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Xerox & Fujifilm ‘One year after’ – Andy McCourt

One year ago, after Fujifilm’s USD$6.1 billion tilt at Xerox, Xerox stock traded at $33.99 per share. That was about the value Fujifilm put on it, notwithstanding the creative nature of the proposed takeover, which involved a debt swap and little cash. On top of this was $9.80 per share as a ‘special dividend’ in cash.Today’s last close of Xerox shares, even after following Wall Street up, was $21.58. The genius of the dissident shareholders Carl Ichan and Darwin Deason, plus their new puppet board, has wiped a third of the value off the company. If ever egg was to be all over faces, it should be theirs.

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         Andy McCourt

While there is no doubting these “wolves of Wall Street’s” bourse savvy (splitting off Conduent as a separate BPO company was smart), neither of them demonstrated the foggiest clue about how our core industry works. In his latest statement, Fujifilm President Shegetaka Komori appears diffident to whether or not a deal will go ahead, kind of ‘if it does, it does, if it does not, Fujifilm will still do well.’

So who’s the fool now? How can a board be proud of washing one-third of a company’s value down the drain? Admittedly, the low share price is being touted as a ‘strong buy’ by analysts – in expectation of a deal of some kind being reached but, if you put an offer in on a house and it catches fire before settlement – the price comes down doesn’t it?

What those who stymied the January 2018 deal failed to do, is their homework on the industry landscape, preferring to dwell on old glories, US jingoism and the so-called ‘accounting scandal’ at Fuji Xerox NZ – actually a commission fiddle by the salesforce and well and truly dealt with by Fujifilm. In high dudgeon, Icahn and Deason were determined for the deal not to go ahead because it was so smart, they were miffed that they hadn’t thought of it first – or something similar. Greed came into play ‘We want $40 a share’ came out at one stage…they actually had that when the special dividend was calculated in.

Now, like Aesop’s fabled dog-with-bone who, seeing his reflection in a pool, perceived it to be another dog with a larger bone and so dropped the real bone in the water; Xerox shareholders are left with no deal, a shrinking market, interrupted planning, lack of vision, $3 billion down the gurgler and an increasingly competitive landscape eating away at their prized cash-generation of recurring revenues as HP, Konica Minolta and Ricoh run rampant in the high-end A3 sheet and web digital print market. Ironically, the only saviours are the Fujifilm-manufactured digital machines, such as Iridesse, that are in demand, excellent and way ahead of the ageing iGen platform.

Cap this with the fact, at least in the ANZ region, some of the best people in the digital print game, having had lengthy careers with Fuji Xerox, are now avidly selling against their old employer with arch competitors, and you have a perfect storm for further market share loss. 

And still, Fujifilm represents the best hope for Xerox – even the vulture private equity funds shun a bottom-feeder acquisition of Xerox because of the agreement for Fujifilm’s j.v. and manufacturing supply deal going to 2023. Who would take a bet on where the industry will be in four years’ time?

But Fujifilm is playing it cool, and why not? Xerox, you were out-smarted a year ago, you have been outsmarted along the way and you are outsmarted now. Going back to Aesop and 16thCentury poet Geoffrey Whitney’s surmisal:

“ Whome fortune heare allottes a meane estate,

  Yet gives enowghe eache wante for to suffise:

  That wavering wighte, that hopes for better fate,

  And not content, his cawlinge doth despise,

  Maie vainlie clime, but likelie still to fall,

  And live at lengthe with losse of maine and all.”

These days, we might say: “Never look a gift-horse in the mouth.”

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