Business History: Xerox Corporation, One That Got Away from Rochester

I find business history to be a fascinating subject. Here is a quick history of the Xerox Corporation, a well-known business innovation story.

Current Snapshot

Xerox Corporation (NYSE:XRX) is a $15.7 billion technology and services enterprise that helps businesses deploy Smarter Document Management strategies and find better ways to work. Its intent is to constantly lead with innovative technologies, products and services that customers can depend upon to improve business results.

Headquartered in Stamford, Conn., Xerox is No. 130 among the Fortune 500 with 56,300 employees worldwide, including 30,300 in the United States (October 2005). The company's operations are guided by customer-focused and employee-centered core values -- such as social responsibility, diversity and quality -- augmented by a passion for innovation, speed and adaptability.

Early Beginnings

The Haloid Company was incorporated in Rochester, NY in 1906 to make and sell photographic paper. (Note: Xerox relocated from Rochester to Stamford in 1969. Needless to say, this was a major loss to the Rochester area.) In 1935 it bought photocopier company Rectigraph, which led Haloid to buy a license for a new process called electrophotography (renamed xerography from the ancient Greek words for "dry" and "writing") from the Battelle Memorial Institute in 1947. Battelle backed inventor Chester Carlson (Photo below), who had worked to perfect a process for transferring electrostatic images from a photoconductive surface to paper.

Download a report on the story of xerography here.

Haloid commercialized xerography with the Model A copier in 1949 and the Xerox Copyflo in 1955, and by 1956 xerographic products represented 40% of sales. The company changed its name to Haloid Xerox in 1958 (Haloid was dropped from the name in 1961), and in 1959 it introduced the first simplified office copier. That machine took the world by storm, beating out such competing technologies as mimeograph (A.B.Dick), thermal paper (3M), and damp copy (Kodak). Sales soared to nearly $270 million in 1965.

Xerox branched out in the 1960s by buying three publishing companies and a computer unit; all were later sold or disbanded. In the 1970s Xerox bought printer, plotter, and disk drive businesses, as well as record carrier Western Union (1979; sold in 1982). In 1974 the FTC, believing Xerox was too market-dominant, forced the company to license its technology.

More Recent History

In the 1980s Xerox bought companies specializing in optical character recognition, scanning, faxing, and desktop publishing. It also diversified by buying insurance and investment banking firms, among others. In 1986 Paul Allaire, who had joined Xerox in 1966, was elected president. He was named CEO in 1990 and became chairman in 1991.

Eyeing future alliances, Xerox agreed to supply computer print engines to Compaq (1992) and Apple (1993). In 1995 it introduced networked color laser printers and software for printing Web documents. Between 1996 and 1998 Xerox sold its struggling insurance units.

Xerox bought Rank's 20% stake in Rank Xerox, the two companies' 41-year-old global marketing joint venture, in 1997. That year Xerox launched a $500 PC printer, copier, and scanner -- its first product specifically for home use -- and Allaire hired IBM CFO Richard Thoman as president and COO to spearhead a push into network and digital products. In 1998 Xerox bought technology consultant XLConnect (renamed Xerox Connect) and parent company Intelligent Electronics.

In 1999 Xerox named Thoman CEO to replace Allaire, who remained chairman. That year Xerox bought France's SET Electronique (high-speed digital printers). The company began selling its products online and reorganized its sales force by customer industry rather than geography. Layoffs also continued, totaling 14,000 for 1998 and 1999.

In an effort to stake a larger claim in the office color printing market, Xerox bought Tektronix's ailing color printing and imaging division in early 2000. The company also formed an Internet unit, formed a joint venture with Fuji and Sharp to make low-cost ink jet printers, and spun off its digital rights management technology unit as ContentGuard. With profits shrinking and market value flagging, Thoman resigned in May 2000 amid pressure from the board. Allaire assumed the CEO post once again. Also that year the company sold its operations in China and Hong Kong to Fuji Xerox.

Xerox's R&D/innovation strategy here.

Early in 2001 the company laid off 4,000 more employees. That year Xerox sold half of its 50% stake in Fuji Xerox to Fuji Photo Film, and it discontinued its product lines aimed at consumer and small office users, including its personal copiers and ink jet printers. Allaire stepped down as chief executive; COO Anne Mulcahy was named as his successor. Looking to reduce its massive debt, Xerox transferred most of its US customer financing operations to GE Capital in a deal including $1 billion in cash financing from the lending giant (it later formed similar arrangements with GE Capital for many of its international operations). Xerox also began selling manufacturing operations to contract manufacturer Flextronics International.

In early 2002 CEO Anne Mulcahy replaced Allaire as chairman. Also that year Xerox agreed to pay a $10 million fine to settle a complaint brought by the SEC alleging financial reporting violations. After the settlement Xerox -- which had fired KPMG as its auditors the previous year and brought in PricewaterhouseCoopers -- initiated an audit of its financial statements from 1997 through 2001; as a result of the audit, in June 2002 the company restated about $2 billion in revenues over the five-year period.

Photo Credit: Xerox Corporation