Download - page 28

26 Xerox 2010 Annual Report
The following Management’s Discussion and Analysis (“MD&A”)
is intended to help the reader understand the results of operations
and financial condition of Xerox Corporation. MD&A is provided
as a supplement to, and should be read in conjunction with, our
consolidated financial statements and the accompanying notes.
Throughout this document, references to “we,” “our,” the “Company”
and “Xerox” refer to Xerox Corporation and its subsidiaries. References
to “Xerox Corporation” refer to the stand-alone parent company and
do not include its subsidiaries.
Executive Overview
We are a $22 billion leading global enterprise for business process and
document management. We provide the industry’s broadest portfolio of
document systems and services for businesses of any size. This includes
printers, multifunction devices, production publishing systems, managed
print services (“MPS”) and related software. We also offer financing,
service and supplies, as part of our document technology offerings. In
2010, we acquired Affiliated Computer Services, Inc. (“ACS”). Through
ACS we offer extensive business process outsourcing and information
technology outsourcing services, including data processing, HR benefits
management, finance support and customer relationship management
services for commercial and government organizations worldwide.
We operate in a market that is estimated to be $500 billion. We have
136,500 employees and serve customers in more than 160 countries.
Approximately 36% of our revenue is generated from customers outside
the U.S.
We organize our business around two segments: Technology and
Services.
Our
• Technology segment comprises our business of providing
customers with document technology and related supplies, technical
service and equipment financing. Our product categories within this
segment include Entry, Mid-range and High-End products.
Our
• Services segment is comprised of our business process
outsourcing, information technology outsourcing and document
outsourcing services. Because we participate in all three of these
lines of business, we are uniquely positioned in the industry, and
we believe this allows us to provide a differentiated solution and
deliver greater value to our customers.
The fundamentals of our business rest upon an annuity model that
drives significant recurring revenue and cash generation. Over 80%
of our 2010 total revenue was annuity-based revenue that includes
contracted services, equipment maintenance and consumable supplies,
among other elements. Some of the key indicators of annuity revenue
growth include:
The number of page-producing machines-in-the-field (“MIF”), which
•
is impacted by equipment installations
Page volume and the mix of color pages, as color pages generate
•
more revenue per page than black-and-white
Services signings growth, which reflects the year-over-year increase
•
in estimated future revenues from contracts signed during the period
as measured on a trailing12-month basis
Services pipeline growth, which measures the year-over-year increase
•
in new business opportunities
Subsequent to the acquisition of ACS, we acquired three additional
service companies, further expanding our BPO capabilities:
In July 2010, we acquired ExcellerateHRO, LLP (“EHRO”), a global
•
benefits administration and relocation services provider
In October 2010, we acquired TMS Health (“TMS”), a U.S.-based
•
teleservices company that provides customer care services to the
pharmaceutical, biotech and healthcare industries
In November 2010, we acquired Spur Information Solutions (“Spur”),
•
one of the United Kingdom’s leading providers of computer software
used for parking enforcement
Additionally, in 2010 we acquired two companies to further expand
our distribution capacity:
In January 2010, we acquired Irish Business Systems Limited
•
(“IBS”) to expand our reach into the small and mid-size business
market in Ireland
In September 2010, we acquired Georgia Duplicating Products
•
(“Georgia”), an office equipment supplier
Financial Overview
During 2010, despite the continued economic weakness, we began
to see improvement in our markets. Results remained strong in our
developing markets countries as well as in the small to mid-size business
market. We began to see increased demand and usage activity in large
enterprise customers, particularly in the fourth quarter 2010. We closed
2010 with strong revenue growth, operating margin expansion and
excellent cash generation, reflecting the strength of our business model
and the benefits of our expanded technology and service offerings.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations