Xerox 2011 Annual Report Download - page 28

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26
Competition
Although we encounter competition in all areas of our business, we
are the leader or among the leaders in each of our principal business
segments. We compete on the basis of technology, performance, price,
quality, reliability, brand, distribution, and customer service and support.
In the Services business, our larger competitors are Accenture, Aon,
Computer Sciences Corporation, Convergys, Dell, Genpact, Hewlett-
Packard, IBM and Teletech. In addition, we compete with in-house
departments performing the functions that we are seeking to have them
outsource to us.
In the Technology business, our larger competitors include Canon,
Hewlett-Packard, Kodak, Konica Minolta, Lexmark and Ricoh.
Our brand recognition, positive reputation for business process and
document management, innovative technology and service delivery
are our key competitive advantages. This, combined with our breadth
of product offerings, global distribution channels and customer
relationships, positions us as a strong competitor going forward.
Global Employment
Globally, we have approximately 139,650 direct employees, including
approximately 7,500 sales professionals, approximately 11,500 technical
service employees and approximately 100,000 employees serving our
customers through on-site operations or off-site delivery centers.
Customer Financing
We finance a large portion of our direct channel customer purchases
of Xerox equipment through bundled lease agreements. Financing
facilitates customer acquisition of Xerox technology and enhances our
value proposition, while providing Xerox an attractive gross margin and
a reasonable return on our investment in this business. Additionally,
because we primarily finance our own products and have a long history
of providing financing to our customers, we are able to minimize much
of the risk normally associated with a finance business.
Because our lease contracts permit customers to pay for equipment
over time rather than at the date of installation, we maintain a certain
level of debt to support our investment in these lease contracts. We
fund our customer financing activity through a combination of cash
generated from operations, cash on hand and proceeds from capital
market offerings. At December 31, 2011, we had $6.4 billion of finance
receivables and $0.5 billion of equipment on operating leases, or Total
Finance assets of $6.9 billion. We maintain an assumed 7:1 leverage
ratio of debt to equity as compared to our Finance assets, which results
in a significant portion of our $8.6 billion of debt being associated with
our financing business.
Our Business
Manufacturing and Supply
Our manufacturing and distribution facilities are located around the
world. The company’s largest manufacturing site is in Webster, NY,
where we produce fusers, photoreceptors, Xerox iGen and Nuvera®
systems, components, consumables and other products. We also have
an EA Toner plant located in Webster. Our other primary manufacturing
operations are located in: Dundalk, Ireland, for our High-end production
products and consumables; and Wilsonville, OR, for solid ink products,
consumable supplies and components for our Mid-range and Entry
products. We also have a facility in Venray, Netherlands, which handles
supplies manufacturing and supply chain management for the Eastern
Hemisphere.
Our master supply agreement with Flextronics, a global electronics
manufacturing services company, to outsource portions of
manufacturing for our Mid-range and Entry businesses, continues
through 2014. We also acquire products from various third parties
in order to increase the breadth of our product portfolio and meet
channel requirements.
We have arrangements with Fuji Xerox under which we purchase
and sell products, some of which are the result of mutual research
and development agreements. In March 2011, we were impacted
by the natural disaster in Japan, when demand exceeded availability
of certain products and supplies sourced from Fuji Xerox. Additionally,
incremental logistics and freight costs were incurred as a result of
alternate sourcing for components and materials. Supply and demand
dynamics returned to normal by the end of 2011. Refer to Note
7 – Investments in Affiliates, at Equity in the Consolidated Financial
Statements in our 2011 Annual Report for additional information
regarding our relationship with Fuji Xerox.