Xerox Looks To Expand In Asia Following Sale Of Fuji Xerox

'We are evaluating the opportunities and business case for expanding into these markets,' Xerox Director, Corporate Communications Caroline Gransee tells CRN.

Xerox will no longer have to work through Fuji Xerox to distribute its products in the Asia-Pacific region, kicking open the door to distribution opportunities in the region pending the close of the $2.3 billion deal unveiled Tuesday.

The deal—which gives full control of Fuji Xerox to Fujifilm—also allows Fuji Xerox to open up its relationships to deal with competitors in the space.

“The symbiotic relationship they had is broken, but Xerox still may be dependent on Fuji Xerox because they don’t have a network there today,” said one rival executive who asked not to be identified. “That is a difficult marketplace. Xerox would really have to put investments in new partner contracts, new feet on the street, developing that engine to get their stuff sold. Not saying they can’t build it, but I’m just saying it’s hard to do.”

But that is just what activist investor Carl Icahn has been urging the company to do since February 2018.

The 57-year-old partnership Fuji Xerox was at various times in those months a bargaining chip and a thorn to potential deals between the two companies.

Full ownership of the venture was supposed to go to Xerox, if the 2018 plan negotiated by former CEO Jeff Jacobson to sell majority control of the company to Fujifilm had gone through. During the proxy battle that erupted after the deal was announced, Icahn encouraged Jacobson to leave the partnership behind since Fuji Xerox in New Zealand and Australia had acknowledged it fraudulent accounting practices in 2017.

“Xerox (or a potential acquirer of Xerox) should spend the next three years thoughtfully diversifying its supply chain away from Fuji Xerox, which would both cannibalize Fuji’s largest revenue stream and enable Xerox to be in a position to not renew the Technology Agreement that restricts Xerox from selling in Asia,” he wrote in an open letter.

[Related: Xerox Kills Fujifilm Deal, CEO Jacobson Out]

Then, amid the legal fight it was revealed that an agreement with Fuji Xerox gave the company control over Xerox’s intellectual property and manufacturing rights in the Asia-Pacific region in the event that Xerox sold a 30 percent stake to another company. This lock-up, which had previously not been disclosed to shareholders, further inflamed the efforts to kill a merger.

The deal unveiled Tuesday would release Xerox from that covenant. It would also see CEO John Visentin making good on a pledge he made in a June 2018 letter to Fujifilm, in which he said he planned to not renew the agreement and to “begin sourcing product from suppliers other than Fuji Xerox.”

“We look forward to explaining to our investors the enormous potential growth opportunity if Xerox were to sell products directly into the growing Asia-Pacific market with sole and exclusive use of the valuable Xerox name and a more efficient, better managed supply chain,” he wrote at the time.

When asked today if Xerox intends to go through other channels to distribute in the Asia-Pacific region, Xerox Director, Corporate Communications Caroline Gransee said, “We are evaluating the opportunities and business case for expanding into these markets.”

The rival executive said unlike the free markets of Europe and North America, it takes time to adjust to how Asian markets—especially in emerging markets such as Sri Lanka, Vietnam, Thailand, Malaysia and Singapore—work.

“Most of the business over there is done by a high-touch environment with several bids, so it’s a very established network,” the executive said. “If you are not in that space it may take Xerox years to develop markets on their own.”

A deal earlier this year between HP and Xerox also raised eyebrows in the industry. Under the June agreement, Xerox will source certain HP A4 devices as well as entry-level HP A3 devices. HP and Xerox will also be partnering in Device as a Service, with Xerox becoming a Device-as-a-Service specialist in HP's Partner First program.

“When I read the announcement that they published, why would two major rivals like this publicly state that they were going to work together?” said the rival executive. “It just read like the start of something bigger. There’s industry speculation out there that this is going to happen.”