A Lull at Xerox

By HP-Time.com

The late Joseph C. Wilson, builder of Xerox Corp., was fond of observing that if his company continued to grow at the meteoric rates of the 1960s, its sales would soon exceed the U.S. gross national product. The implication of that self-evident absurdity: Xerox's growth would have to slow; and it has now come true. Last year the company posted record revenues of $4 billion, but its profits suffered their first decline --a gossamer 1.8% before write-offs, to $342 million--since 1951, when Xerox was a small photographic-paper maker, known as the Haloid Co., in Rochester. Worldwide recession contributed to the decline, as did start-up costs for a new copier and the company's 800-model high-speed office typewriter.

Now Xerox is also getting some unaccustomed competition from fellow corporate titans. Shielded by a patent structure that seemed impenetrable, Xerox for a decade monopolized the field of "plain paper" office copying. Other companies made copiers--some under license from Xerox--but their machines required specially treated paper. In 1970, however, IBM came out with a plain-paper copier of its own, touching off a still unsettled suit by Xerox that charges 22 infringements of its patents. Last year Xerox assured itself of still more trouble by deciding not to fight a longstanding Government antitrust suit and instead signing a Federal Trade Commission consent decree, under which it agreed to share technology with competitors.

Rivals promptly began lining up to chip away at Xerox's 70% chunk of the U.S. office-copier market. IBM last month introduced a third line of copiers. Minnesota Mining & Manufacturing Co. is planning a massive sales effort for its new plain-paper VHS copiers. Last week Eastman Kodak Co. weighed in with its Ektaprint 150 series, a supersophisticated elaboration of the Ektaprint 100 machine first marketed last fall. At the touch of a few buttons, the most expensive machine in Kodak's new line arranges multipage documents and copies, collates and staples them--all at the rate of 4,200 pages per hour.

Price Cuts. Both the new Kodak line and IBM's machines are aimed at a promising new market--users of 30,000 or more copies a month, who now usually rely on in-house printing shops. Most of Xerox's high-volume machines are used in the 20,000-copy range. Xerox's response has been to cut prices almost across the board, in an effort to encourage users to churn out more copies from existing machines, while developing new copiers to capture its share of the extremely high-volume business.

Yet the new rivalry in copiers can only add to the company's problems. Xerox had got into computers in a diversification move but last year was forced to quit the mainframe-computer business (TIME, Aug. 4), taking an $84.4 million write-off--which was not included in the 1.8% profit decline.

Yet Xerox officials, with their usual air of confidence, do not appear excessively worried by the new competitive threat. They note that the company has long expected the copier market to become quickly saturated, even though sales are still growing. Saturation, says Archie McCardell, Xerox's No. 2 executive, behind Chairman C. Peter McColough, "will happen but much more slowly than we thought."

Wall Street analysts generally believe Xerox is not in a slump but a lull caused by the natural constraints of being an industry leader and thus the target everybody shoots at. They expect the company's profits to be flat this year but to pick up in 1977 as the 9200 and other new products begin making a real contribution to earnings. In any case, Xerox is still looking ahead. Having done so much to create the mountain of paper that businessmen deal with daily, Xerox is now working toward helping them eliminate it, or so officials privately admit. One definite future tack: gadgetry for the superefficient office, where stacks of papers on desks would be replaced by TV screens linked to electronic files. Xerox is spending $200 million annually in developing such systems. Its estimate of the size of this "electronic office" market by 1980: $8 billion.

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