Xerox & The Stock Market! Let’s Be Realistic
Here’s the reality, my friends. When an industry faces disruption, that industry’s investors face reality. The investment community is about calculated risk based on a defined hope, and when the calculation becomes complicated, and the hope can’t be defined instantly, the investor seeks a new, risk-based on another defined hope.
When Xerox announced its reinvention, it also publicly recognized that its core deliverable, which had sustained the company for 100 years, was declining, and that continued monetization with profitable outcomes was no longer a realistic path on its own for the company's future. Xerox needed a reinvention.
Anyone reading this understands that business printing is declining not only in equipment use but, more importantly, in the mindsets of business leaders who are actively evaluating all business processes.
Artificial Intelligence has moved up the chain, and today it is safe to say it is quickly becoming the most important link. Soon, all technologies will connect to or will be disconnected from the artificial intelligence chain.
As I look at the industry's response to what’s going on at Xerox regarding its stock price, I am amazed by the absolute lack of understanding of the real issue. The entire industry is facing its greatest challenge: a decline in its core deliverables, and everyone must realize that Wall Street is not the place to reinvent a 100-year-old print services business.
Xerox has actually been the most transparent about the realities of its needed reinvention. When Xerox leadership announced the reinvention, I was pretty outspoken about the need for Xerox to exit Wall Street. This is still my strong opinion.
In my view, Xerox made many right decisions during its reinvention journey. The acquisition of IT Savvy has been a success, as Xerox has been publicly sharing the numbers for Xerox IT Services, along with the division’s operating profit ratios.
Xerox acquired Lexmark, a strategic move that positioned it to capture the largest share of the A4 MFP end-user market. The TAM on the A4 desktop and MFP, both black-and-white and color, is the largest in the industry. Today, more A4 MFPs are being delivered to end users than A3 MFPs.
When Xerox announced the acquisition of Lexmark, I was outspoken about the need for Xerox to sell off or align with another OEM to offload Lexmark's manufacturing. In my view, the most valuable Lexmark asset to Xerox is its end-user customer base, not the manufacturing.
I believe that, with the right OEM partner, the Lexmark manufacturing component is valuable enough to provide a large cash infusion, thereby lowering debt. Kyocera, a world-class manufacturer of A4 and A3 MFPs, would benefit greatly from working with Xerox as a manufacturer. Kyocera could literally shut down all the Lexmark manufacturing and, through a partnership with Xerox, replace the entire Lexmark M.I.F (Machines In Field) with Kyocera.
I still see that strategy as very viable. In late 2025, on an End Of The Day with Ray episode, I discussed that Kyocera would be a perfect partner to Xerox. Kyocera has more available cash than any other company in the industry.
The founder of Kyocera was also one of the founders of KDDI, the massive telecommunications company in Japan. Kyocera has been selling off its KDDI stock, and its total equity value in KDDI is around $10 billion. Kyocera also has extremely low total debt. Kyocera maintains a negative net debt position, meaning its cash and liquid assets significantly exceed its total debt.
Kyocera did align with Xerox, allowing Xerox to bring the Kyocera TASKalfa 15000c Inkjet production unit to the Xerox customer base. If Kyocera formed an alliance, whereas Xerox could exit Wall Street, I believe the synergies would be extremely beneficial.
What about Fujifilm?
Fujifilm and Xerox have had an interesting relationship since their falling out over the pre-COVID-19 acquisition attempt. Xerox still remains Fujifilm’s largest customer within the Fujifilm business innovation unit. Estimates seem to suggest that Xerox delivers between 1.5 and 2 billion dollars a year.
It seems very logical that Fujifilm is looking extremely hard at its options to protect that revenue from evaporating if another OEM acquires or financially aligns with Xerox.
Fujifilm would still be able to sell Xerox its toner-based production equipment if Kyocera were to align financially with Xerox, as Kyocera is currently limited in its production print equipment portfolio.
However, I do believe that Kyocera will continue expanding its inkjet production portfolio, which would eventually erode Fujifilm's production print market share within the Xerox M.I.F.
Let’s address the Xerox debt, and hopefully those reading will open their eyes rather than reading the idiotic headlines or watching charts of Xerox's massive stock price decline. I hope those reading realize that a company’s Market Cap is not what it sells for. A company is sold based on its enterprise value.
As of its FY2025 year-end, Xerox had total debt of $4.2 Billion. After subtracting the lease portfolio debt of $1.5 billion and cash on hand of $600 million, the core debt was $2.1 billion.
For those confused, the lease portfolio debt is actually good debt because it’s distributed across thousands of end users. Xerox has, over the past two years, sold a large portion of its financing business to PEAC Solutions and others. I expect they will continue doing that.
Some of the industry’s largest dealers who actually have their own leasing companies will understand the benefits and value of the leasing debt.
When Xerox ended its FY2025, it had captured only 6 months of Lexmark revenue, and, of course, in its quarterly earnings report, Xerox showed the entire debt related to Lexmark. Xerox will share their 1st qtr earnings sometime in late April or early May. Unless, of course, they exit Wall Street through privatization or a tuck-in acquisition by a Japanese OEM.
Xerox is projecting around $250 Million in free cash flow for FY2026. Xerox has also recognized and projected around 1 billion dollars in cost-saving synergy tied to the acquisition of Lexmark. Currently, they have realized about half of that.
In the last 30 days, Xerox implemented an R.I.F. (Reduction In Force) as part of its reinvention and alignment efforts to bring together Xerox and Lexmark. I expect to see more adjustments in human capital, not only at Xerox but also across the entire industry.
Xerox has debt maturity walls in 2028,2029,2030 and over the current FY2026 and FY2027. The notes are easily managed.
However, I am doubling down on my thinking that Xerox must participate in some form of financial partnership event, which would take them off Wall Street. Or Xerox needs a major announcement of a unique partnership to recapture hope in a Xerox reinvention in the eyes of Wall Street.
I think back to September 2021, when ServiceNow announced a $10 million investment in CareAR, a Xerox acquisition in the augmented reality space. At that time, I suggested that ServiceNow should more deeply strategically align with Xerox. One of ServiceNow's shortcomings is its limited access to the SMB space. Obviously, Xerox has that access.
Maybe in 2026, a Xerox ServiceNow alignment is just the catalyst to excite Wall Street. Especially if the alignment included ServiceNow taking a major equity position in Xerox.
I think everyone in the print industry must pay attention to the real issue involving Xerox, as today I believe too many are still living in denial about what the industry’s disruption actually is.
The business printing component of the overall print industry is under significant pressure as end users continue to implement digitalization, thereby decreasing the need to copy, print, or scan. These reductions will continue, and it’s imperative that all those in the business printing landscape face the reality of those landscape changes.
This landscape change is an opportunity for those bold enough to participate in redefining the landscape. Part of the realignment will be consolidation; some of which will capitalize on the decline of print, and some will see alignments that many can’t even imagine. I heard once that when you look in the same place everyone else does, you miss the same things everyone else does.
Those selling, supplying, and servicing business print equipment are in a unique opportunity to capitalize on being the landscapers who change the landscape. Yes, some will definitely be mowed over; however, the industry must realize that Wall Street is extremely impatient and believes reinventions can happen in a quarter.
The industry will sell, supply, and service print equipment for the foreseeable future. It will be those who focus on the end-users and go where the market is going who will increase their odds of successfully reinventing.
Dealers must quickly align their human capital to ensure that, in the near term, the dealership can capitalize on selling its intellect. The industry’s infrastructure was built for a different time, and it’s imperative that folks reimagine and relandscape the infrastructure.
Xerox still has a tremendous opportunity. Its greatest asset is the Xerox massive customer base and the Xerox Partners who serve and support it. Xerox set out to reinvent itself. The leadership was honest; it had to adjust the reinvention’s navigation, and it will always have to adjust the navigation.
In comparison to HP Inc. The other print company on Wall Street is also under pressure. Since 2019, HP leadership has spent around 14 billion dollars on share buybacks to drive up the share price, and has had no strategy to realign HP as its largest profit business unit; printing is rapidly eroding. I predict that HP inc will soon be experiencing the wrath of Wall Street short sellers.
I expect an event regarding Xerox and its alignment with someone soon. Fujifilm has a strong motive, and Kyocera has a strong opportunity to completely disrupt the industry if it chooses to financially align with Xerox. Xerox aligning with an organization such as ServiceNow, my 2021 suggestion too would be not only disruptive, but it would spark the imagination of the investors.
Xerox’s Japanese OEM peers will publish their FY ending March 31st, 2026, results in the next month or so. In my next recaps of the OEMs' financial results, I will dig deep into the realities of the revenue streams of the print businessess within the conglomerates.
Xerox is one of the largest players in business printing and production printing. Xerox has also proven that its IT Services business is both scalable and highly revenue-generating. Xerox will end its current FY with revenues exceeding $7.5 billion, of which around $800 million will come from its IT Services business.
In closing, the print industry will not escape challenges as its business landscape changes; some will elect to be the landscapers, and some won’t.
Xerox has elected to be one of the landscapers, and as I have screamed since the renovation announcement, Xerox needs to get the hell off Wall Street and continue reinventing the industry’s landscapers!
Once the reinvention takes hold, a Xerox IPO would be welcomed! I would add that if either Fujifilm or Kyocera absorbs Xerox, Xerox as a wholly owned entity would do wonders for either one bold enough to join Xerox in that relandscaping.
Interesting times ahead. In full disclosure, I see the Xerox stock as being on sale.
Ray Stasieczko, Host of The Print Industry's Only Unfiltered YouTube Series, The End Of The Day With Ray!
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