Xerox 2014 Annual Report Download - page 40

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 the
MD&A, we refer to various notes to our Consolidated Financial Statements which appear in Item 8 of this 2014
Form 10-K, and the information contained in such notes is incorporated by reference into the MD&A in the places
where such references are made.
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
With revenues of $19.5 billion, we are the world's leading global enterprise for business process and document
management solutions. We provide services, technology and expertise to enable our customers - from small
businesses to large global enterprises - to focus on their core business and operate more effectively.
Headquartered in Norwalk, Connecticut, the 147,500 people of Xerox serve customers in more than 180 countries
providing business services, printing equipment and software for commercial and government organizations. In
2014, 33% of our revenue was generated outside the U.S.
We are a leader across large, diverse and growing markets estimated at over $650 billion. The global business
process outsourcing market is very broad, encompassing multi-industry business processes as well as industry-
specific business processes, and our addressable market is estimated at almost $300 billion. The document
management market is estimated at roughly $100 billion and is comprised of the document systems, software,
solutions and services that our customers have relied upon for years to help run their businesses and reduce their
costs. The remaining market is the global information technology outsourcing market segment, which is
estimated to be roughly $250 billion in aggregate - see the following paragraph.
On December 18, 2014, we announced an agreement to sell our Information Technology Outsourcing (ITO)
business to Atos SE (Atos). The transaction is subject to customary closing conditions and regulatory approval and
is expected to close in the first half of 2015. As a result of this pending transaction and having met applicable
accounting requirements, in 2014 we reported the ITO business as a Discontinued Operation and reclassified its
results from the Services segment to Discontinued Operations. Subsequent to the closing of this transaction, Xerox
will no longer directly market stand-alone IT services. This transaction is part of our on-going effort to evolve our
portfolio in line with our business and financial strategy. It gives us the opportunity to make further investments and
acquisitions in our remaining Services business - strengthening our competitive positioning and supporting our
global expansion goals. Refer to Note 4 - Divestitures in our Consolidated Financial Statements for additional
information regarding Discontinued Operations.
We organize our business around two main reportable segments: Services and Document Technology.
•Our Services segment is comprised of business process outsourcing (BPO) and document outsourcing
(DO) services.
In 2014 we focused on improving our cost infrastructure and evolving our Services portfolio to enable increased
revenue growth and margin expansion. Revenue from Services grew 1% in 2014, reflecting growth in both
service offerings, BPO and DO, and represented 54% of our total revenues. Revenue growth was below the
prior year growth rate of 2% and our longer-term expectations of mid-to-high single digit growth; however, we
did deliver improvements in revenue growth and profit margin through the year. Services signings in 2014
declined by 13% but were up 20% year-over-year in fourth quarter 2014. During 2014, we implemented
initiatives to improve our go-to-market effectiveness, software platform implementation and global service
delivery capabilities. Across our services portfolio, the diversity of our offerings and the differentiated solutions
we provide, enable us to deliver greater value to our customers.
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