Top performing tech stock of 2019 isn’t Google or Amazon – it’s a 113-year-old printing company

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A 20th century power station

Xerox quickly rose to prominence after releasing the first copier in 1959, causing dramatic change in the American workplace. In the early 1970s, Xerox launched its first color copier, and the company subsequently reported record revenues and profits.

At the same time, Xerox began to imagine the “office of the future”. Its famous Palo Alto Research Center (PARC) invented many technologies that workers today take for granted: the first computer mouse; PDF file format; The “graphical user interface”, now used on all personal computers; laser printer; and local Ethernet network.

But Xerox failed to bring these inventions to market. After an antitrust lawsuit with the United States Federal Trade Commission in 1975, Xerox was forced to license its entire patent portfolio to other competitors, reducing the company’s share in the United States market. copiers from nearly 100% to less than 14%.

The development of digital copiers in the 1990s allowed Xerox to regain market share. Xerox shares soared to $ 165 in 1999, from $ 13 at the start of the decade. But when the dot-com crash hit, the stock plummeted, along with the rest of the market. By the end of 2000, Xerox had fallen to $ 10 a share.

Death of the print

Since the dot-com crash, Xerox has struggled to stay relevant as offices increasingly do so digitally. Not only do workers print much less, but stand-alone printers have been replaced with multifunction printers that can print, copy and scan, meaning there are fewer printing devices overall that offices have to buy. .

Xerox’s revenue, which stood at $ 20 billion in 2013, fell to just $ 9.8 billion for 2018. In addition, a proposed merger with Japanese rival Fujifilm was scrapped. last year after two of Xerox’s biggest shareholders, Carl Icahn and Darwin Deason, sued to block the deal, claiming it significantly undervalued Xerox and would be the “final death knell” for the iconic American company.

As part of the settlement, chief executive Jeff Jacobson resigned and was replaced by Icahn’s pick, John Visentin. Six other board members, including Chairman Robert Keegan, also left, giving Icahn and Deason more control. (A spokesperson for Xerox said the company is positioning itself “to be a stronger and more innovative Xerox for years to come.”)

What’s next for Xerox

Visentin presented his vision for Xerox to shareholders in February, with plans to invest in the company’s relatively stable printer and copier maintenance business, as well as to reduce costs and seek new potential revenue streams. – promising investors for sales growth by 2021.

Xerox’s service business, primarily the repair and maintenance of printers and copiers for existing customers, already accounts for 80% of the company’s total sales. Revenues from printing services, which decline much more slowly than equipment sales, also offer better profit margins, analysts said. Xerox has few comparable competitors capable of offering such a range of services.

Xerox is also reducing costs. Analysts expect the company to save $ 640 million in 2019, mainly by selling its ancillary finance and leasing businesses, downsizing and closing offices. This has already helped Xerox improve its operating margins, with 2018 posting the first reported year-over-year increase in more than five years.

Of course, in the longer term, Xerox must find organic revenue growth. While difficult, according to CFRA analyst David Holt, the sale of its finance and leasing business should provide the company with liquidity to invest in areas such as digital document packaging and technology. 3D, which could eventually gain traction.

In February, Xerox announced new offerings that act as an intermediary between scanning software in the heavy paperwork industries. The company has also made acquisitions in potential growth areas, such as when it bought Vader Technologies, a liquid metal 3D printing company, earlier this year.