UPDATE - Xerox seeks momentum with new high-volume printers
Thursday January 29, 4:47 pm ET
By Franklin Paul


(Updates New York event details, closing stock prices)
NEW YORK, Jan 29 (Reuters) - Xerox Corp. (NYSE:XRX - News) on Thursday unveiled redesigned additions to its key DocuTech line of high-volume printers, hoping to sustain momentum fueled by recent strong office equipment sales and historic highs in its stock price.

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The Stamford, Connecticut, company, which invented the copier but lost its market grip to overseas competition, unveiled DocuTech 100 and 120 copier printers, black-and-white digital systems that can publish up to 700,000 pages per month and cost between $77,000 and $99,000.

Xerox introduced DocuTech in 1990, calling the virtual printing plants its "most revolutionary advance since the introduction of the copy machine 31 years ago." Demand has been strong for the line, but over time rivals such as Germany's Heidelberger Druckmaschinen (XETRA:HDDG.DE - News) have nibbled away at Xerox's share.

"From Xerox's standpoint, (the new line) is a defensive strategy to protect their large installed base of DocuTechs," said Charles Pesko, managing director of consulting firm CAP Ventures. "It's also a move to get back some of the market share that has been taken away from them."

Such high-volume machines, which were unveiled to hundreds of customers in New York on Thursday, are key to the bottom line of printer makers, who subsequently sell must-have supplies such as ink, paper, parts and long-term service contracts -- each highly profitable and recurrent.

"These are not inexpensive products, and we expect there to be some pent-up demand," said Andrew Johnson, managing vice president at Gartner Inc. "People have been sitting on (older models) for a while and are ready to upgrade, and we expect good sales right out of the gate."

The announcement comes just two days after Xerox reported 2003 results with its biggest full year profit since 1999, driven by new equipment sales. The news further put behind it years besmirched by accounting scandals, sales force troubles and stock price erosion. Its stock rose to a 3-1/2 year high.

FACES TOUGH COMPETITION

Analysts noted that Xerox must continue to push out new hardware products if it hopes to keep its new found luster, particularly in light of fierce competition.

Xerox's roster of office and production machines put it up against manufacturers such as Hewlett-Packard Co. (NYSE:HPQ - News), Canon Inc. (Tokyo:7751.T - News) Ricoh Co. Ltd. Inc. (Tokyo:7752.T - News), and services provider Ikon Office Solutions Inc. (NYSE:IKN - News).

With the introduction Thursday of another new model -- Phaser 8400, a $1,000 office color printer derived from a new solid ink platform -- Xerox also crosses the path of low-end printer maker Lexmark International Inc. (NYSE:LXK - News)

"The leaders in this marketplace are HP and Lexmark ... and there will be absolute share gains in this segment," said Ursula Burns, president of Xerox Business Group Operations. "(The high-end machines) will be able to get pages that were reserved for offset (printers) moved to digital and that will be an expansion of the current printing market."

CAP Ventures' Pesko said the time is right for such competition, since the global economy is improving and corporations are more willing to buy systems that they hope will offer high-quality in-house printing at affordable prices.

"We are coming out of a time frame where folks were not making these kinds of capital investments -- now we are moving back into it," he said. "We are seeing the confidence level improve in the ability to purchase these products. It's a good sign for everybody in the business."

Xerox also debut updated service offerings at the event.
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