Xerox Looks Past Q4 For Stronger 2021

Xerox Holdings Corp. XRX ended its fourth quarter with a weaker financial picture and the expressed hope for a more solid 2021.

What Happened: The Norwalk, Connecticut-based company reported $77 million in fourth-quarter net profits Tuesday, a far cry from the $818 million it reported one year earlier.

The quarter's $1.93 billion in revenue represented a 21% year-over-year tumble, while the earnings of 58 cents per share were 56% lower year-over-year.

The fourth quarter also saw the company shedding 750 positions worldwide, which gave Xerox a total global workforce reduction of 2,300 for the year.

Why It's Important: While Xerox's earnings report attributed much of its problems to the ongoing COVID-19 pandemic, which saw the rise of a remote workforce that did not require its office-centric technologies while working from home, many of the company's problems preceded the health crisis.

At the start of 2020, Xerox had managed to reach an amicable resolution with Japan's Fujifilm Holdings FUJIY following the contentious and litigious cancellation of their planned merger. But no sooner was Fujifilm Holdings in Xerox's rear-view mirror than it began to chase after HP Inc. HPQ in a hostile takeover that consisted of veiled public threats, brash displays of financial prowess and even the promise of free dinners for HP shareholders at a ritzy restaurant in the pricey New York suburb of Greenwich, Connecticut.

HP greeted the effort with a mix of bafflement and indifference, and Xerox abruptly halted its plans when the COVID-19 pandemic took root, leaving it with a public relations disaster.

As the year progressed, Xerox continued to have an optics problem. Activist investor Carl Icahn, Xerox's largest shareholder, became the center of media attention by increasing his ownership stake with a robust acquisition of shares.

Icahn's cantankerous behavior was also responsible for ending the Fujifilm Holdings merger and encouraging the doomed pursuit of HP, which made his share-buying spree even more curious. Also giving Xerox black eyes were a pair of widely reported cybersecurity breaches last fall, which was rather embarrassing because Xerox was trying to position itself as a cybersecurity expert.

What's Next: Xerox Vice Chairman and CEO John Visentin used the fourth- quarter earnings call to accentuate the positive while admitting a return to growth was not in the cards for this first quarter of this year.

In 2021, Xerox expects revenue of at least $7.2 billion in constant currency; operating cash flow from continuing operations to total at least $600 million; and free cash flow of at least $500 million, the CEO said.

"We believe this is achievable even in the unlikely scenario businesses don't start reopening in a meaningful way in the first half. The benefit of a solid strategy is it's flexible in its application, yet strong in its foundation," he said.

Visentin also promised that 2021 will see the company "adding workflow automation, machine learning, artificial intelligence and remote services to make our clients [and] employees more efficient while maintaining security."

Xerox's "strong cash position provides flexibility to explore a wide range of M&A opportunities," Visentin said.

Without mentioning Fujifilm Holdings or HP, Visentin held out the hope that the third time would be the charm for growing the company by uniting with another.