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September 17, 1998

DIGITAL XEROX WILL GROW DOUBLE DIGITS

By CBR Staff Writer

Xerox Corp EVP Barry Romeril wasn’t drawn on the notion of buying IBM Corp’s print systems division on a Merrill Lynch & Co-hosted call yesterday but did stress that strategic acquisitions will play an important role in its business. With 12 shopping days left until the end of the quarter, Romeril said growth, minus the effects of currency fluctuations, should be in the double digits. The transformation of its marketplace from analog to digital; black and white to color-capable; boxes to services and solutions; and standalone to networked products provides an enormous opportunity for it to sell much more. The market should be worth some $212bn by 2001, up from $123bn last year. But it’s been a painful realization, with losses and a huge charge for axing 9,000 jobs. And so much for the paperless office. Xerox believes the use of digital networked products will increase page volumes by 25% to 50% over standalone analog devices. It also notes that while just 5% of a black and white page is covered with toner on color printing, the coverage is 35% (good for its toner business) while photo-quality prints, where toner is mixed, require 150% to 200% coverage. Digital product revenue was up by 39% in its second quarter (and represented 43% of $4.7bn second quarter revenue), light lens copiers declined by 8% and paper and other products increased by 6%. Through 2001 it expects double digit growth and lower gross margins (they were 47% in 1997).

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