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Tuesday, March 25, 2025

Still Standing: Xerox’s Relentless Crawl Back

- Celeste Dame

Xerox Holdings Corporation's announcement to acquire Lexmark International for $1.5 billion reverberates across an industry where every decision echoes through supply chains, service models, and competitive strategy. This merger, rather than a simple expansion of portfolios, signals Xerox’s latest attempt to realign itself in a sector it once dominated but now finds increasingly complex and fragmented.

Once a market titan, Xerox has grappled with years of declining revenue and persistent competition. Its shares plunged more than 50 percent in 2024, a reflection of a company wrestling with relevance. Against this backdrop, CEO Steve Bandrowczak framed the deal succinctly, stating, "By combining our capabilities, we will be better positioned to drive long-term profitable growth and serve our clients, furthering our reinvention." The language is confident, yet it recalls a familiar Xerox pattern—relying on acquisition to reset trajectory.

Lexmark, founded in 1991 as an IBM spinoff, holds firm ground in the A4 color printer and multifunction space, areas where Xerox has lacked depth. Allen Waugerman, Lexmark's CEO, struck a more tempered tone, reflecting pride in Lexmark's history and cautiously aligning with the narrative of growth and shared talent. What goes unsaid is the volatility Lexmark faced under Ninestar ownership, culminating in U.S. sanctions over human rights concerns—a factor that undoubtedly made Lexmark ripe for sale.

What differentiates this acquisition from Xerox’s past maneuvers—like the $6.4 billion Affiliated Computer Services (ACS) buy in 2010—is that Lexmark’s portfolio slots neatly into Xerox’s existing hardware line. ACS, intended to vault Xerox into business services, became an operational albatross. By 2017, Xerox spun off those services, creating Conduent and conceding the strategic misstep. The Lexmark deal feels tighter, more tactical.

Still, risks loom large. Integrating product lines sounds logical but historically has meant months, sometimes years, of channel confusion. Greg Walters of "The Death of the Copier" blog once remarked during Xerox's previous restructures, "They build it up, they tear it down, they build it up again. It's what they do." His observation feels prophetic here.

Conversations in the field already swirl around parts availability, firmware updates, and whether Xerox’s notorious bureaucracy slows down what Lexmark dealers had come to expect—nimble service and straightforward backend systems. What many are watching closely is how Xerox treats Lexmark’s A4 strength, especially in light of the global shift toward distributed workforces and less demand for oversized A3 hardware.

Quocirca, known for their critical takes on imaging industry moves, noted in their analysis, "This acquisition strengthens Xerox's competitive position in the print hardware market but comes with a significant integration challenge. The real question is not what Xerox has bought, but what they choose to do with it." That sentiment cuts to the heart of what most wonder—does this deal avoid Xerox's past mistakes, or is it another cycle of expansion destined for contraction?

There is opportunity if handled with precision. Bulk purchasing power, supply chain consolidation, and elimination of redundant development paths could create significant cost efficiencies. The projected $200 million in synergies may materialize, but it is equally plausible that cultural rifts between legacy Xerox and Lexmark’s teams stall those gains.

Xerox’s decision to reduce its dividend to fund the acquisition signals a rare moment of fiscal discipline. That move, along with the immediate impact on debt ratios, sets a foundation that previous deals lacked. But the market will watch what happens when boots hit the ground.

For those closest to the action, this merger is less about Wall Street statements and more about what happens in the first 18 months—whether supply lines stay intact, whether firmware downloads work, whether customers feel the shift. Lexmark’s reputation for durable machines and clean service engagements now sits in the hands of a company with a history of ambitious restructures and mixed execution.

Ultimately, this is not simply about two brands merging. It is a test of whether one of the industry’s oldest names can still adapt without cannibalizing what it just paid for. The channel, the competitors, and the customers will all be watching.

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Greg Walters, Incorporated
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