Saturday, April 25, 2009

Xerox Q1 Earnings Call

It's actually a very interesting call, if you eliminate the profit forecasts. Profits depend on revenue depends on the size of the addressable market. Addressable market size depends on effective market size. No one can predict the size of effective markets in a Black Swan world. Everyone can make educated guesses. I assume our management team can make pretty good educated guesses.

If you can predict effective markets, then you can predict revenue streams. That works in value chain economies. It does not work in user network economies. It you imply that you can predict the future, you're either Bernie Madoff or kidding yourself.

If you believe, as I do, that Print is in process of going through a tipping point, future effective market size is much too pessimistic. On the other hand, I've been saying this I read about the docutech in the WSJ in the 1990's. When a friend decided that I was a "thought leader," instead of just another creative, I did a series of columns at What They But consider, even a stopped clock tells the right time, at least twice a day.

Anyway, you can read the full transcript of the earnings call at Seeking Alpha. There were some smart questions and good answers.

If I were in the room, I would have tried to drill down on at least two issues:

Issue Number 1
Q snippet: . . . "You also talked last quarter about going back and renegotiating some of your supply agreements with Fuji Xerox and hoping to get a little bit of benefit there."

A snippet: ". . . but also we have an agreement with Fuji Xerox and within that agreement, like any agreement, within an agreement there is room for negotiations around it. We are constantly revisiting that where we try to limit the amount of exposure we have."
Issue Number 2
A snippet: . . . IGen4, both our populations on machines in the field and our installs grew in iGen4. So, clearly there are some upgrades or paths forged from iGen3 to iGen4, but we have a significant amount of new placements as well. So, MIPs grew and installs grew.

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