Xerox Closes Merizon Acquisition

Xerox Corp. (XRX - Analyst Report) recently announced that one of its fully owned subsidiaries, Global Imaging Systems (GIS), has acquired Appleton, Wisconsin-based Merizon Group Incorporated, previously known as Modern Business Machines. However, the company did not disclose the financial details of the deal.

Prior to the acquisition, Merizon Group Incorporated was an independent office distributor of various products like copiers, printers and multifunction systems of renowned companies including Canon Inc. (CAJ - Analyst Report), Samsung Electronics Co. Ltd (SSNLF) and   Kyocera Corp. (KYO - Snapshot Report). After the acquisition, Merizon will provide Xerox’s full range of office printing products. Moreover, Merizon’s existing clients will also have access to Xerox’s technology and managed print services.

The deal is expected to strengthen Xerox’s distribution network as well as expand its customer base going forward. The company is highly determined to capitalize on the growing opportunities prevailing in the local as well as emerging markets. The channel partnerships with Trigon and Global Imaging Systems are testimonial of this situation. In this process, GIS’ main objective is to develop a nationwide network of locally-based companies focused on improving document workflow and office efficiency. The recent acquisition is consistent with this strategy.

Xerox has closed a number of acquisitions in the current year including Xerographic Solutions, Education Sales and Marketing, LLC, Midwest Business Solutions Inc., Premier Office Equipment Inc., United Business Solutions, Florida Imaging & Network Systems and Innova Consulting. All these are expected to be accretive to Xerox’s business going forward.

In the last reported quarter, Xerox earned $374 million or 26 cents per share compared with $314 million or 22 cents per share in the year-ago quarter. Revenues climbed 3% year over year to $5.58 billion, driven by higher sales, outsourcing and rentals. The company expects to witness better performance going forward based on its attempt to grow and expand its businesses, particularly its Business Process Outsourcing.

Based on its improved financial performance, Xerox has projected adjusted earnings in the range of $1.08 to $1.11 per share for full-year 2011. However, intensifying competition and availability of substitutes for the company’s products have put the company on the back foot.

Thus, the shares of Xerox Corp. are maintaining a Zacks #3 Rank, which translates to a recommendation of “Hold” for the short term (1 to 3 months) and we reiterate our recommendation of “Neutral” for the long term (more than 6 months).

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