XEROX:TECH PORTFOLIO A GROWTH CATALYST

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Date: Saturday March 6, 2004 09:44:00 am
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    Xerox CEO sees tech portfolio as growth catalyst
    NEW YORK,- Xerox Corp. (NYSE: XRX News) will turn to its own technical breakthroughs to boost growth as the office equipment maker looks for low-cost ways to expand in an increasingly crowded office printing market, Xerox Chief Executive Anne Mulcahy said on Thursday.
     
    “We are being approached and have been approached by a lot of technology providers,” Mulcahy said at the Reuters Technology, Media and Telecommunications Summit. “I think we will be a source not just for our own use, but for others going forward.”

    Through its famed Palo Alto Research Center in California, Xerox has been developing digital paper and document management technologies, for example.

    The research center is credited with breakthroughs such as the laser printer and the computer mouse, but has been criticized by some investors who have complained that the company historically has failed to capitalize on its innovations.

    Separately, Mulcahy also detailed progress in rejigging Xerox’s board of directors. The board has added five members in recent months, and it plans to announce on Friday the addition of Glenn Britt, chairman and CEO of Time Warner Cable, a unit of Time Warner Inc. (NYSE: TWX News)

    “(Our board is) 85 percent independent,” she said. “As the company got healthier and more credible, it was a lot easier to recruit — they sense they are coming in at the right time. I was actively recruiting two or three years ago, and…I had more rejection than I ever had in my life.”

    Mulcahy, who was tapped as CEO in 2002, has guided Xerox through a period of scandal and financial losses, steering the company back to profitability. Along the way, Xerox trimmed billions in costs by shedding more than 15,000 jobs, moving major manufacturing overseas and cutting unprofitable assets.

    DELL, INTEL AMONG TECHNOLOGY PARTNERS

    Mulcahy said the companies approaching Xerox are those that want to offer their customers technology in which Xerox specializes.

    In January, for example, the company signed a deal with No. 2 personal computer maker Dell Inc. (NasdaqNM: DELL News) that calls for Xerox subsidiaries to share printing technology with Dell, which is beefing up its presence in the printing arena.

    In September, Intel Corp. (NasdaqNM: INTC News), the world’s largest microprocessor maker, said it would launch new microprocessors developed jointly with Xerox that are designed for use in digital copiers, scanners and printers.

    But Mulcahy said that targeting licensing revenues for a technical development is difficult. “Licensing is somewhat of a serendipity,” she said. “You don’t plan on it. You don’t count on it. If it works, it’s great.”

    Mulcahy added that Xerox, which ended 2003 with its biggest annual profit since 1999, had started to see a modest recovery in spending on technology starting in the fourth quarter. Growth in color printing is one sign of a better recovery, she said.

    But, she added, “It’s not a ‘wow, sit up and take notice’ recovery. It’s been more modest.”

    Mulcahy said she does not expect Xerox’s employee figures to change much this year. “I don’t really think we’re going to grow a lot from an employment standpoint.”

    One area where Mulcahy could envision growth is consulting and services, which has become increasingly important with the growth of digital imaging.

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