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Xerox Exits SoHo Business

Rochester, N.Y. – Xerox, citing difficult economic conditions and mounting losses, reported today that it is pulling out of the retail channel as it abandons the SoHo products market space.

Anne Mulcahy, Xerox president and CEO, called the decision difficult but necessary since the company lost $82 million on SoHo products in the first quarter 2001 and expects a similar loss in the second quarter. The products affected are the company’s newly introduced inkjet printers and multifunction devices. The phase-out will take place during the next six months, she said, but Xerox will continue to offer support and consumable supplies for these products.

Xerox hoped to offset the expenses inherent in launching a new product line through investment from outside firms.

‘The slow down in the PC business and lower inkjet [retail] prices kept investors away. We expected rapid growth in the inkjet market, but in the last few months it has fallen apart and will not recover anytime soon,’ Mulcahy said, adding that companies would have been interested if economic conditions were better.

Xerox’s shaky financial state did not allow it to wait around for the PC and inkjet markets to turn around and it had to make take immediate steps in order to continue with the company’s plan to regain profitability later this year.

All research and development activities for SoHo products will immediately cease and the remaining inventory will be closed out through retailers and other channel sources.

‘Our exit plan will generate a savings of at least $100 million in the second half,’ Mulcahy said.

Layoffs will also take place. The exact number of people affected was not released, but at least a portion of the 1,500 people in the SoHo business division will lose their jobs. Mulcahy said some workers will be transferred to other areas and those dealing in support and consumables will keep their positions.

Today’s announcement directly contradicts the rosy picture Xerox painted for its inkjet and multifunction device products just two months ago. At that time, Marc Young, the SoHo group’s strategic marketing vice president, said the company’s over arching financial situation and reorganization being implemented to regain profitability would not effect the retail products development.

The inkjet printers, which started shipping in January, were part of a joint research and development venture between Xerox, Sharp and Fuji announced in March 2000. The troika intended to take on the established players in the inkjet market.