Xerox
1. Discuss the advantages and disadvantages of Xerox’s intention to operate ACS as a standalone business.
Advantages- By consolidating its document management services with ACS’s client back office operations, Xerox anticipates to increase its overall revenue. Only 20% of the two firm’s customers overlap. This enables a cross selling of each firm’s products and services to the other firm’s customers.
Disadvantages- Xerox’s credit rating was downgraded to triple B-minus, which is only one notch above junk by Standard& Poor. An apparent lack of synergies between the two firms, Xerox’s rising debt levels and firm’s stressed printer business fueled apprehension about the long term practicality of the merger leading to fall in share price.
2. How are Xerox and ACS similar and how are they different? In what way will their similarities and differences help or hurt the long term success of the merger?
There are several differences such as customer base, revenue sources, and government customers often requiring considerably greater effort to close sales than Xerox’s traditional commercial customers. If Xerox intends to realize major incremental revenues by selling ACS services to current Xerox customers, some degree of combination of the sales and marketing organization would seem to be essential. However, at the same time it would be difficult to do cross selling as customers are likely to continue at least in near term to view Xerox as product rather than service companies. The sale of services will require major spending to rebrand these companies so that they will be viewed progressively more as service providers. Also, additional incentives may be required such as some packaging of Xerox hardware with ACS IT services but this may also require major price discounting at a time when printer and copier profit margins already are under significant pressure.
3. Based on your answers to questions 1 and 2, do you believe that investors reacted
Advantages- By consolidating its document management services with ACS’s client back office operations, Xerox anticipates to increase its overall revenue. Only 20% of the two firm’s customers overlap. This enables a cross selling of each firm’s products and services to the other firm’s customers.
Disadvantages- Xerox’s credit rating was downgraded to triple B-minus, which is only one notch above junk by Standard& Poor. An apparent lack of synergies between the two firms, Xerox’s rising debt levels and firm’s stressed printer business fueled apprehension about the long term practicality of the merger leading to fall in share price.
2. How are Xerox and ACS similar and how are they different? In what way will their similarities and differences help or hurt the long term success of the merger?
There are several differences such as customer base, revenue sources, and government customers often requiring considerably greater effort to close sales than Xerox’s traditional commercial customers. If Xerox intends to realize major incremental revenues by selling ACS services to current Xerox customers, some degree of combination of the sales and marketing organization would seem to be essential. However, at the same time it would be difficult to do cross selling as customers are likely to continue at least in near term to view Xerox as product rather than service companies. The sale of services will require major spending to rebrand these companies so that they will be viewed progressively more as service providers. Also, additional incentives may be required such as some packaging of Xerox hardware with ACS IT services but this may also require major price discounting at a time when printer and copier profit margins already are under significant pressure.
3. Based on your answers to questions 1 and 2, do you believe that investors reacted