Xerox Corp. is planning to split into two different companies, essentially unwinding the company largest ever acquisition since 2010. The brand, which has become famous for its copy machines, is currently struggling in the current market.
The split, which it will officially announce this Friday during its fourth-quarter and year-end financial results, will see the separation of Xerox’s business and service sides.
The Big Split
The company will officially divide itself into two, separating its business side and service sector into separate entities. On Friday, the company will officially announce its move, although they have revealed that Carl Icahn, the company’s second largest investor, will be getting three seats on the service company’s board.
Icahn took a stake in the company last November, which now stands at eight percent within Xerox. At the time, he believed that the shares were undervalued, although he had planned to speak with executives about improving operational performance in the pursuit of strategic alternatives.
The company’s big split, however, will unwind Xerox’s largest acquisition to date, the 2010 purchase of Affiliated Computer Services Inc. which amounted to $5.6 billion. Analysts are still unsure whether the split will have consequences for the two separate companies in the future.
Following a Trend
Xerox’s decision to split its main services, however, is not something new. The current trends in corporate America are seeing more and more companies diversifying themselves by splitting in order to create more specialized arms. A good example is Hewlett-Packard Co, which recently split into two publicly traded companies.
Hewlett Packard Enterprise will now focus on servers, software, and professional services. On the other hand, the more familiar HP Inc. will handle personal computers and printing. In a similar vein, eBay spun off its PayPal payments processing unit as its own entity back in 2015, and other companies seem to be following suit.
While the reason behind the split is as yet unknown, analysts believe that the famous copy machine company is trying to stem losses from a record of slumps and decline in the recent years.
The split, however is looking like a step backwards for many who still remember Chairman Ursula Burns’ stance that she will stand by the company’s existing structure and maintaining the two units under one roof. As she explained last October, “We do see, to date, strategic value in having these to businesses together. As you go through the review, that’s one of the things that we’ll validate.”
The effects of the split are still hard to determine, but financial analysists say that if the trends are anything to go by, it may be what the struggling company needs to revitalize itself after several years of decline.