Xerox Corp. Chief Executive Officer Ursula Burns, less than three months on the job, is betting that computer services can revive growth at a century-old company with roots so deep in copying that its name became a verb.

Xerox’s $6 billion offer for Affiliated Computer Services Inc., whose technology is used to run systems such as the E- ZPass electronic tolls in the U.S., would move the company into a market that offers more predictable revenue growth than its office-equipment business. A few days after taking the helm at Xerox, the world’s largest maker of high-speed color printers, Burns, 51, said growth was her biggest challenge.
“They were a company that really did need to do something different,” said Daniel Morgan, a portfolio manager who oversees about $3.5 billion at Synovus Securities Inc. in Atlanta. “If you look at their business, which is basically copiers, printers and so forth, they’ve had a lot of competition.”
Burns, who grew up in public housing in New York City, studied engineering and joined Norwalk, Connecticut-based Xerox right out of college in 1980. She assumed the chief executive position in July, succeeding Anne Mulcahy, who remains chairman. Xerox’s sales have declined for three consecutive quarters, the longest stretch in almost six years, as customers delay purchases amid the recession.
The acquisition of Dallas-based Affiliated Computer will give Xerox the ability to cross-sell to different customers, bringing the hardware and software parts of the business together, Morgan said. Affiliated Computer’s technology handles tasks such as processing credit-card applications and managing insurance claims.
“If Xerox hadn’t made this deal, they would’ve been left behind,” said Steve Reynolds, an analyst who follows the printing and imaging industries at Newtonville, Massachusetts- based Lyra Research Inc.
Xerox’s move mirrors the expansion of other hardware companies into computer services. Computer maker Dell Inc. agreed last week to buy Perot Systems Corp. for $3.9 billion to expand in the health-care market. Last year, Hewlett-Packard Co. bought Electronic Data Systems Corp. for $13.2 billion.
Investors were skeptical of the Affiliated Computer deal yesterday, sending Xerox shares down $1.30, or 14 percent, to $7.68 in New York Stock Exchange composite trading. Affiliated Computer jumped $6.61, or 14 percent, to $53.86. Burns declined to comment for this story. Almost 90 percent of Affiliated Computer’s new business contracts last year came from outsourcing, or managing operations for other companies. Total sales rose 5.9 percent to $6.52 billion in the year ended June 30.
Burns, who has a master’s degree from Columbia University, started as a summer intern at Xerox three decades ago. She rose to become the first black female CEO among Fortune 500 companies and one of about 15 women who lead companies in Fortune’s list.
At Xerox, she has run divisions such as product development and marketing. Her challenge now is to integrate operations and corporate cultures of Xerox and Affiliated Computer.
“There’s not a better leader at the company for this type of acquisition, because at the end of the day it’s all about execution, and Ursula’s very good at that,” said Maggie Wilderotter, who sits on Xerox’s board and is CEO at Frontier Communications Corp.
Burns’s engineering background gives her the savvy to understand complex issues, said Christa Carone, Xerox’s vice president of marketing.
“I do think she’s an engineer at heart,” said Carone, who has worked alongside Burns for about 10 years. “She’s really disciplined in her approach.” Affiliated Computer is the biggest purchase in Xerox’s 103- year history.
“She clearly has some guts,” said Peter Falvey, a managing director at Revolution Partners LLC in Boston. “Good for her to be able to clearly make a move that she and the board think are in the long-term interest of the company.”
(Source: Bloomberg)