Xerox Split to Cost Company $80M-100M Next Year

Xerox's split will cost the company between $80 million and $100 million next year, the company's top executive revealed Friday.

But Ursula Burns, CEO of the Norwalk, Conn.-based company, said the overall separation bill will come in lower than expected. Xerox, whose Global Services business is ranked No. 9 on the CRN Solution Provider 500, reduced its total separation cost projections from between $200 million and $250 million earlier to between $175 million and $200 million.

Xerox expects to incur between $40 million and $50 million in tax-related separation costs next year, Burns said. The company additionally expects costs relating to the loss of efficiencies from the split to come in between $40 million and $50 million next year, though Burns said those costs will be offset by the company's strategic transformation program.

[Related: Partners Relieved As Xerox Reportedly Rejects Donnelley Merger Proposal]

’This is a credit to the good cost management of our team continuing the separation process,’ Burns said on a Friday call with investors.

Xerox also announced the progress it has made on its three-year strategic transformation program, which it announced in January in tandem with the split.

The plan is expected to cost Xerox $300 million during the 2016 fiscal year (ending Dec. 31), of which $71 million was incurred during the second quarter, ended June 30. Xerox said the restructuring is expected to save the company $2.4 billion, with $700 million realized this year.

Xerox reported net income of $155 million, or 15 cents per share, during its second quarter. Net income for the year-ago quarter came in at just $12 million, or 6 cents per share.

The company reported $4.39 billion in revenue, down 4.5 percent from $4.59 billion from the year-ago quarter.

Burns said the company will be more active in mergers and acquisitions during the second half of the fiscal year, and is looking to spend $100 million targeting distribution companies for its document technology business and smaller, "tuck-in" acquisitions for its services business.

In the first half of the year Xerox spent $18 million on acquisitions.

Speculation about the sale or merger of either one of the future stand-alone companies is high following a report about a potential merger between Xerox with printer company RR Donnelley & Sons earlier this month. Subsequent reports said Xerox turned down the offer.

Burns passed on the opportunity to comment on the potential sale of either company, post-split, on a call with analysts Friday morning, stating that the new leaders of each company would be able to best address their potential merger or acquisition.

’I think that we should wait post-split for the new leaders of those two companies to talk about what those plans are as they proceed forward,’ she said.

Xerox has taken several steps recently to separate its $7 billion business process services organization from its $11 billion document technology company.

Xerox announced previously that its business process organization company would be named Conduent, and said former iGate CEO Ashook Vemuri would lead the company.

Also in June, Xerox announced that the document technology company will retain the Xerox Corp. name and named Jeff Jacobson, the current president of the document technology business, to be the CEO of that company.

Xerox announced that Burns will continue in her current role as chairman and chief executive officer of Xerox until the separation, and serve as chairman of the Xerox board following the split.

For the remainder of the year, Xerox said it is on-track to finish the separation of the two companies and to meet its guidance of 45 to 55 cents earnings per share.