Sack the Xerox CEO 'immediately', yell activist investors

Moneymen always ready to say: Icahn tell you what you're doing wrong

Shouting match

Activist investors Carl Icahn and Darwin Deacon are linking arms to force Xerox to “explore strategic alternatives” for the business and squeeze out the “old guard” manning the fort should they resist change.

Icahn and Darwin collectively own 40 million shares in photocopier and print giant Xerox - equating to a 15 per cent stake - making them the biggest and third biggest shareholders respectively.

But the pair aren’t happy with the way the firm is being run and penned a letter to the Xerox board voicing their disapproval and making a series of demands:

  • in light of the recent [September] accounting scandal at Fuji Xerox (which owns 75 per cent of a joint venture that sells photocopier and related services in Asia Pacific), the joint venture should be terminated or renegotiated to make it more favourable to Xerox;
  • Xerox should immediately commence a process with new independent advisers to explore strategic alternatives;
  • Xerox should immediately disclose the agreement governing the Fuji Xerox joint venture;
  • CEO Jeff Jacobson, a member of the Xerox “old guard”, is incapable of creating long-term value for Xerox shareholders and should be replaced immediately: and
  • If the “old guard” directors are unwilling to make the tough decisions necessary to prevent the Xerox ship from sinking, they must be replaced as well.

The Wall Street Journal recently noted talks Xerox had started with Fujifilm, covering an “array of potential transactions”, that it said could lead the a change of control at Xerox.

Three of Xerox’s board members have been in situ for more than a decade and CEO Jacobson joined the company in 2012, having been made boss at the start of 2017 after Xerox spun out its BPO services business to become Conduent Inc.

The two investors said a change of control would “make sense” as “consolidation in this industry is inevitable” but they implored the board of directors that “lacked the intestinal fortitude to challenge and demand accountability from Xerox management” to not allow the current CEO to lead the negotiations.

“He is neither qualified nor capable of successfully running this company, let alone negotiating a major strategic transaction that will do more than save his own job,” the letter to Xerox added.

They warned that each day the board and top brass remain in power, “overseeing the company’s steady decline - is a waste of time that could inevitably erode the value of our investment down to nothing. We simply cannot wait any longer for things to change.”

“Stay tuned, fellow shareholders. This is just the beginning.”

The plan from Icahn and Deacon is to nominate four board members if their calls fall on deaf ears.

Xerox stock has risen 38 per cent since Jacobson took over at the start of last year although almost half of that gain was made on the first day of trading at the trimmed-down Xerox. In that time, the S&P 500 technology index has swelled by 46 per cent in value.

Company revenues have fallen on a year-on-year basis in each of the quarters since it became a standalone photocopier and related services biz.

Xerox issued a statement:

The Xerox Board of Directors and management are confident with the strategic direction in which the company is heading and we will continue to take action to achieve our common goal of creating value for all Xerox shareholders.

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