Shares of Xerox (NASDAQ:XRX) are down by about 10% after the company announced that it would lay off 15% of its workforce as part of its restructuring plan called the Reinvention and Operating Model. As part of the plan, the technology company has also made several changes to its executive team, which includes a new chief operating officer (COO), chief financial officer (CFO) and president. Several other executives will also leave the company. CEO Steven Bandrowczak had this to say about the restructuring plan:
“The evolution of Xerox’s Reinvention aligns our resources in three key areas – improvement and stabilization of our core print business, increased productivity and efficiency through the formation of a new Global Business Services organization, and disciplined execution in revenue diversification.”
The announcement comes just days after Xerox subsidiary Xerox Business Solutions (XBS) U.S. experienced a security breach. Xerox noted that XBS U.S. did not experience any significant effects from the event.
Shares of XRX stock have greatly underperformed the market during the past five years, with a loss of 21%. Meanwhile, the S&P 500 has increased by 86%.
XRX Layoffs: Xerox Announces 15% Workforce Reduction
As part of the company’s core print business priority, Xerox will focus on simplifying its core products in order to better serve its customers. It will also seek to increase its profitability and invest more in its partner-enabled go-to-market model.
The company also plans on simplifying and increasing the efficiency of its global business services priority by centralizing internal processes and generating operating leverage. Operating leverage is defined as the relationship between fixed and variable costs and how these costs affect operating income and revenue. A higher operating leverage is generally viewed as more favorable than a low one.
For Xerox’s information and technology (IT) and digital services priority, it plans on diversifying its revenue by tackling markets with high growth and profitability.
Wall Street analysts aren’t exactly bullish on XRX stock, although the company’s restructuring plan could possibly warrant some price target changes in the coming days. The average analyst price target is $14.33 based on three analysts with coverage of the company. That implies a downside of about 10% from current levels.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
