Saturday, May 23, 2009

Xerox Names Burns Chief as Mulcahy Retires Early

It was clear that Anne was going to retire this year given the rumors that she may take a post with the Obama administration. Also, Ursula has been heavily pursued by headhunters for CEO posts given she would be the first African American CEO to head up a Fortune 100 company.

Anne took over following a disastrous succession attempt by Paul Allaire who had brought in Rick Thoman from IBM to be the next CEO. While Paul stayed on as chairman, Rick tried to unsuccessfully turn around the company by taking on too much too soon. He was later ousted by the same person who had brought him in. Anne was the best but not the most obvious choice at the time but later on everyone had agreed that she did a respectful job to save the company from bankruptcy. In my opinion the secret to her success stood with her brilliance with people skills and knowing the culture she had grew up with. I tend to think she would do great in politics unlike Carly Fiorina for example.

Today Xerox stock sits at about the same level as back in August 2001. Revenues have not changed either. The company relentlessly cut its way to survival considering it had 79,000 employees back then vs about 57,000 now, which in turn boosted profitability and cash flows. It is ironic that after eight years since Rick Thoman Xerox still faces the exactly same problem unfortunately during one of the worse financial crises of our lifetime: To become strategically relevant to customers again to start thriving as a healthy growth company. Time will tell if a Xerox life-timer will be able to pull it off.

Xerox Names Burns Chief as Mulcahy Retires Early

Anne Mulcahy, who led a turnaround that revived Xerox Corp. when it was near bankruptcy, said she will take early retirement as chief executive, handing the job to her lieutenant, Ursula Burns.

Ms. Burns, who like Ms. Mulcahy has spent decades climbing the ranks at Xerox, will become the first African-American woman to head a Fortune 500 company, according to research group Catalyst Inc.

Ms. Burns faces a challenge in the current recession of cutting costs fast enough to regain profitability. Longer term, the company has the task of increasing its market share against larger competitors like Canon Inc. and Hewlett-Packard Co. in the slow-growing, mature markets of office and commercial printing.

Ms. Mulcahy will remain Xerox's chairman. The change, set for July 1, was announced before Xerox's annual shareholder meeting Thursday.

The 56-year-old Ms. Mulcahy didn't discuss her reasons for retiring now. She had signaled Xerox's succession plans two years ago when she named Ms. Burns, now 50, as president. The copier and printer company, based in Norwalk, Conn., declined to make either executive available.

The two executives had agreed more than a year ago that Xerox's 2009 annual meeting would be an appropriate time for the transition to be announced, according to a person close to Ms. Burns.

Ms. Burns has been considered by recruiters as a potential CEO for other companies, including Archer Daniels Midland Co. and Sunoco Inc., according to people familiar with the situation. But she had made it clear she preferred to stay at Xerox.

Ms. Mulcahy said in a prepared statement: "The decision to move on is made easy only in the fact that Ursula Burns is so well positioned to take Xerox to the next level." A Xerox spokesman said Ms. Mulcahy, who is a board member at Citigroup Inc. and Target Corp., plans to remain an active chairman.

Ms. Burns, who grew up in public housing in New York, worked as an intern at Xerox before getting a master's in engineering at Columbia University.

Voluble and fast talking, she ran some of Xerox's biggest operations in Rochester, N.Y., earlier this decade and negotiated cost cutting and outsourcing deals with labor unions that resulted in thousands of layoffs. She has recently led Xerox's development operation.

Ms. Burns vaulted into management after being plucked from the engineering department to serve as special assistant to Xerox's former chief executive, Paul Allaire.

She has a reputation for pushing hard to make the company move faster and for making the company's famous research labs focus more directly on products to help the bottom line.

"Most companies have one woman who might be a possibility to become CEO," said Ilene Lang, president of Catalyst, a non-profit that promotes the advancement of women in business. Xerox "has a range of them."

Ms. Lang said Xerox had women on its board years before most companies, and has an unusual number of women in senior positions in key operations such as sales and manufacturing.

Over her 33-year career at the company, Ms. Mulcahy rose into the executive ranks after starting at Xerox in sales. She was little known when she was named president in May 2000, when Xerox removed her predecessor in the midst of a financial crisis. She took over as CEO in August 2001.

At the time, Xerox's copiers were being hammered by desktop printers and Japanese rivals. An emerging accounting scandal was about to engulf Xerox in a Securities and Exchange Commission investigation, resulting in restated earnings and a huge fine.

During Ms. Mulcahy's first year as president, crushing debt forced the company to take emergency bank loans and sell Asian assets to raise cash.

Since then, Xerox has pared its debt, rebuilt its product line and established a large business selling high-end printers to commercial print shops. It generates about $1 billion in cash a year, and has resumed paying dividends and repurchasing stock.

"It has the best product line and the best strategy and distribution in the industry," said Shannon Cross, an imaging-industry analyst at Cross Research.

Ms. Mulcahy's tenure hasn't been an unalloyed success. Xerox stock, around $20 when she became president, fell below $5 several times in her first three years before rallying. It plummeted last year as the world-wide recession took hold and closed Thursday at $6.82, down eight cents, on the New York Stock Exchange.

Developing markets such as Russia, which had been growing fast, have been hit hard by the global credit crunch. The company started a round of layoffs late last year. To capture business from rivals, Xerox is banking on such innovations as its recently unveiled solid-ink printer-copier devices for the office, which slash the cost of printing in color.

The company's stock-market value is little changed from when Ms. Mulcahy took over as CEO in 2001. Despite several asset sales and acquisitions, revenue growth has been hard to come by: Revenue was $17.6 billion last year, well below the record $19.45 billion of 1998.

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1 comment:

cfpicks said...

When Mulcahy became CEO on August 1, 2001 the stock was at $8.13. Today it closed at $6.78, a drop of over 19%.

How exactly is taking a firm with a market capitalization of $8 billion and leaving it 8 years later with a market capitalization of $6 billion saving it?

Over her time at Xerox, it has steadily become a nonentity in the industry. Whereas HP and Canon have market capitalizations of $80 bn and $40 bn respectively, Xerox is stuck at $6 bn.

Xerox does not even try to compete in the major growth areas anymore. Just seems to be happy trying to be a niche company, whereas once it could challenge the big boys in all areas.

Words are cheap, and praise can be heaped on anyone for various reasons. But the market numbers do not lie.