New Top Copy at Xerox

Xerox Corp. stockholders like to open their annual meetings with a round of applause for management--and they have ample reason. Since 1960, when Chairman Joseph Chamberlain Wilson introduced one of history's most profitable single products--the Xerox 914 office copier--the company's sales have increased 18-fold (to last year's $701 million), its profits have grown 37 times (to $97 million), and its stock, long the shiniest of the glamour issues, has increased in value 50 times to the latest close of $277.67.

Last week's meeting in Rochester, N.Y., opened with the usual applause but ended in astonishment. Joe Wilson, 58, caught 2,200 attentive stockholders unaware at the meeting's close with word that he was stepping out of day-today management, would devote himself to "long-range planning." And "with a sense that this is a great milestone for Xerox," he announced that his title of chief executive officer would pass to C. (for Charles) Peter McColough, 45, the company's president since 1966.

Protective Patents. Few histories of business growth are as dramatic as that of Xerox. Founded in 1906 as the Haloid Co., a maker of photographic papers, the firm prospered quietly until the early '40s, when noisy court battles erupted among its twelve founding partners--including Wilson's father, who eventually won control. When his turn to take over the family fiefdom came in 1946, Joe Wilson, then 36, found it faltering. Searching for profitable new business, he seized on a little-known copying process called "xerography," and in eight years raised some $87.6 million in loans and stock issues to finance research. Once the process--which is unique in that it permits use of ordinary paper--was perfected, Wilson made a second daring decision. Rather than sell his machines outright, he determined to lease them for a flat rental, charge a small fee per copy. Thus the early Xerox 914s, which cost some $2,000 to make, could earn more than $4,000 in one year alone.

Wilson's brilliant associate, onetime Rochester Lawyer Sol M. Linowitz, who two years ago left the Xerox executive committee chairmanship to become U.S. Ambassador to the Organization of the American States, made sure that the techniques could not be copied for some time. A thicket of more than 500 patents surrounds the basic xerography process. Meanwhile, the company is making machines that turn out copies--and therefore revenues --at ever faster rates. The 914 model turns out 420 pages per hour. Model 2400, launched 21 years ago, makes 2,400 pages of copy per hour. After a faltering start because prices were too high, new machines have been in great demand, and last year they produced more than half of the billions of Xerox copies made. This year Xerox is invading the high-volume duplicating market with its 3600 model, which can turn out 3,600 copies per hour.

Last year Xerox showed a 21.8% profit increase over 1966--for the sixth straight year of 20%-plus profits growth. Only because the company set aside cash for an anticipated 10% tax surcharge did 1968 first-quarter earnings rise a mere 12.7% over the same period last year. Not even Xerox expects to keep duplicating such successes forever. More than a dozen competitors have come into the copying field. Among them is the Minnesota Mining and Manufacturing Company, which is now testing a machine that can make color copies in one minute.

Making the Most. One of Wilson's better products has been President McColough. A native of Halifax, Nova Scotia, McColough served in the Royal Navy in World War II, got a Harvard Business School degree in 1949, quickly decided that "business is more interesting in the U.S. than in Canada." He almost changed his mind in 1954 when, after five years with small Lehigh Coal & Navigation Co., he went for a job interview at Xerox (then Haloid). "It wasn't very impressive," McColough recalls. "I went up to see one of the vice presidents and he had a workman's black lunch pail on his desk and his bookshelf was a painted orange crate." Then he listened to Wilson's spiel about xerography. "It was all promise and no performance," McColough says, "but I was taken with the opportunities."

Salesman McColough, who built up what is now a 7,800-man nationwide marketing force, made the most of those opportunities, and was rewarded with the presidency two years ago. For the future, McColough plans to work on cutting costs and expanding Xerox' duplicating business at home and copier sales abroad, where the market is growing much faster than the U.S. rate of 15% a year.

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