Computer
Xeroxs $6 billion offer for Affiliated Computer Services Inc., whose technology is used to run systems such as the E- ZPass electronic tolls in the U.S., would move the company into a market that offers more predictable revenue growth than its office-equipment business. A few days after taking the helm at Xerox, the worlds largest maker of high-speed color printers, Burns, 51, said growth was her biggest challenge.
“They were a company that really did need to do something different,” said Daniel Morgan, a portfolio manager who oversees about $3.5 billion at Synovus Securities Inc. in Atlanta. “If you look at their business, which is basically copiers, printers and so forth, theyve had a lot of competition.”
Burns, who grew up in public housing in New York City, studied engineering and joined Norwalk, Connecticut-based Xerox right out of college in 1980. She assumed the chief executive position in July, succeeding Anne Mulcahy, who remains chairman. Xeroxs sales have declined for three consecutive quarters, the longest stretch in almost six years, as customers delay purchases amid the recession.
Cross Selling
The acquisition of Dallas-based Affiliated Computer will give Xerox the ability to cross-sell to different customers, bringing the hardware and software parts of the business together, Morgan said. Affiliated Computers technology handles tasks such as processing credit-card applications and managing insurance claims.
“If Xerox hadnt made this deal, they wouldve been left behind,” said Steve Reynolds, an analyst who follows the printing and imaging industries at Newtonville, Massachusetts- based Lyra Research Inc.
Xeroxs move mirrors the expansion of other hardware companies into computer services. Computer maker Dell Inc. agreed last week to buy Perot Systems Corp. for $3.9 billion to expand in the health-care market. Last year, Hewlett-Packard Co. bought Electronic Data Systems Corp. for $13.2 billion.
Market Reaction
Investors were skeptical of the Affiliated Computer deal yesterday, sending Xerox shares down $1.30, or 14 percent, to $7.68 in New York Stock Exchange composite trading. Affiliated Computer jumped $6.61, or 14 percent, to $53.86.
Burns declined to comment for this story.
Xerox will assume about $2 billion in debt as part of the deal, and Standard & Poors said yesterday that it may cut Xeroxs BBB corporate credit rating to BBB-.
Burns, who has a masters degree from Columbia University, started as a summer intern at Xerox three decades ago. She rose to become the first black female CEO among Fortune 500 companies and one of about 15 women who lead companies in Fortunes list.
At Xerox, she has run divisions such as product development and marketing. Her challenge now is to integrate operations and corporate cultures of Xerox and Affiliated Computer.
“Theres not a better leader at the company for this type of acquisition, because at the end of the day its all about execution, and Ursulas very good at that,” said Maggie Wilderotter, who sits on Xeroxs board and is CEO at Frontier Communications Corp.
Engineering Background
Burnss engineering background gives her the savvy to understand complex issues, said Christa Carone, Xeroxs vice president of marketing.
“I do think shes an engineer at heart,” said Carone, who has worked alongside Burns for about 10 years. “Shes really disciplined in her approach.”
Affiliated Computer is the biggest purchase in Xeroxs 103- year history.