Xerox 2011 Annual Report Download - page 17

15Xerox 2011 Annual Report
n 83% Annuity
Approximately 83% of our revenue, annuity includes revenues from
services, maintenance, supplies, rentals and financing.
n 17% Equipment Sales
The remaining 17% of our revenue comes from equipment sales, from
either lease arrangements that qualify as sales for accounting purposes
or outright cash sales.
Business Model Fundamentals
Through our annuity-based business model, we deliver significant cash
generation and have a strong foundation upon which we can expand
earnings.
Annuity Model
The fundamentals of our business are based on an annuity model that
drives significant recurring revenue and cash generation. Approximately
83 percent of our 2011 total revenue was annuity-based revenue that
includes contracted services, equipment maintenance, consumable
supplies and financing, among other elements. Some of the key
indicators of annuity revenue growth include:
• Services signings growth, which reflects the year-over-year increase in
estimated future revenues from contracts signed during the period
• Services pipeline growth, which measures the year-over-year increase
in new business opportunities
• The number of page-producing machines in the field (“MIF”), which is
impacted by the number of equipment installations
• Page volume and the mix of pages printed on color devices, as these
pages generate more revenue per page than black-and-white.
Revenue Stream
17%
83%
Cash Generation
The combination of consistent strong cash flow from operations and
modest capital investments enabled us in 2011 to provide a return to
shareholders through:
• Repurchasing a significant number of Xerox shares during the year
• Expanding our Services business and our distribution capabilities
through acquisitions – we spent over $200 million on acquisitions
in 2011
• Maintaining our quarterly dividend.
Expanded Earnings per Share
In 2011, we expanded our earnings per share through:
• Modest revenue growth driven by Services
• Driving cost efficiencies throughout the company
• Making accretive acquisitions
• Repurchasing shares.
We expect to use the same model to expand earnings per share in
the future.
Innovation and RD&E
Xerox has a rich heritage of innovation, and it continues to be not only a
core strength of the company but also a competitive differentiator. Our
investments in innovation align with its growth opportunities in areas
such as business services, color printing and customized communication.
Our overall aim is to create value for our customers, for our shareholders
and for our people by influencing the future in key areas. Four innovation
themes emerge in our research portfolio:
1) Implementing Agile Business Processes
In today’s fast-paced and rapidly evolving marketplace, flexibility
is required to operate efficiently and effectively. Xerox innovation
investments are focused on automating business processes through
flexible platforms that run on scalable infrastructures, speeding up and
simplifying the ways work gets done, anywhere and at any time. By
infusing more agility into business processes, clients benefit from our
research on image, video and natural language processing coupled
with machine learning.
2) Harvesting Knowledge from Information
Information comes in two forms: structured, where the content sits
tidily in searchable indices or in limiting databases; or unstructured,
where content can be anything from photos, videos, hand-written
forms, emails, etc. The unstructured information has endless growth
and creates a need for businesses to be more effective in mining
context from content. This is a key research area for us – making sense
of unstructured information using natural language processing and
semantic analysis. We explore how to better analyze information for
human use by better understanding contextual detail on how the
content has been created and used. We’re also developing proprietary
methods for predictive analytics applied to business processes.