‘India is certainly a contributor to our strong performance’

Anne M Mulcahy is chairman of the board and chief executive
officer of Xerox Corporation. Most recently she was president and chief
operating officer of Xerox, and prior to that, president of Xerox’s General
Markets Operations.

Mulcahy earned a bachelor of arts degree in English/journalism
from Marymount College in Tarrytown, New York. In addition to the Xerox board,
she is a board director of Catalyst, Citigroup Inc, Fuji Xerox Company, Target
Corporation, and is the chairman of the corporate governance task force of the
Business Roundtable.

On a trip to India recently, Mulcahy spoke on a range of issues,
specially on Xerox’s current activities and future plans.

What took you so long to come to India?
Our focus for the first 5 years of my tenure as a CEO was really on getting
our business back in shape. So I spent a lot of time just making sure that we
had a good business model and we were in a position to really bring great
offerings to our customers. We restructured our balance sheet and we had a lot
of financial challenges at that time that we wanted to get resolved.
Fortunately, the company now is in very good shape, and we have also become a
majority owner here in our Indian company, which we are very pleased about. It
just seems like a great time now to visit India, and I can assure you that I
will be back soon.

I think a perfect visit is when you have a chance to really
communicate with your people, meet with your management team and hear their
feedback, and communicate with your customers and partners. So, that truly is
the purpose of the visit.

What do you have to say about Xerox India’s results in the
last financial year?
I think the results were very good. Five years ago the company was in a loss
situation. Our revenue in 2006 was $1.2 bn, a 17% growth over the last year. We
are very pleased with the earnings growth and the business trajectory that we
are on. Our revenue started to grow for the first time in a number of years. Our
ability to grow our digital revenues and our services business, and color and
all of our emerging businesses is certainly now beginning to take place. We are
very optimistic about the future as well, not only did we earn $1.2 bn, we
actually delivered about $1.7 bn of operational cash flow as well. It was a very
strong performance and certainly our operations here in India contributed to
that, and we are very optimistic about the future.

What will be your strategy for launching new products in the
About 95% of products in the last three years have been refreshed, based on
the existing product range. We have hundreds of technologies at work that have
been incorporated in these products. We have three lines businesses, namely,
small medium business offices, production, and services. In each and every case
we have to make sure the products are different and that they are widely
accepted by our customer.

Can you tell us something about Xerox’s R&D initiatives?
Xerox spends $1.7 bn dollars, on a yearly basis, in research, development
and engineering.

We have about two patents issued to us every day and our
historical pattern portfolio is about 50,000 patents. We constantly have a focus
on differentiating our products and services through innovative technologies,
which is definitely what we have been doing in the past and we will keep doing
it. Even in tough times we kept investing and it is very, very important.

How has Xerox’s research and technology evolved over the
years? Does Xerox have external clients?
I think today’s research is actually very much embedded in our services
business and we license, we do spin off, and we’ve commercialized our
investments in R&D very effectively. The amount of innovation coming from
our research labs is really the foundation for so much of our differentiation.

We have
constantly had a focus on differentiating our products and services
through innovative technologies, and we will definitely keep doing it

We even have one of our research center’s that actually
sponsors research with other companies, in areas which are non-competitive for
us. We actually have external clients funding research, that actually plays very
much to the strength of the Xerox portfolio. So I think we have certainly done a
good job of finding multiple avenues to commercialize and monetize our research
capabilities. We think we are getting a great return on investment these days.

You mentioned investing 6% of your revenues in R&D. What are
the key areas?
The 6% is in development and engineering, within the research center, mostly
engineering. One focus is smart document management, it is also research and
support of our future services and comprising businesses.

A lot of work is in the area of information that is contained in
the document. It is about content, and how we help to use and manage that
content more intelligently, and its search and retrieval and all of the aspects
of having access to it. Then there is also opportunity to embed intelligence
into document as well, so that they actually have more than a passive role.

What is Xerox’s Technology philosophy? What is the gestation
period for Xerox’s products?
Two thirds of our equipment revenues come from products and technologies
that have been brought to the market in the last two years, and that is really
an important matrix because if we talk back to the research and technology
investments revenue, it is probably one of the most important ways to think
about the productivity of our R&D pipeline. If you look at the low end of
the market, the vast majority of revenues come from probably technologies that
have been introduced in the last 12-18 months. It even gets shorter because the
higher end products have a longer lifecycle in the market and, therefore, that
blends into a two-year matrix But at the low end of the market the cycle time is
very quick, and we look at a minimum of one year refreshes for almost everything
we bring into the SME market.

Why has there been no focus on consumers?
Well, a little bit of this is by plan. I think you know, every company has
to choose areas of focus and competency, and sometimes the worse mistake you can
make is trying to bring all things to all people. We are primarily a B2B
company, and clearly that is our focus. Having said that, there is a thin line
between home office and small business, and these lines are blurring. So we are
working more and more to make technology available to home office environments
and make that technology available through channels that can participate in the
buying decisions.

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