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December 29, 1999

Xerox Sets Up Internet Business Group

By CBR Staff Writer

Troubled imaging and document management company Xerox Corp yesterday attempted to haul itself into the internet age with the announcement of a new division to focus on web-based business activities and internet-related technologies. In what should be a key strategic move for the company, which earlier this month issued its second profit warning in as many quarters, Xerox instead chose to slip the announcement out with barely any details as to what exactly the new division will entail. In a short press release, the company said its new Internet Business Group would accelerate a number of the company’s web-based activities and maximize the value of its portfolio of internet-related technologies.

It said the group will enhance the Xerox web site to include additional, interactive communications that help to build relationships with customers and extend the range of services available to them on line.

The Internet Business Group will amplify our key existing internet activities and develop new e-business and e-service opportunities, said Rick Thoman, Xerox president and CEO. It will also move swiftly to leverage internet-related research with Xerox technology centers worldwide.

Michael Miron, who previously served as senior VP, corporate business strategy and development, will become president of the new organization, which Thoman said would also pull together a suite of Xerox knowledge tools and technologies and make those tools available to partner companies.

In addition, the company said it would look to raise outside capital for the unit with the intent of spinning it off in order to create greater shareholder value. Spokespeople were not available as we went to press.

With or without firm details, Xerox’s move to capitalize on the internet will no doubt be viewed by many as a case of too little too late. Earlier this month, the company issued its second profit warning in as many quarters, announcing that fourth-quarter earnings could come in roughly 40% below Wall Street estimates due to a host of factors, including weak demand and the lingering effects of its recent sales force reorganization. Analysts surveyed by First Call were expecting earnings of $0.66 for the period.

Although the imaging and document management company said that December remains a mystery, October and November results confirm that the negatives from last quarter have intensified. More details about the new internet group should emerge on January 25 when Xerox reports its fourth-quarter results.

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