Xerox pays $6.4bn for Affiliated Computer Services

The office equipment maker's deal will add computer services to the business as sales of its conventional copiers decline

The office equipment manufacturer Xerox is paying $6.4bn (£4bn) for an IT outsourcing firm in a takeover meant to broaden revenue and diversify from recession-hit sales of photocopiers, printers, paper and ink.

The deal for Affiliated Computer Services (ACS) is the largest in Xerox's history and will triple the size of the US group's consulting services arm, which helps business customers tailor technology needs.

"The combination of these two companies has been called for by our clients," said Xerox's chief executive, Ursula Burns. "They're telling us more and more that we could bring the two companies together and help them become more efficient."

Xerox, the world's biggest brand in copying, can trace its imaging history to the invention of the first xerographic image by a New York patent attorney, Chester Carlson, in 1938. The company coined the name Xerox from the Greek words for "dry" and "writing".

But the Connecticut-based corporation has suffered in the recession as business customers cut back on spending on machines, paper and ink. The credit crunch has cut the financial services industry's need for reams of copies of legal documents for mortgages, loans and other transactions. Xerox's sales for the three months to June were down 18% to $3.7bn.

ACS, based in Dallas, will add 74,000 employees to Xerox's payroll of 54,000 people. It provides outsourcing services to a variety of industries ranging from government to healthcare, financial services and transport. The two companies hope that the Xerox brand will bring in more consultancy customers around the world.

"We have now found a partner to help us reach even greater heights," said ACS's founder and chairman, Darwin Deason. "This is a tremendous outcome for our shareholders."

Xerox is paying for ACS through a mixture of cash and stock worth $63.11 at Xerox's opening share price today. But Xerox's stock plunged at the opening bell on Wall Street, falling by 17% to $7.38.

The transaction is the first big move for Burns, who took over as chief executive in July. The first black woman to head a Fortune 500 firm, she replaced Anne Mulcahy, who steered Xerox through an accounting scandal and a financial crisis at the start of the decade.

Xerox's deal follows a spate of similar strategic shifts by hardware companies branching into business services. Last week, the computer manufacturer Dell bought Ross Perot's Perot Systems for $3.9bn and a year ago, Hewlett-Packard pounced on Electronic Data Systems.


Andrew Clark in New York

The GuardianTramp

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