If there were a contest for world's worst corporate slogan, "Technology/Document Management/Consulting Services" would definitely make the top 10. It's on my short list for the medal round.
Yet that's exactly the addled specimen of dysfunctional groupthink on which Xerox (NYSE:XRX) will wager its future, according to an oddly reverential article in today's New York Times. Maybe the Times is feeling some retro love for the groundbreaking company, but there's little cause for excitement about Xerox's future prospects, as that halfhearted tag line makes clear.
Here's a quick quiz for you. How rich would you be if you'd purchased 1,000 shares of Xerox in 1970 and held them until today? Does this chart answer your question? (Answer for those too lazy to click: Less rich than before.) Yes, the company was a 20-bagger from the low in '91 to the high in '99, but since then, it has shed 88% of its value.
How does a company with a name that is synonymous with duplication technology squander that kind of capital and come a cropper? One answer is that its products and services became a commodity, replicable by any number of companies. And nothing has changed today. Printers? How about Lexmark (NYSE:LXK), Canon (NYSE:CAJ), and Hewlett-Packard (NYSE:HPQ)? E-documents? Adobe Systems (NASDAQ:ADBE), anyone? Copiers? Don't make me list them all.
Ask yourself, what does Xerox do that two dozen other companies can't do? The answer is, not much. That's why last quarter's numbers don't look so great to me. Revenues were down 2% before the 2% gain in currency exchange. That's minus 4% to you and me. Gross margins slipped 1% even with that forex benefit. Profits? Please. They came through expenses, which is nice, but that goes only so far. Finally, it's tough to be enthusiastic about a self-described tech company that cut research and development expenses by 17%.
Cash flow looks OK, but what of it? If things are so peachy, why the need for borrowing twice the free cash flow for "general corporate purposes"? Yes, it looks like a bargain to some Fools, but given management's propensity to put lipstick on pigs, I remain a skeptic. If I held it, I'd be ready to drop it on any sign of weakness, and this tag line sure looks like strike three.
My pick for Xerox's new slogan?
How about: The Dorkument Company? Sorry, that's just mean. Make it: Just another document company.
Doesn't do much for the ear, but it's getting closer to reality, and investors should keep that in mind.
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Seth Jayson still appreciates the opportunity to photocopy body parts, but he has no position in any company mentioned. View his Fool profile here.
