Xerox has one of the few corporate names in America used as a verb, but investors today are wondering if Xerox can survive its transition from a manufacturer of paper duplication equipment into a digital document company. Incorporated in 1906 as The Haloid Company to sell and manufacture photographic paper, the company renamed itself Xerox in 1958. A year later, the company revolutionized office technology when it introduced the first automated office copier, the Xerox 914. The machine was named for the size of the copies it produced, 9" x 14", and shocked competitors 3M and Kodak by making as many as seven copies a minute. Such a paradigm-changing device deserves a place of honor, accordingly the Xerox 914 now resides in the Smithsonian museum.

The core to the fore

Under former and now recurrent CEO Paul Allaire, in 1986 the company began a major restructuring and streamlining effort, consolidating 36 administrative centers into three and replacing five geographic regions with four core business groups. The company also changed its product offerings, placing a new emphasis on scanners, network laser printers, and color copiers, as well as on software, consulting, and document production and storage. In 1998, the company also sold the last of its insurance businesses, which it began accumulating in the 1980s. Xerox is hoping its $1 billion restructuring effort, complete with a layoff of 9,000 employees, will enable it to capture the digital document needs of modern, "paperless offices."

So what happened?

Still, the company has recently fallen behind investor expectations. Beleaguered company officials blamed the slump on reorganization efforts in the sales force, bureaucratic bumbling, Y2K costs, and even an economic crisis in Brazil. Meanwhile, observers say the company needed to hurry along its sales reorganization and reformat its back office operations. Skittish investors, less eager to put money in old-line industries already, sold Xerox stock until the company's valuation actually fell below its revenues.

The "Document Company" for a new age

And so, on the cusp of the 21st century, the outfit that turned its name into a synonym for the duplication of paper documents is preparing for a new market. With more and more offices now linked on internal networks, texts once photocopied are now e-mailed or read on-screen as full page images. Copy machines now make a little less than half of Xerox's business, but industry observers say they expect these sales to flatten out in the next three years, while the sale of printers will rise by 50 percent.

Fighting a two-front war

The move into digital documents also leaves Xerox facing two formidable rivals. Hewlett-Packard has already won a large market share of the lower-cost printer and scanner market, a field Xerox is hoping to expand into with its "SOHO" ("Small Office and Home Office") products. HP has also introduced printer-copiers it calls "Mopiers." Meanwhile, Cannon continues its dogged challenge in the area of more traditional copiers.

In September 1999 Xerox acquired the color printing and imaging division of Tektronix for $950 million. In addition to the company's printers, manufacturing capabilities, and related software, Xerox gains access to Tektronix's extensive distribution network. Xerox is hoping that the 16,000+ resellers and dealers can help it regain some of its lost market share.

Back to the drawing board

One hope for Xerox's continued success lies in the company's legendary Palo Alto research center. The research lab that invented the first computer mouse, Ethernet, client-server technology, and graphic interfaces (and managed to let other companies capitalize on these inventions) has continued to produce cutting-edge innovations. Xerox patents soared 32 percent in 1998; meanwhile, with more than 1,000 patents, Xerox's lab ranked as the fourth most inventive corporate lab in America.

Copying? That's so five minutes ago

Xerox's new focus is on graphic arts and digital document management, including networkable printers. The company also formed an agreement with Motorola that will allow users of Motorola's PageWriter 2000X to contol and distribute documents on their network servers while away from the office. In order to strengthen its online presence, in 2000 Xerox opened the Xerox Manufacturer's Store at Outpost.com, where the 4 million monthly visitors can peruse the complete line of Xerox products. ContentGuard, launched in conjunction with Microsoft, is an internet company that develops software to protect electronic content like books, music, and software. A marketing agreement with Dell Computer Corporation formed in 2000 will increase Xerox's customer base by marketing their printers directly to small businesses and corporations.