XEROX said yesterday it would sell its China operations for $550 million (€620.6 million) in cash, giving itself a much-needed liquidity boost as it enacts a sweeping turnaround plan.
The sale is the first in a series planned by Xerox amid concerns by Wall Street analysts that the company was running out of money to pay for short term operations.
In October, Xerox reported its first loss in 16 years as it grappled with tougher competition and a customer shift away from free-standing copy machines. Xerox lost $128 million or 20 US cents a share before special items in the third quarter. It earned $339 million, or 47 US cents a share, in the year earlier period.
The turnaround plan, announced the same day as the loss, includes $1 billion in cost cuts and $2 billion to $4 billion in asset sales.
Among the plants under review is Xerox's Dundalk operation. The company employs 2,300 people in the Republic, 1,600 of them in Dublin. The 700-strong Dundalk operation is undergoing a $500 million expansion which was intended to see the workforce grow to 2,100 in Louth. That investment could now be scaled back.
Xerox shares rose 871/2 US cents, or more than 15 per cent, to $6.561/4 at midday on the New York Stock Exchange.
While the company said last week it had adequate liquidity, its planned use of the more than half a billion dollars gives some indication of the urgency of its situation.
"Generally it's going to be used to improve our liquidity," president and chief operating officer Ms Anne Mulcahy said. "It will not be reinvested."
Ms Mulcahy said talks on the sale of part of the company's stake in Fuji Xerox were on track and should lead to a deal early next year.
"Those are negotiations that I would clearly characterise as on track," she said, noting that the sale was likely to be completed "early next year". She did not elaborate, except to note that while Xerox has said it wanted to sell some 25 per cent of its stake, nothing had been settled.
Fuji Xerox is a 50-50 joint venture between Xerox and Fuji Photo Film. It is an entirely separate entity from Xerox.
Other asset sales are planned, including Xerox's engineering unit and its European paper business, but Ms Mulcahy was less specific about the timing.
"It is the first of, clearly, a series of announcements we'll be making with regard to progress on our turnaround plan," Ms Mulcahy said of the China sale. "We're pleased with the progress that we're making on the asset sales."
Ms Mulcahy said she did not think a looming US economic slowdown would affect the turnaround plan, but she acknowledged that growing core businesses would be a challenge.
"With regard to asset sales and cost reduction, we are fairly confident that we can accomplish those goals despite the slowing economy," she said. "The bigger challenge is delivering growth in our core business areas."
