Xerox’s Q4 was yet another disappointment for the copier and IT/BP giant. We predicted that things would get worse for services last quarter (see Xerox tumbles on Q3 miss), and so it proved to be.
Services revenue was down 1% in constant currency, worse than the flat performance expected. Services' margin was also lower than expected at 9.6%, vs. 11.2% last year.
Services has, until now, been Xerox’s only growth engine. The document technology business meanwhile continued its freefall - revenue was down another 6%.
Across the three services towers, document outsourcing performed best of all up 4%, next was ITO up 2%, but BPO (the largest division) was down 3% - due to the student loans contract loss earlier this year and lower volumes in customer care. Xerox has also been relying on M&A to help boost the top line numbers, however this time there was no inorganic boost. Q114 will however after December’s acquisition of German customer care provider Invoco Holding GmbH. Invoco should help nudge services to 1% growth in Q114.
Xerox is implementing a ‘5-plank' services strategy to deliver cost savings and growth. But this looks like simply plastering over the cracks. Xerox's attempts to transform from a hardware to 'services-led company' are falling flat, much like happened to rivals Dell (Perot Systems) and HP (EDS). It begs the question, was the purchase of ACSreally the solution, or actually the start of a much bigger problem for Xerox?
We will have more to say on this in UKHotViewsExtra later.