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  • Xerox: Activist Investor In Old Tech  [View article]
    Taplinger: "IT outsourcing is a highly competitive, low margin business" Hear, hear! They're up against very tough and cut-throat 'up-or-out' firms, among them ACN, CTSH, INFY etc. ACN said to be hiring 70,000 this year on a work force of 350,000. A little known fact is that they're replacing or dumping in the order of 35,000. CTSH numbers are somewhat lower but the same approach. It's 'up-or-out' , either perform or you're history. Yet their employees - those who are not tagged for deletion - love the challenge. According to glassdoor.com, both firms have very high levels of morale and confidence in their CEO's.

    XRX has a soft touch with its work force, born of its past successes with copiers. They are older and soft. Everybody gets an 'A' rating and a raise in their annual reviews. Everybody is 'above average'. Minorities get pushed up the ladder over more qualified non-minorities (their so-called 'Wilson rule' which Obama loudly applauds). XRX recently scored 100% in their LGBT program to push those types up in the organization over straights. More applause from the White House.

    The result: very low morale and CEO ratings, among the very lowest of large U.S. companies according to glassdoor.com; low returns; declining sales; project failures; lawsuits; ready excuses; etc. Why are the CFO's leaving? XRX's return on capital continues to run well below its cost of capital. ACN's return on capital, on the other hand, continues to run 6-8 times its cost of capital. CTSH is also in that category. Yes, folks, a Kodak moment no doubt awaits XRX.
    Dec 12, 2015. 08:26 AM | 1 Like Like |Link to Comment
  • After Hours Gainers / Losers  [View news story]
    Even ol' Carl isn't up to fixing this one. He can smear some Icahn lipstick on it, pump it up a bit, then dump it. I'm guessing that will be the outcome.

    XRX just copped a perfect '100' on their LGBT program. That's the sort of culture he's up against. Ursula and her captive BoD to Carl: "Eh? shareholder value as a priority? what's that all about? how can our (politically correct) 'Wilson Rule' accommodate that?"
    Nov 24, 2015. 01:42 PM | Likes Like |Link to Comment
  • Out Of Ink? Xerox In Q3  [View article]
    XRX is not 'out of ink'. They're still setting benchmarks for 'success'. For instance, they were just awarded a perfect '100' score for their LGBT program. That the sort of priority that really drives shareholder value. Question is - in what direction?
    Nov 23, 2015. 01:33 PM | 2 Likes Like |Link to Comment
  • Out Of Ink? Xerox In Q3  [View article]

    The answer is easy, Xerox's so-called 'Wilson Rule' for diversity (Google it). It has long been embedded in their culture. It severely limits their 'clock speed' and ability to perform. It developed when times were good in copiers, when Xerox was 'king'. As an employee you get good ratings if you demonstrate that you're able to promote diversity (regardless of competence). Shareholder value? That's such a shopworn (at Xerox) concept.

    Let's see. ACN, with almost 400,000 employees is said to be hiring 100,000 globally this year. CTSH, the tech services and outsourcing up-and-comer at 230,000 employees is said to be hiring a comparable 40-50,000 this year. Both are up-or-out cultures. Perform well or you're out, diversity goals notwithstanding. On the other hand, XRX, with 100,000 employees in tech services and outsourcing, continues to cut headcount and freeze hiring as their revenues decline.

    You cannot be a winner in any tough industry, particularly this one, by following diversity as your North Star. To succeed or even to hang on, you must work harder and smarter than XRX's culture allows it to do. That fact will not change quickly, probably not ever.

    Get off the XRX train before the engineer (Ursula) does more dumb things and it jumps the tracks.
    Nov 21, 2015. 05:33 PM | 1 Like Like |Link to Comment
  • Xerox: A Sick Dog With Too Many Fleas  [View article]
    Joseph, simply compare ACS's cash flow to XRX's the year the latter acquired the former. You will see almost an order of magnitude difference. IT Services is a low operating margin, low cash flow business as compared to copiers. Check out the stars, e.g., CTSH, ACN, INFY, etc. and compare them to XRX's services segment financials.

    XRX is missing the boat, in several ways: (a) they do not have a credible (and higher margin) consulting business of any substance, focusing instead on outsourcing, the low-margin end of the IT Services business, (b) they do not have the corporate culture that can survive in this highly competitive segment where people are cannon fodder working 'lean' under great pressure, not coddled like prima donnas as XRX does, and (c) they are not good at risk management, essential for success in long-term contracting, which you can see in their failed projects. Compensating their sales forces for immediate sales, as they have always done with copiers, is a no-no in a long-term contracts business, due to underpricing so as to 'book the business'. They need to compensate sales people based on long-term contract profitability, as in restricted stock awards rather than short-term cash based on current bookings.

    XRX will disappear as did EK and others, but not before their senior management fattens their respective wallets and purses.
    Jul 31, 2015. 08:08 PM | 2 Likes Like |Link to Comment
  • Xerox: Not Your Father's Copier Company  [View article]
    Big comp packages for senior management plus a bridge to bigger and better things, e.g., their former CFO 'graduating' to Apple.
    Jul 31, 2015. 07:49 PM | Likes Like |Link to Comment
  • Xerox Q2 Is A Shroud Over An Uncertain Future  [View article]
    Oracle, I have to agree with David B. I play XRX (I am currently long) for its ups and downs. It's not unlike having fun on the moguls on the kiddie slope at a ski resort. XRX's up and down pattern closely resembles EK's as they tumbled downward during its last five years before the Grim Reaper knocked on their door. I exited that stock for good when it hit $5 or so, but made a good bit on its way down. You need to be somewhat of a day trader and pay attention to do well, but it's worth it.

    What's going on here is a company with a highly-regarded brand gradually sliding down the tubes. The financial news depresses it and then the brand awareness among unwary investors bounces it back up, a la EK and GM. Death throes (except for Ursula's bank account). Check out their Altman Z-score.
    Jul 30, 2015. 09:51 AM | 3 Likes Like |Link to Comment
  • Xerox Generates Solid Cash Flow  [View article]
    Solid cash flow, yes, but dwindling year after year as their copier business tanks. The cash flow from services is low, even when compared to peers such as INFY, CTSH, ACN and other large IT services providers, e.g., IBM and HPQ. A services operating margin of 8.5%, falling from its 11% when ACS was acquired, is a telltale sign that things continue to unwind under Burns' leadership. Another is their claimed (extraordinarily) high renewal rate on long-term contracts, no doubt the result of underpricing to win the business. As those chickens come home to roost margins will decline even further, along with cash flows. You cannot compensate the services sales force the same way you do the copier sales force, on immediate short-term bookings.

    I remain long XRX but only for now. I play the ups and downs as I did EK on its way to the Rochester boneyard. Sorry, XRX not a sound long-term investment.
    Jul 30, 2015. 09:39 AM | Likes Like |Link to Comment
  • Xerox: Not Your Father's Copier Company  [View article]
    I agree with techwatcher1. Compare XRX's stock price and financials over time to Kodak's and you will see striking similarities. I'd say XRX is now where EK was five or so years before they went belly up.

    Money can be made by playing XRX's stock price ups and downs in the near term (read: day trading), but it's certainly not a 'deep value' company or stock, except for the officers such as Burns who have the feedbag strapped on as they tease investors with their 'turnaround' (as in 'hang on, folks, it's just around the corner') storyline. It's truly amazing how industry analysts and some investors - the wishful-thinking crowd dazzled by the brand - fall for their bald-faced lies.

    Compare XRX's services segment with direct competitors such as INFY, ACN, CTSH and the like and you'll appreciate how far back they're sliding in terms of operating margin, growth, cash flow (other than from their legacy remnant), etc. They will never catch up. Their long-standing culture of 'everybody's an 'A' player' when that's certainly not the case just won't allow it.

    Burns boasts of extraordinary contract renewal percentages, far above those of XRX's services competitors. The only way to achieve that is to underprice the renewal bids, leading to unprofitable long-term contracts that can take five to eight years to unwind. Look for continued bleeding as operating margins continue to drop.

    Altman's Z-score says bankruptcy is their future. They almost got there twice before. Is their time about to come? Is it 'three strikes and you're out' time?
    Jul 28, 2015. 07:44 AM | 1 Like Like |Link to Comment
  • Should Insider Selling At Accenture Worry You?  [View article]
    That ACN insiders should continually be in 'sell' mode should come as no surprise. Their executives are compensated in both cash and stock, with an emphasis on the latter.

    The individuals referenced in this 'analysis' are two of ACN's most senior execs. They probably receive stock awards of 30-40,000 or more shares annually. The 'day one' rule in Investing 101 is 'diversify your holdings'. So who would deny these individuals the common-sense action to diversify as most of the rest of us would?

    Check out the likes of Goldman-Sachs and other firms similar to ACN, with ex-partners running the ship (a vessel by the way that lives or dies by its acumen in crafting long-term profitability in the client deals they make). Virtually all compensate heavily in stock, for obvious reasons. The idea is that they're thereby motivated to generate long-term profitability as opposed to short-term 'hit-and-run' sales.

    To question such de minimus insider sales as these given how ACN compensates its execs (clearly laid out in the IPO prospectus and subsequent filings) seems naive at best. Give us substance please, not alarmist speculation.
    Jul 5, 2015. 09:15 AM | 5 Likes Like |Link to Comment
  • Inferior Performance Pays Well At Xerox  [View article]
    Jb, thx for the idea of investing around regulatory issues as a strategy. As I think of my portfolio and winners vs losers, regulatory-sensitive holdings such as Cigna, United Healthcare, Accenture (who fixed Obamacare's website and who just landed a $500+m contract to continue) stick out, as do such companies as GE (a laggard) now dropping many of its formerly unregulated (and lucrative) financial businesses due to Dodd-Frank regs.
    Jun 27, 2015. 02:26 PM | Likes Like |Link to Comment
  • Inferior Performance Pays Well At Xerox  [View article]

    I agree with your take that most 'investors' are somewhat naive about building and maintaining their portfolios. That's the basis for my view that a stellar brand, as it declines due to mismanagement (or the market moving away from it and their being unable to respond appropriately), will continue to dazzle many, creating demand for the stock and momentary upticks until the next dose of reality hits. Check out the stock price pattern for EK of several years ago against XRX. You will see great similarities.

    Remember when EK bought the pharma company, Sterling Drug, as its Hail Mary based on vague and questionable 'synergies' and then sold it at a loss 6 years later? Suggest you Google these articles: 'How Kodak Lost Its Way' by Mike Dickinson, and Peter Cohan in Forbes 'How Success Killed Eastman Kodak'. The latter notes how after peaking at $80 in February 1999 EK dropped to $0.75 by September 2011, a twelve-year ride into oblivion. I was fortunate enough to have been able to trade in and out along its downward 'ski slope' of up-and-down moguls, finally exiting at just under $5.00 when the 'belly up' writing was clearly on the wall. That's the same (quite) lucrative game I've been playing with XRX. It's not day-trading but close. It likely has several more years to run, unless there's a strong shake-up that works, which may change the game to 'hold'.

    As previously noted, there are very likely a number of ticking time bombs lurking within their multi-year outsourcing portfolio. That's the inevitable result of rewarding people to book contracts rather than to operate them profitably over multiple years. Watch for continued margin erosion, from the 10-12% of ACS pre-merger to the declining (current under 7%) margin of XRX's post-merger ACS component.

    As with EK, XRX's politically-correct culture is immune to profitably operating a 'non-traditional' (to them) business, in this case, a consulting and outsourcing company. Benchmark them against ACN, CTSH, INFY, WIT, etc., the fleet-of-foot in the industry, who run margins double or more that of XRX's ex-ACS services unit.
    Jun 26, 2015. 08:10 AM | 1 Like Like |Link to Comment
  • Inferior Performance Pays Well At Xerox  [View article]
    JBgoose, here's how I'm playing XRX and making good money at it (so far). XRX is a stellar brand, like EK was before it went under (as well as GM, etc.). The 'end of life' behavior of such companies having stellar brands follows a pattern geared for profitable 'in and out' trading. Their ups and downs are easily predicted, down on a bit of bad news, followed by a rebound as unwitting investors 'buy the brand' and hope for the best. It's sort of like riding the moguls on the bunny trail at the ski slope.

    Most of these investors don't follow the industry analysts whom I questioned in my post, so their reporting more honestly really wouldn't change the 'mogul' pattern I describe. I just question their motives (or intellect). Nonetheless, I believe Mr. Zhang is spot on with his take on what management is doing to the investor, to wit, milking the company while making poor business decisions. Ms. Burns' Hail Mary in overpaying for ACS cannot succeed in the face of the likes of ACN, CTSH, INFY, etc. without major surgery that XRX's politically-correct culture (starting at the very top) cannot stomach.

    Significant questions continue to be: what sort of embedded future losses lurk within their services portfolio of five- to seven-year contracts? how much did they have to underprice to get the business? what will be their ability to renegotiate mid-contract, especially given their poor track record of getting results for their clients in the first place? when will these chickens come home to roost in a big way?
    Jun 25, 2015. 07:34 AM | 1 Like Like |Link to Comment
  • Inferior Performance Pays Well At Xerox  [View article]
    One mystery about XRX is why the 'blue-chip' industry analysts who follow the company continue to lap up the Kool-Aid that Burns serves up during the quarterly earnings reports. Either they're complete lackeys (looking for M&A work perhaps?) or totally stupid. No matter what, they lack credibility, less after each quarterly review.
    Jun 24, 2015. 11:10 AM | 1 Like Like |Link to Comment
  • Why Xerox Is A Strong Buy In 2015  [View article]
    For some time I have been trading in and out of XRX, taking advantage of their ups and downs a la EK as they floated down and out of business. Remember how EK acquired a pharmaceutical company as their panacea to cure their ills? Burns' 'Hail Mary pass' of XRX buying ACS is not unlike that. Definitely not a good fit of cultures or top management knowhow, rather a grasping at a thin reed.

    XRX is an overweight and unwieldy behemoth trying to 'reinvent' itself in an industry known for only the fleet of foot succeeding, e.g., CTSH, ACN, INFY et al. Compare not only their financial results but also their respective glassdoor.com scores to see what their employees think of their leadership.

    Recently XRX's new head of ACS commented that they had won 20 out of their last 20 large multi-year contract bids. That's a sure sign of a 'stay-alive' strategy if there ever was one, underpricing their competitors to boost current period revenues while hoping things will work out over the contract life, an 'improbable voyage' but buying time for the execs to maintain their high salaries.

    XRX's persistent very low Z-scores do concern me (especially given their two prior brushes with bankruptcy) but not enough not to take advantage of their decline via short-term trading. Just don't 'file and forget' XRX in your retirement fund, unless you want to emulate those EK shareholders who refused to look reality in the face.
    Feb 5, 2015. 10:36 AM | Likes Like |Link to Comment