Fujifilm and Xerox - Match made in heaven?

While the USD 6.1-bn takeover of Xerox by Fujifilm has sent the world into a tizzy, Sriraam Selvam breaks down what the deal could mean to the future of the company

22 Mar 2018 | By Sriraam Selvam

As the noise and dust of the landmark deal settle, the business world looks to make sense of the new force that is Fuji Xerox and the effect it can have on the print industry at large and the future of the company in particular.
The 1962-established joint venture, Fuji Xerox primarily served the Asia-Pacific region, with Fujifilm owning a majority 75% stake. According to a report, with the USD 6.1-bn bank fund, Fuji Xerox will first buy the 75% stake in the joint venture to become a 100% subsidiary of Xerox, and Xerox will change its name to Fuji Xerox. Fujifilm will acquire 50.1% of the new Fuji Xerox. The new company will maintain dual headquarters in US and Japan and will operate as “Fuji Xerox” and “Xerox” brands within its respective operating regions.
The now USD 18-bn enterprise as its first milestone is expected to leapfrog its nearest competition (Canon and Ricoh in terms of printing revenues) and will be a close second to HP in terms of scale.
The market and public investors in the US were positive about the development especially about the USD 2.5-bn extra dividend handed over to them, and Xerox shares saw an uptick of 4%.
Fujifilm also announced that it would be working to achieve USD 1.7-bn additional revenue through several measures by 2022.
According to reports, Fuji Xerox is expected to implement a wide range of restructuring including job cuts, changes in production locations and also enhance development processes with an aim to integrate with the US Xerox entity and increase efficiency across the globe.
The job cuts especially have caught the attention of the media with Fujifilm saying that it will cut 10,000 jobs at existing Fuji Xerox entity, mainly in Asia Pacific region where the company plans to shut down several factories.
The existing joint venture employs about 47,000 people globally, and Xerox employs about 36,000.
Shigetaka Komori, chairman and chief operating officer of Fujifilm and chairman of the existing Fuji Xerox, will serve as chairman of the new board who is said to have spoken about this takeover 10 years ago to the Japanese media and ironically claimed that he would have ‘considered buying Xerox if he was ten years younger’.
Many industry insiders welcomed the deal with veteran journalist Simon Eccles and print industry expert Andrew Tribute talking at length about the good in the deal.
Talking about Xerox and its many historical achievements Eccles, says, “The story of Xerox is a long and fascinating one, with a lot of significant innovations along the way. Xerographic copiers are only the first one, but it also made the first commercially viable laser printer (Xerox 9700) in the 1970s. Its mono DocuPrint of 1990 laid the groundwork for today’s digital production presses, the DocuColor 2000 series (introduced in 2000) had outsold every other digital colour production press in the world by Ipex 2002. The iGen established the idea of a high volume digital press (alongside the concurrent Kodak-Heidelberg NexPress). Since iGen most of the new print technologies seem to have come out of acquisitions: Tektronix (for phase-change printing) and Impika (fast inkjets).”
“Fuji-Xerox did its own thing, often very well, and a lot of the lower priced copiers and low-to-mid capacity digital presses came out of Japan. Outside Asia, the Xerox badge went on everything, with no attempt to identify which came from where,” Eccles adds.
Though many business experts call Xerox’s situation as a classic case of ‘competency trap’ wherein an organisation fails to look beyond the product or capability, it has mastered. 
Xerox though has been trying to reinvent itself as a services company in the recent years and aggressively positioning itself as a managed print service company amidst serious competition. 
There have been words of caution too. In his analysis to a Japanese business daily Masayuki Kubota, chief strategist of Rakuten Securities Economic Research Institute says, “This acquisition can be seen as Fujifilm being talked into buying [Xerox] by Carl Icahn, the activist investor who holds the largest stake in Xerox. For now, it can be viewed as negative or positive.” 
“It is also unclear if Fujifilm can integrate a giant like Xerox smoothly,” he adds.
Jeff Jacobson, current chief executive of Xerox, who has had a run-in with activist investor Carl Icahn, who has pushed Xerox to explore the option including a shake-up in its joint venture with Fujifilm, and even called for Jacobson’s replacement as chief executive officer of Xerox, will serve as chief executive officer of the new Fuji Xerox.
Icahn who along with American billionaire Darwin Deason (the third-largest shareholder in Xerox) have been pushing for reforms in the company for several years now and have had serious concerns about Fuji Xerox relationship. Deason, in fact, has taken the matter to court, asking the merger deal to be blocked on the basis that the transaction ‘dramatically’ undervalued Xerox and ‘disproportionately’ favoured Fuji.
The duo of Icahn and Deason, which owns a combined 15.2% in Xerox, in a letter to shareholders, has appealed to them to free ‘the company from the shackles of the Fuji Xerox joint venture.’
It is to be noted that the duo has continuously opposed any potential expansion of the Fuji Xerox joint venture and questioned the non-transparent working on the arrangement.
Icahn had earlier said in December that ‘he believes Xerox still has potential, but it will go the way of Kodak if there aren’t major changes.’
He had also cast serious doubts about the position and capability of Jacobson and had said he is ‘incapable of creating long-term value’ for shareholders. 
Tribute though gave Jacobson his vote of confidence. He says, “I see executive understanding in Jacobson taking on the role of CEO of the new company. Unlike many of his forerunners at Xerox Jacobson has both the understanding and vision of the industry. I have known and worked with Jacobson for many years from his time at Kodak Polychrome Graphics. I was surprised when he was overlooked many years ago to take on the role of running the print related businesses of Kodak. No doubt today as he takes control of this new operation he will thank those who did not give him the poisoned chalice of running Kodak. I wish him well for the future.”
Xerox from its part has called this campaign by Deason-Icahn as ‘misinformed’ and have said that the merger was in the best interest of both the companies and was taken forward after exhausting all other possibilities.
It has in its part started a new PR campaign ‘Better Together’ with a special team which will ‘help to dissolve its partner barriers, inspiring and enabling the brainpower and passion of more than 6,000 researchers and engineers to create a unified team.’
Meanwhile, in India, the reaction to the deal has been mixed with a majority being cautiously optimistic.
An industry insider, echoed the sentiments of the task at hand to integrate wholly different cultures. He says, “It’s a hell of a job to integrate cultures. I feel the first phase will see a major drop in value. As the new entity paces up, all rattling parts will go. There will be job loss, product streamlining. I guess what we will see is a very focused imaging technology company which will have a workflow at its heart and all formats and all technology – offset, flexo, laser, inkjet, continuous inkjet, and UV – working to put together the final products.”
In spite of doubts and resistance from some quarters, the general consensus on the deal has been positive and only time will tell if this is a new dawn for the company.

Expert Talk: Andrew Tribute 

This is a very logical move and one that I have expected for some time. In recent years Xerox has been split into the production printing and document company, and the business process outsourcing company. Before this happened, I had commented that I felt Xerox was losing interest in the traditional Xerox business and was concentrating too much on the services area. For years Fujifilm through its majority ownership of Fuji Xerox and Xerox had worked well together. Fuji Xerox providing the mass market products and Xerox the higher end production printing products. For years Xerox largely dismissed liquid inkjet as the technology for high-speed printing and pushed its solid ink technology which was unable to provide the quality and speed of drop-on-demand liquid inkjet. It was only since the acquisition of the French company Impika that one saw a change in impact. Fujifilm, however, had been significantly more progressive in this area becoming a major player in large-format inkjet printing. It made major acquisitions in its own rights in this area with printhead manufacturer Dimatix and ink companies Avicia and Sericol. It also expanded inkjet press manufacturing with its Jet Press 720. It has developed the Dimatix printhead range and in particular, the Samba that has become the printhead of choice for the leading presses from companies such as Heidelberg and Landa pushing highest quality inkjet printing. I see real potential for the future with the new FujiXerox incorporating the Fujifilm printhead and other Fujifilm technologies into core technology structures for the future.