Xerox 2013 Annual Report Download - page 62

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• DO revenue increased 2%, including a 2-percentage point negative impact from currency, and represented 31%
of total Services revenue. The increase in DO revenue was primarily driven by our new partner print services
offerings as well as new signings.
• ITO revenue increased 8% and represented 12% of total Services revenue. ITO growth was driven by the
revenue ramp resulting from strong growth in recent quarters and also includes 3-percentage points of growth
related to revenue from intercompany services, which is eliminated in total Services segment revenue.
Segment Margin 2012
Services segment margin of 10.2% decreased 0.9-percentage points from the prior year primarily due to a decline
in gross margin, which was driven by the ramping of new services contracts, pressure on government contracts,
the impact of lower contract renewals and lower volumes in some areas of the business. The gross margin decline
was partially offset by the benefits from restructuring and lower SAG, primarily in DO.
Document Technology Segment
Our Document Technology segment includes the sale of products and supplies, as well as the associated
maintenance and financing of those products.
Revenue
Year Ended December 31, Change
(in millions) 2013 2012 2011 2013 2012
Equipment sales $ 2,727 $2,879 $3,277 (5)% (12)%
Annuity revenue 6,181 6,583 6,982 (6)% (6)%
Total Revenue $8,908 $9,462 $10,259 (6)% (8)%
Revenue 2013
Document Technology revenue of $8,908 million decreased 6%, with no impact from currency. Total revenues
include the following:
• Equipment sales revenue decreased by 5% with a 1-percentage point positive impact from currency. Equipment
sales benefited from our 2013 mid-range product refresh, growth and acquisitions in the small and mid-size
business market and increased demand for color digital production presses. These benefits were more than
offset by the continued migration of customers to managed print services and our growing partner print services
offerings (included in our Services segment), weakness in developing markets and price declines, which were
in the historical 5% to 10% range.
• Annuity revenue decreased by 6%, with no impact from currency, driven by a modest decline in total pages, the
reduction in channel supplies inventory levels, lower sales in developing markets and a decline in financing
revenue as a result of prior period sales of finance receivables and lower originations. Annuity revenue was
also impacted by the continued migration of customers to our partner print services offerings (included in our
Services segment).
Document Technology revenue mix was 21% entry, 58% mid-range and 21% high-end.
Segment Margin 2013
Document Technology segment margin of 10.8% decreased 0.5-percentage points from prior year. The decline was
primarily driven by an increase in SAG as a percent of revenue due to the overall impact of lower revenue and
higher pension settlement losses which were only partially offset by restructuring savings, productivity
improvements and lower compensation-related expenses.
Total revenue declines in 2014 are expected to remain at the mid-single digit level for the Document Technology
segment as projected declines in black-and-white printing are only partially offset with growth in color and in the
graphic communications and SMB markets. The expected 2014 revenue decline for the Document Technology
segment is consistent with the trend we have experienced for this segment over the past three years as we
continue to transform the Company from a technology-based equipment company to a document outsourcing
services-based entity and customers continue to migrate their business to more services-based offerings. These
services-based offerings are reported within our Services segment. This business is also heavily impacted by price
and page declines. Although annual revenue declines are expected in 2014, we believe there will eventually be a
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