WEBVTT 1 00:00:07.465 --> 00:00:10.135 Hello and welcome to this educational film which is 2 00:00:10.245 --> 00:00:13.295 devoted to the merger of Xerox 3 00:00:13.795 --> 00:00:16.015 and Lexmark in the printing industry. 4 00:00:17.075 --> 00:00:20.135 I'm not going to elaborate too much about the deal itself. 5 00:00:20.315 --> 00:00:22.335 I'm going to insist very much on the management 6 00:00:22.335 --> 00:00:26.375 of technological innovation, inventions innovation 7 00:00:26.875 --> 00:00:31.215 and all the missed opportunities at Xerox in the first years 8 00:00:31.315 --> 00:00:35.175 of its existence, there are very well known statements made 9 00:00:35.235 --> 00:00:37.895 by Xerox and missed opportunity. 10 00:00:38.345 --> 00:00:41.015 Could have owned the entire computer industry. 11 00:00:41.315 --> 00:00:43.495 It could have been the IBM of the nineties 12 00:00:43.515 --> 00:00:45.095 and Microsoft the nineties 13 00:00:46.075 --> 00:00:47.695 and at the end of the day who said 14 00:00:47.695 --> 00:00:50.575 that very well known person whose name is Steve Jobs 15 00:00:51.515 --> 00:00:55.255 in 1995, Steve Jobs is interviewed at that time, 16 00:00:55.275 --> 00:00:58.535 his normal at Apple are not yet at Apple. 17 00:00:58.785 --> 00:01:00.695 Again, he is a manager 18 00:01:00.835 --> 00:01:04.735 and owner of next, which is going to produce the OSX. 19 00:01:05.715 --> 00:01:08.775 He holds 51% of Pixar. 20 00:01:09.065 --> 00:01:13.295 Pixar is going to produce Toy Story in 95, which is going 21 00:01:13.295 --> 00:01:16.535 to be the beginning of a stratospheric career of Pixar, 22 00:01:16.925 --> 00:01:19.415 leading eventually to the sale to Disney 23 00:01:19.635 --> 00:01:21.215 for seven point some billion. 24 00:01:21.795 --> 00:01:24.215 So Steve Jobs is interviewed, it's going 25 00:01:24.215 --> 00:01:26.455 to be named the lost interview. 26 00:01:26.675 --> 00:01:28.055 Why? Because it's been lost 27 00:01:28.555 --> 00:01:31.575 and during about 20 years nobody knows where exactly 28 00:01:32.195 --> 00:01:33.375 the video he is. 29 00:01:33.555 --> 00:01:36.575 We have some extracts of the podcast and that's it. 30 00:01:37.075 --> 00:01:39.055 It was found again and it's available 31 00:01:39.275 --> 00:01:43.695 and it is a mind blowing course in technological innovation. 32 00:01:44.875 --> 00:01:47.015 Now, Steve Jobs is going to explain the reasons 33 00:01:47.075 --> 00:01:48.535 of the failure of Xerox. 34 00:01:49.035 --> 00:01:52.015 He says, well, if you look at companies Jerry speaking at X, 35 00:01:52.315 --> 00:01:55.535 you have a success and the success comes from an 36 00:01:55.535 --> 00:01:56.575 innovative product. 37 00:01:57.755 --> 00:01:58.935 Ts is an innovative product. 38 00:01:59.075 --> 00:02:03.575 You create a monopole because you are far beyond everybody 39 00:02:03.965 --> 00:02:06.815 because you are protected your business with a portfolio 40 00:02:06.815 --> 00:02:09.335 of patents, protection and so on and so forth. 41 00:02:09.715 --> 00:02:11.255 So this is the beginning of the story 42 00:02:11.315 --> 00:02:14.375 and then you keep on with the pursuit of this story 43 00:02:15.035 --> 00:02:16.695 and it's about improving the product. 44 00:02:17.045 --> 00:02:18.695 It's about maximizing sales. 45 00:02:19.355 --> 00:02:21.215 So who is in charge of the success? 46 00:02:21.445 --> 00:02:23.935 Next step, marketing and sales. 47 00:02:24.395 --> 00:02:27.215 So the marketing and sales team is going to be the source 48 00:02:27.215 --> 00:02:29.375 of success is why this guys going 49 00:02:29.375 --> 00:02:30.895 to be promoted in the company 50 00:02:31.275 --> 00:02:32.615 and they're going to be the senior 51 00:02:32.615 --> 00:02:33.655 management of the company. 52 00:02:33.795 --> 00:02:37.215 The company is led by the sales and marketing team. 53 00:02:37.915 --> 00:02:39.135 Now what about products? 54 00:02:39.165 --> 00:02:42.215 Product is outside their concerns 55 00:02:42.675 --> 00:02:45.215 and for a number of reasons, including time horizon 56 00:02:45.965 --> 00:02:47.215 when you're in charge of sales 57 00:02:47.235 --> 00:02:50.655 and marketing, your objective is next week, next month, 58 00:02:50.765 --> 00:02:53.335 next quarter, next year when you're in charge 59 00:02:53.335 --> 00:02:56.375 of product development, your time horizon about years, 60 00:02:57.225 --> 00:03:00.245 maybe 10 years if it is a disruptive innovation. 61 00:03:00.785 --> 00:03:03.565 So you understand that the product teams are 62 00:03:04.125 --> 00:03:05.645 absolutely not listened to 63 00:03:06.225 --> 00:03:07.685 by the sales and marketing people. 64 00:03:07.685 --> 00:03:12.245 It's a very traditional dilemma between exploration product 65 00:03:12.665 --> 00:03:15.445 and exploitation, sales and marketing. 66 00:03:16.785 --> 00:03:18.845 At the end of the day, if you look at the story 67 00:03:19.025 --> 00:03:21.245 of Xerox at the beginning of the story, 68 00:03:21.405 --> 00:03:25.125 a gentleman whose name is Chester Carson, not invented, 69 00:03:25.385 --> 00:03:29.285 but one of the very first pioneers of electro photography, 70 00:03:29.655 --> 00:03:33.605 which is going to replace a chemical photography whose icon 71 00:03:33.665 --> 00:03:38.205 is obviously Eastman Co Eastman Coac is producing Copers, 72 00:03:38.345 --> 00:03:42.085 but they are all working operating based on the technology 73 00:03:42.085 --> 00:03:44.445 which is about chemical photography. 74 00:03:45.355 --> 00:03:47.325 Then you can copy a little bit, 75 00:03:47.585 --> 00:03:51.045 you get something which is not exactly dry, you have 76 00:03:51.045 --> 00:03:52.045 to dry it, 77 00:03:52.585 --> 00:03:55.405 and what zero is about, it's about 78 00:03:55.985 --> 00:03:59.765 dry copying concept is going to first propose the patterns 79 00:03:59.765 --> 00:04:01.165 and the innovation to the company, 80 00:04:01.215 --> 00:04:02.485 which is living next door. 81 00:04:03.095 --> 00:04:04.405 Whose name is Isman? 82 00:04:04.785 --> 00:04:08.645 AK Rochester, New York because he lived there, right? 83 00:04:08.745 --> 00:04:12.845 And Kodak is going to refuse, reject this innovation. Why? 84 00:04:13.315 --> 00:04:17.125 Because all the researchers are in organic chemicals. 85 00:04:17.125 --> 00:04:20.645 They have been trained to do so they know this technology 86 00:04:20.745 --> 00:04:22.165 and there's a guy who is saying, 87 00:04:22.355 --> 00:04:23.885 your technology is outdated. 88 00:04:24.125 --> 00:04:25.365 I have something which is brand new 89 00:04:25.585 --> 00:04:28.085 and which is going to completely change your business. 90 00:04:28.235 --> 00:04:31.405 They're rejected. It's a very famous syndrome 91 00:04:32.265 --> 00:04:33.645 not invented here. 92 00:04:34.435 --> 00:04:38.085 International business machines is also going 93 00:04:38.105 --> 00:04:42.725 to reject innovation and ironically later on Kodak 94 00:04:42.905 --> 00:04:46.285 and IBM are going to produce photocopiers, 95 00:04:46.465 --> 00:04:48.285 but they both miss the opportunity 96 00:04:48.705 --> 00:04:51.125 of taking the patent in the first years. 97 00:04:51.505 --> 00:04:54.205 Now, who accepted this technology, A small company 98 00:04:54.775 --> 00:04:58.045 based in Rochester, New York whose name is Helo Company. 99 00:04:58.635 --> 00:05:01.565 They are in the photographic equipment and so on, so forth. 100 00:05:02.145 --> 00:05:04.805 And so the CEO is going to say this is a great invention. 101 00:05:05.665 --> 00:05:09.525 So he bought the patent, he started producing equipment. 102 00:05:09.985 --> 00:05:14.765 Cop initially transformed the name from Halo to Halo, Xerox 103 00:05:15.105 --> 00:05:18.925 and it became Xerox first base in Rochester, New York. 104 00:05:18.925 --> 00:05:21.725 Then moved to Stanford, Connecticut. 105 00:05:21.905 --> 00:05:23.805 Now after the innovation, you have the product. 106 00:05:24.145 --> 00:05:28.845 The first product is named Xerox nine 14. 107 00:05:29.225 --> 00:05:32.565 It was produced and sold in 1959 108 00:05:33.385 --> 00:05:34.765 and if you see on the picture, 109 00:05:35.355 --> 00:05:38.685 it's a very big stuff whose design is a 110 00:05:38.685 --> 00:05:39.845 little bit approximate. 111 00:05:40.195 --> 00:05:41.205 What are the features 112 00:05:41.265 --> 00:05:44.245 of this first photocopier first is very big. 113 00:05:45.075 --> 00:05:49.965 It's heavy more than 300 kilograms, so it's not the kind 114 00:05:49.965 --> 00:05:51.205 of thing you can move easily 115 00:05:51.665 --> 00:05:55.485 and it's very expensive, $400,000 116 00:05:55.985 --> 00:05:57.805 as people private business 117 00:05:58.105 --> 00:06:00.525 and companies cannot pay this amount upfront. 118 00:06:01.235 --> 00:06:04.005 It's going to be leased by Xerox, 119 00:06:04.305 --> 00:06:07.125 so their rental business is going to start on lease. 120 00:06:07.255 --> 00:06:11.645 Activ is going to be a very significant profit generator in 121 00:06:11.645 --> 00:06:13.805 the company at the very beginning. 122 00:06:14.115 --> 00:06:18.645 Technically the copier produces seven copies per minute, 123 00:06:18.935 --> 00:06:22.445 which is absolutely not big, but it's fast growing 124 00:06:22.545 --> 00:06:25.245 and it's going to be dozens per minute quite quickly. 125 00:06:26.305 --> 00:06:30.325 Now the competitors are the classic traditional copiers, 126 00:06:30.555 --> 00:06:35.285 east man Coda, which are much less expensive, 300 to $400, 127 00:06:35.665 --> 00:06:38.725 but they're producing one to two copies per minute 128 00:06:39.225 --> 00:06:41.765 and then you have to wait for the moment, it's dry 129 00:06:41.765 --> 00:06:42.845 before you can use it. 130 00:06:43.265 --> 00:06:46.245 Now the technology is not completely mature as far 131 00:06:46.245 --> 00:06:48.085 as the nine 14 is concerned 132 00:06:48.085 --> 00:06:51.365 because when there's a paper jam inside the equipment, 133 00:06:51.515 --> 00:06:53.885 sometimes the equipment catches fire. 134 00:06:54.515 --> 00:06:56.725 This is why you need to put a cavity 135 00:06:56.785 --> 00:06:58.685 for the fire extinguisher. 136 00:06:59.315 --> 00:07:02.325 There's a paper jam, it catches fire and 137 00:07:02.545 --> 00:07:05.525 and you use the extinguisher a little bit later on. 138 00:07:05.755 --> 00:07:08.325 This feature disappeared from the functioning 139 00:07:08.425 --> 00:07:11.285 of the equipment and the commercial point of view. 140 00:07:11.315 --> 00:07:12.565 It's an outstanding success. 141 00:07:12.625 --> 00:07:15.405 The first machine is sold in 1959. 142 00:07:15.945 --> 00:07:18.965 In 1961, the revenues generated 143 00:07:19.025 --> 00:07:23.045 by sales are about $60 million in 65, 144 00:07:23.435 --> 00:07:25.485 more than $500 million 145 00:07:25.785 --> 00:07:26.885 and the company is going 146 00:07:26.885 --> 00:07:29.525 to start going at the speed of flight. 147 00:07:30.235 --> 00:07:34.165 It's going to adv or it become the Fifteenth's largest 148 00:07:34.315 --> 00:07:36.245 company in the United States. 149 00:07:36.675 --> 00:07:39.205 Outstanding success as a consequence 150 00:07:39.225 --> 00:07:40.805 of being in the monopoly, 151 00:07:41.305 --> 00:07:43.925 the company is generating considerable margins 152 00:07:44.625 --> 00:07:47.605 and then the question is, where do you invest your margin? 153 00:07:48.105 --> 00:07:49.405 Or you can pay dividend, 154 00:07:49.505 --> 00:07:51.165 of course you can buy back your shares. 155 00:07:51.165 --> 00:07:55.885 Of course you can reinvent the corporation product renewal 156 00:07:56.505 --> 00:07:58.565 and this is what they're going to try to do. 157 00:08:00.145 --> 00:08:02.325 In 1969, the regime 158 00:08:02.785 --> 00:08:06.285 and in 1970 they opened the pillow. 159 00:08:06.355 --> 00:08:10.285 Palo Alto Research Centers a very famous park. 160 00:08:10.555 --> 00:08:13.165 It's based in Palo Alto in California 161 00:08:14.145 --> 00:08:17.045 and it's going to welcome a few researchers. 162 00:08:17.135 --> 00:08:20.885 First a few dozens, then 100, 150. 163 00:08:21.075 --> 00:08:24.125 It's never going to be a army of researchers. 164 00:08:24.305 --> 00:08:27.965 Not too many people maximum 400 researchers, 165 00:08:28.465 --> 00:08:30.365 but these are geniuses. 166 00:08:30.745 --> 00:08:34.565 You put a few geniuses in the world, you give them freedom. 167 00:08:34.705 --> 00:08:38.205 You say, Hey guys, develop the office of the future. 168 00:08:38.635 --> 00:08:41.285 They are going to be extremely successful in a technology 169 00:08:41.285 --> 00:08:44.045 called point of view and they're going to produce dozens of 170 00:08:44.705 --> 00:08:48.365 Brexit innovations, which are still extremely valid 171 00:08:48.705 --> 00:08:50.645 and used in our daily life today. 172 00:08:51.175 --> 00:08:55.245 Among the inventions Alto, the first personal computer 173 00:08:55.855 --> 00:08:59.885 which was developed in 1973, you remember 174 00:08:59.885 --> 00:09:03.085 that Apple one was produced by Steve Jobs 175 00:09:03.305 --> 00:09:07.325 and Steve Nia in 76, 77, 176 00:09:08.275 --> 00:09:10.925 they developed a graphical user interface, 177 00:09:11.595 --> 00:09:13.205 mind blowing innovation. 178 00:09:13.955 --> 00:09:16.125 Another innovation is with a wig. 179 00:09:16.155 --> 00:09:17.925 What you see is what you get, okay? 180 00:09:17.925 --> 00:09:20.685 You want to print something you see on the screen 181 00:09:20.985 --> 00:09:22.525 and what you see on the screen is going 182 00:09:22.525 --> 00:09:26.285 to be reproduced on the paper, which is definitely a plus. 183 00:09:27.105 --> 00:09:29.685 Now they notice that the alto computers were not 184 00:09:29.715 --> 00:09:30.765 that powerful. 185 00:09:31.225 --> 00:09:34.765 In order to transform that into a more powerful pc, 186 00:09:35.265 --> 00:09:38.245 you link them, you link them with a network 187 00:09:38.625 --> 00:09:40.605 and the network going to be ethernet 188 00:09:40.625 --> 00:09:42.845 and they are going to develop at the part the seven 189 00:09:42.845 --> 00:09:44.405 layers of ethernet. 190 00:09:45.185 --> 00:09:46.205 Now you want to print 191 00:09:46.265 --> 00:09:47.965 but you don't need a printer per machine. 192 00:09:47.965 --> 00:09:50.885 You want to share the printer. It's going to be on internet. 193 00:09:51.505 --> 00:09:53.405 And in addition to that, instead 194 00:09:53.405 --> 00:09:56.885 of these all very noisy printers, you replace at 195 00:09:56.905 --> 00:09:59.805 by something which is extremely powerful, high quality 196 00:10:00.335 --> 00:10:02.445 laser printer, which uses more 197 00:10:02.445 --> 00:10:04.605 or less the same technology as a photocopy 198 00:10:05.465 --> 00:10:09.125 and also you want to share messages and so on and so forth. 199 00:10:09.345 --> 00:10:10.645 You develop a technology 200 00:10:10.945 --> 00:10:13.605 and this technology is going to become Internet 201 00:10:14.555 --> 00:10:18.525 park did not develop internet park developed innovation 202 00:10:18.525 --> 00:10:22.085 science to which basically 50% of what was needed 203 00:10:22.105 --> 00:10:24.565 to develop internet was created. 204 00:10:24.905 --> 00:10:27.965 So there were major contributor, et cetera, 205 00:10:28.305 --> 00:10:29.325 et cetera, et cetera. 206 00:10:29.505 --> 00:10:32.765 Now the reputation of the park is absolutely outstanding, 207 00:10:33.025 --> 00:10:34.685 so they are going to receive some visits. 208 00:10:35.415 --> 00:10:38.725 Apple is created in 76, 77. 209 00:10:38.975 --> 00:10:42.125 Steve Jobs visit the park in 79 210 00:10:42.945 --> 00:10:45.845 and in the interview I already imagined he's going 211 00:10:45.845 --> 00:10:48.645 to mention the fact that he's been fascinated 212 00:10:48.785 --> 00:10:51.285 by the graphical user interface. 213 00:10:51.865 --> 00:10:53.445 Of course he's going to say there were plenty 214 00:10:53.465 --> 00:10:55.005 of other things to do the shopping, 215 00:10:55.345 --> 00:10:57.565 but that was absolutely mind blowing. 216 00:10:57.915 --> 00:11:00.285 He's going to sign a deal with Xox, he's going 217 00:11:00.285 --> 00:11:03.765 to pay his Apple shares value. 218 00:11:03.895 --> 00:11:07.805 About $1 million at that time went up later on. 219 00:11:08.435 --> 00:11:10.125 It's going to pay the ability 220 00:11:10.385 --> 00:11:13.685 and the right to do a kind of shopping inside the park 221 00:11:14.145 --> 00:11:15.605 and he's going to do the shopping 222 00:11:16.305 --> 00:11:18.885 and with what he is going to buy, he's going to be able 223 00:11:18.885 --> 00:11:22.605 to develop Liza Macintosh and so on so forth. 224 00:11:23.435 --> 00:11:24.805 Sometimes people say 225 00:11:24.805 --> 00:11:27.205 that the mouse was invented at the park. 226 00:11:27.345 --> 00:11:29.685 Now it was very much developed at the park, 227 00:11:29.745 --> 00:11:32.125 but initially it comes from the Stanford 228 00:11:32.765 --> 00:11:33.805 research institutes. 229 00:11:33.985 --> 00:11:35.325 The neighbor next door 230 00:11:36.095 --> 00:11:39.645 after Steve Jobs, bill Gates is also going to visit the park 231 00:11:40.465 --> 00:11:43.525 and Bill Gates said, well, I took plenty of ideas 232 00:11:43.585 --> 00:11:47.965 to develop windows from what I've seen in the park. 233 00:11:48.965 --> 00:11:52.445 Interestingly, later on, Steve Jobs accused Bill Gates of 234 00:11:53.085 --> 00:11:54.685 stealing what was in the park, 235 00:11:55.345 --> 00:11:57.205 but there was a very interesting 236 00:11:57.385 --> 00:12:00.045 and humoristic answer from Bill Gates. 237 00:12:00.555 --> 00:12:01.925 Well, Steve, you know what? 238 00:12:02.065 --> 00:12:03.565 We were both the neighbor 239 00:12:03.865 --> 00:12:06.685 of a rich Kaepernick's name was the rocks. 240 00:12:07.235 --> 00:12:11.365 When I broke into the house to steal the tv, I understood 241 00:12:11.365 --> 00:12:13.645 that you had already stolen the tv, 242 00:12:13.895 --> 00:12:15.605 which is exactly what happened. 243 00:12:15.605 --> 00:12:17.485 Steve Jobs did the shopping first 244 00:12:17.985 --> 00:12:19.005 and what was left, 245 00:12:19.515 --> 00:12:22.365 basically Bill Gates did the additional shopping. 246 00:12:24.385 --> 00:12:27.845 Now the reasons for the fear what has been named 247 00:12:27.865 --> 00:12:30.685 by academics, the competency trap, 248 00:12:30.905 --> 00:12:35.045 of course it's about exploitation versus exploration. 249 00:12:35.665 --> 00:12:37.885 One competency is very much about sales 250 00:12:37.885 --> 00:12:40.525 and market can develop on productivity, et cetera. 251 00:12:40.785 --> 00:12:42.685 The other one is about inventing. 252 00:12:43.015 --> 00:12:46.285 There is a trap, you move into one, you lose the other. 253 00:12:47.145 --> 00:12:49.565 But there are a few additional points which I would like 254 00:12:49.565 --> 00:12:52.685 to point out the length of the sales cycle. 255 00:12:53.515 --> 00:12:55.565 I've been privileged to work at Xerox, 256 00:12:55.625 --> 00:12:59.045 the finance department at that time in the eighties, 257 00:12:59.065 --> 00:13:01.805 and I could observe the fact that it was extremely difficult 258 00:13:01.825 --> 00:13:06.485 for the French subsidiary to hire good salespeople 259 00:13:07.195 --> 00:13:09.125 because a good salespeople, 260 00:13:09.275 --> 00:13:12.285 they were all working in a co business. 261 00:13:12.705 --> 00:13:17.245 In a co business, a sales cycle is a few days, a few weeks 262 00:13:17.865 --> 00:13:19.125 for individuals. 263 00:13:19.265 --> 00:13:21.725 For large companies it's a few months, 264 00:13:22.265 --> 00:13:25.685 but you know what, you immediately get your bonus on the 265 00:13:25.765 --> 00:13:27.845 price of the copay you have sold to the company. 266 00:13:29.065 --> 00:13:31.125 If you want to sell ethernet 267 00:13:31.265 --> 00:13:34.645 and the associated equipments, it takes yours. 268 00:13:35.075 --> 00:13:36.965 It's not the same time horizon 269 00:13:37.465 --> 00:13:40.845 and which kind of bonus do you get initially a percentage 270 00:13:40.905 --> 00:13:44.045 of the ethernet cable you have installed in the building, 271 00:13:44.535 --> 00:13:46.045 which is absolutely peanut. 272 00:13:46.505 --> 00:13:50.645 Of course, later on you are going to sell laser printers 273 00:13:50.705 --> 00:13:52.925 and so on and so forth, and the policy is going 274 00:13:52.925 --> 00:13:54.165 to be very much postponed, 275 00:13:54.175 --> 00:13:57.125 which is absolutely not in the mind of the salespeople. 276 00:13:57.425 --> 00:13:59.765 So it was impossible to hire good 277 00:14:00.275 --> 00:14:05.085 salespeople at Xerox in France, everywhere else I guess. 278 00:14:05.865 --> 00:14:09.885 And also there was an interesting cultural gap between sales 279 00:14:09.945 --> 00:14:11.165 and marketing r 280 00:14:11.165 --> 00:14:14.005 and d of course time Horizon and so on and so forth. 281 00:14:14.385 --> 00:14:15.885 But you know what? Sales 282 00:14:15.905 --> 00:14:19.125 and marketing head office, Stanford, Connecticut, east Coast 283 00:14:20.075 --> 00:14:22.365 Park, Palo Alto, west coast, 284 00:14:22.865 --> 00:14:25.285 and these guys, it just could not talk to each other. 285 00:14:26.405 --> 00:14:29.525 I had the privilege to meet some people working at the park 286 00:14:29.985 --> 00:14:31.365 and they used to tell me, you know, 287 00:14:31.365 --> 00:14:33.725 it's very funny when we observe those sales 288 00:14:33.745 --> 00:14:35.605 and marketing people who are dressed like sales 289 00:14:35.605 --> 00:14:39.205 and marketing people coming from east coast to to visit us, 290 00:14:39.865 --> 00:14:41.805 we are dressed like researchers. 291 00:14:42.425 --> 00:14:44.485 And so at the end of the day, uh, 292 00:14:44.625 --> 00:14:48.245 you see people in the research department in the park 293 00:14:48.475 --> 00:14:51.245 with a guitar on the shoulder, uh, barefoot 294 00:14:51.365 --> 00:14:53.645 because you know shoes, it's not that comfortable. 295 00:14:54.065 --> 00:14:57.205 You are allowed to bring your personal pets in the office. 296 00:14:57.705 --> 00:15:00.125 So you can bring your cat, you can bring your dog, 297 00:15:00.425 --> 00:15:03.205 and for a researcher, the pet was a python. 298 00:15:03.745 --> 00:15:05.765 So you want to take a coffee with your colleagues, 299 00:15:05.765 --> 00:15:07.485 you leave your python on the chair, 300 00:15:08.065 --> 00:15:11.165 no problem about security, nobody's going 301 00:15:11.165 --> 00:15:12.245 to get into your office. 302 00:15:12.705 --> 00:15:14.925 You understand the cultural gap, which was 303 00:15:15.485 --> 00:15:16.565 absolutely tremendous. 304 00:15:16.975 --> 00:15:19.285 These people could not talk to each other. 305 00:15:19.665 --> 00:15:21.525 So there were visits from outside, 306 00:15:22.265 --> 00:15:24.685 but there were also missed opportunities from inside. 307 00:15:25.825 --> 00:15:27.085 Uh, one day a couple 308 00:15:27.145 --> 00:15:30.165 of researchers saying they had developed something which was 309 00:15:30.165 --> 00:15:32.205 quite interesting about pictures, 310 00:15:32.295 --> 00:15:34.205 about softwares and so on and so forth. 311 00:15:34.475 --> 00:15:36.565 They concluded that they wanted to create a startup. 312 00:15:37.385 --> 00:15:40.005 So the company said, okay, you can buy the technology. 313 00:15:40.435 --> 00:15:43.885 They bought the intellectual property for $2,000 314 00:15:43.945 --> 00:15:47.365 and they created a company whose name was Adobe. 315 00:15:48.075 --> 00:15:49.685 They developed Photoshop. 316 00:15:50.375 --> 00:15:55.165 Adobe is worse on the capital market there, $190 billion. 317 00:15:56.225 --> 00:15:57.805 The market capitalization 318 00:15:57.825 --> 00:16:01.925 of Xerox is less than a billion dollars end of the story. 319 00:16:02.235 --> 00:16:05.325 Unfortunately, April, 2023, 320 00:16:05.975 --> 00:16:09.725 Xerox eventually donates the Palo Alto research 321 00:16:09.725 --> 00:16:14.005 after what is left from to the Stanford Research Institute, 322 00:16:14.425 --> 00:16:15.685 the neighbor next door. 323 00:16:15.905 --> 00:16:17.005 Now, what is the evolution 324 00:16:17.005 --> 00:16:19.245 of the market valuation of the company? 325 00:16:19.785 --> 00:16:21.765 If you look at the long term, you understand 326 00:16:21.765 --> 00:16:25.045 that the company had a value which was quite stable 327 00:16:25.385 --> 00:16:27.365 and then it started skyrocketing. 328 00:16:28.245 --> 00:16:30.805 I mean more or less because of the success of the company 329 00:16:31.185 --> 00:16:34.285 and also because of the internet bubble at the maximum, 330 00:16:34.945 --> 00:16:39.885 the sales price got to the point of $166 per share. 331 00:16:40.495 --> 00:16:45.205 Today when I record this movie, it's $6.60 per share. 332 00:16:45.665 --> 00:16:46.725 The value of equity, 333 00:16:46.785 --> 00:16:50.405 the market capitalization is less than 1,000,000,800 334 00:16:50.505 --> 00:16:51.805 and $30 million. 335 00:16:52.145 --> 00:16:54.965 The enterprise value, which is market capital debt, 336 00:16:55.465 --> 00:16:59.685 is a bit more than $4 billion, which basically means 337 00:16:59.685 --> 00:17:02.525 that in the company there's a lot of debt, 338 00:17:03.255 --> 00:17:05.965 which is a problem we'll discuss a little bit later on. 339 00:17:06.155 --> 00:17:09.365 What about the stock market credibility price 340 00:17:09.385 --> 00:17:12.965 to book market value for equity divided by book equity 341 00:17:13.515 --> 00:17:16.325 zero point 77, which means that for each 342 00:17:16.325 --> 00:17:19.805 and every dollar invested by shareholders in the equity, 343 00:17:20.225 --> 00:17:22.085 the value is 77 cents. 344 00:17:23.185 --> 00:17:25.365 It is about value, distraction, and value. 345 00:17:25.645 --> 00:17:28.085 Distraction is absolutely consistent with the fact 346 00:17:28.085 --> 00:17:30.805 that the company is not performing at all. 347 00:17:31.065 --> 00:17:32.605 If you take a shorter perspective, 348 00:17:32.665 --> 00:17:33.845 and if you look at what happened 349 00:17:33.845 --> 00:17:37.645 to the stock price the last year, the NASDAQ went up 350 00:17:37.905 --> 00:17:39.565 by 17% 351 00:17:40.185 --> 00:17:44.805 and stock price of Xerox went down by 64%. 352 00:17:45.105 --> 00:17:47.725 Now let's have a look at the financial developments over the 353 00:17:47.725 --> 00:17:51.765 last years, 20 18, 20, 24, 7 years. 354 00:17:52.095 --> 00:17:56.085 First, sales are declining, declining a little bit, 355 00:17:56.085 --> 00:17:58.925 declining a little bit more because the sell of business 356 00:17:59.265 --> 00:18:01.765 and then stabilizing and then declining. 357 00:18:02.545 --> 00:18:05.525 So basically the sales figure, which was about 10 billion, 358 00:18:06.185 --> 00:18:08.205 is now about 6 billion. 359 00:18:08.545 --> 00:18:10.885 So no good news as far as sales are concerned. 360 00:18:11.715 --> 00:18:13.445 What about the revenues by segment? 361 00:18:13.705 --> 00:18:16.525 The company is in fact involving three segments. 362 00:18:16.945 --> 00:18:19.085 You sell services, you sell product, 363 00:18:19.585 --> 00:18:21.285 and there's some sales financing. 364 00:18:21.345 --> 00:18:22.925 You remember the leasing activity. 365 00:18:23.585 --> 00:18:26.925 The leasing activity is absolutely marginal. 366 00:18:26.975 --> 00:18:29.725 Today, what is dominant is services, 367 00:18:29.975 --> 00:18:33.045 which is reasonably stable as a business 368 00:18:33.825 --> 00:18:37.285 and equipment, which is stable in terms of uh, 369 00:18:37.855 --> 00:18:39.365 percentage to revenues. 370 00:18:39.625 --> 00:18:40.805 But at the end of the day, you have 371 00:18:40.805 --> 00:18:43.565 to start the sales process again, each 372 00:18:43.585 --> 00:18:46.245 and every year service, it's more about contract, 373 00:18:46.355 --> 00:18:47.685 it's more about visibility. 374 00:18:49.545 --> 00:18:53.005 The problem is the gross margin. The gross margin is down. 375 00:18:53.065 --> 00:18:56.325 The gross margin is sales, minus cost of sales 376 00:18:56.745 --> 00:18:59.405 as a percentage to revenues, and it's down. 377 00:18:59.435 --> 00:19:03.165 It's down for the three segments, not at the same time. 378 00:19:03.435 --> 00:19:05.885 Financing went down quite recently 379 00:19:05.885 --> 00:19:08.485 because probably of the evolution of the interest rates, 380 00:19:08.665 --> 00:19:11.285 but basically it's declining year after year 381 00:19:11.305 --> 00:19:14.445 and the company lost about 10% in gross margin. 382 00:19:14.905 --> 00:19:17.365 Now, if you observe all the cost, you have the cost 383 00:19:17.365 --> 00:19:19.645 of sales, which is up by 10%. 384 00:19:19.935 --> 00:19:22.205 Gross margin is down by 10%. 385 00:19:23.245 --> 00:19:24.765 SGNA sales general 386 00:19:24.945 --> 00:19:28.885 and have been quite stable throughout the years and research 387 00:19:28.905 --> 00:19:31.245 and development, which is not a cost, it's an investment. 388 00:19:31.515 --> 00:19:33.245 Well, it's not very much an investment. 389 00:19:33.715 --> 00:19:36.125 It's quite low, unstable, low. 390 00:19:36.345 --> 00:19:38.845 As a consequence, what happens to the return on sales? 391 00:19:38.915 --> 00:19:43.005 It's about EBIT divided by revenues. It's down. 392 00:19:43.425 --> 00:19:46.725 You take the current ebit when you exclude all the 393 00:19:46.725 --> 00:19:49.405 exceptional items or you take the published ebit. 394 00:19:49.705 --> 00:19:54.005 Return on sales is down year after year indefinitely. 395 00:19:54.055 --> 00:19:56.965 There is a trend. Return on sales can be calculated 396 00:19:57.075 --> 00:20:00.045 with the ebit, which takes into account precision 397 00:20:00.045 --> 00:20:01.045 and monetization. 398 00:20:01.465 --> 00:20:03.805 The question is, if you exclude the precision 399 00:20:03.805 --> 00:20:05.285 or monetization, what happens? 400 00:20:05.505 --> 00:20:07.605 The return on sales, now it's a bid DA. 401 00:20:07.985 --> 00:20:11.565 If you take a bid, DA divided by revenues, it's declining. 402 00:20:11.915 --> 00:20:15.005 It's declining from 14%, 8%. 403 00:20:15.425 --> 00:20:19.685 So in seven years a company lost six points, 404 00:20:20.105 --> 00:20:23.805 6% of EBDA as a percentage to revenues. 405 00:20:24.375 --> 00:20:27.365 CapEx is not a very significant figure in the company 406 00:20:27.825 --> 00:20:30.125 and if you take the cash conversion cycle, 407 00:20:30.195 --> 00:20:32.725 basically the working capital requirement in days 408 00:20:32.725 --> 00:20:36.045 of revenues, it's quite stable 409 00:20:36.385 --> 00:20:39.045 and it's about one to two months of revenues. 410 00:20:39.545 --> 00:20:41.405 Um, nothing special about that. 411 00:20:41.705 --> 00:20:44.445 Now, the assets turnover is going to be a little bit up 412 00:20:44.445 --> 00:20:47.685 during the last years, but the return on capital employee is 413 00:20:47.685 --> 00:20:48.725 a return on sales time. 414 00:20:48.725 --> 00:20:49.765 The assets turnover 415 00:20:50.545 --> 00:20:53.525 and definitely the trend of the rose is a trend 416 00:20:53.525 --> 00:20:54.925 of the return on sales. 417 00:20:55.825 --> 00:20:58.165 And so the return capital is going to go down. 418 00:20:58.925 --> 00:21:01.765 A few years ago it was about 10%. 419 00:21:02.255 --> 00:21:06.365 Today it is about 5%, a bit less than 5% 420 00:21:06.945 --> 00:21:08.845 at 10% you hardly pay the wage. 421 00:21:08.845 --> 00:21:11.805 Average cost of capital economic profit is at 422 00:21:11.805 --> 00:21:13.485 breakeven at 5%. 423 00:21:13.505 --> 00:21:17.445 You don't pay the work. So the company is not performing. 424 00:21:17.465 --> 00:21:19.285 The performance of the company is negative, 425 00:21:19.285 --> 00:21:21.005 it's economic profit is negative, 426 00:21:21.385 --> 00:21:23.125 the percentage and dollars. 427 00:21:23.435 --> 00:21:26.645 When you observe a company in way some sales financing 428 00:21:27.005 --> 00:21:29.805 activity, it disturbs a little bit the analysis 429 00:21:29.955 --> 00:21:33.605 because the sales financing productivity is a bit different 430 00:21:33.605 --> 00:21:35.525 from industrial service activity. 431 00:21:35.625 --> 00:21:37.485 So you can calculate a rose, a core, 432 00:21:37.985 --> 00:21:41.445 and a rose a total in the total you have the core business, 433 00:21:41.445 --> 00:21:45.485 which is about selling goods and selling services, 434 00:21:45.905 --> 00:21:49.085 and the rose total incorporates the sales financ activity. 435 00:21:49.475 --> 00:21:54.005 Same trend. So rose core is down also 436 00:21:54.885 --> 00:21:57.325 probably a little bit less, but it's very marginal. 437 00:21:57.505 --> 00:21:59.165 You know that there is a strong correlation 438 00:21:59.165 --> 00:22:02.565 between the performance rose, rose against walk 439 00:22:03.305 --> 00:22:05.645 and the value creation market to book. 440 00:22:05.725 --> 00:22:07.725 I already mentioned that the price to book 441 00:22:07.725 --> 00:22:10.085 of the company was 0.77. 442 00:22:10.985 --> 00:22:14.005 Now, definitely we calculate the market to book, not 443 00:22:14.035 --> 00:22:16.125 with only the market capitalization, 444 00:22:16.185 --> 00:22:19.605 but introducing also the net financial debt in order 445 00:22:19.785 --> 00:22:21.365 to calculate the enterprise value. 446 00:22:21.905 --> 00:22:24.325 So market to book is enterprise value, the value 447 00:22:24.325 --> 00:22:26.245 of your business operations divided by 448 00:22:26.305 --> 00:22:28.045 how much you invested in your business 449 00:22:28.045 --> 00:22:29.605 operations capital employed. 450 00:22:30.315 --> 00:22:32.245 When the market to book is greater than one, 451 00:22:32.245 --> 00:22:34.085 it's about value creation less than one. 452 00:22:34.085 --> 00:22:35.365 It's about value. Distraction 453 00:22:35.905 --> 00:22:40.325 as a predominantly debt is playing a big role in the balance 454 00:22:40.415 --> 00:22:43.205 sheet in the market to book is less than one, 455 00:22:43.225 --> 00:22:46.445 but closer to one that what could be suggested by a price 456 00:22:46.445 --> 00:22:49.085 to book off about 0.77, 457 00:22:49.705 --> 00:22:52.245 but definitely the company is destroying values. 458 00:22:52.255 --> 00:22:55.765 There is a consistency between the rose, which is terrible 459 00:22:56.225 --> 00:22:58.805 and the market to book, which is less than one. 460 00:23:01.465 --> 00:23:04.645 You can also compliment this analysis confronting the market 461 00:23:04.705 --> 00:23:07.085 to book, assuming that there is no growth 462 00:23:07.305 --> 00:23:09.765 and the market to book, which is actually observed. 463 00:23:09.885 --> 00:23:13.485 A capital market market to book no growth is calculated. 464 00:23:13.485 --> 00:23:16.005 Dividing the R attacks by the whack, 465 00:23:16.505 --> 00:23:18.525 you can calculate the rose total, 466 00:23:18.945 --> 00:23:21.645 you can take the rose core At the end 467 00:23:21.645 --> 00:23:22.805 of the day, what do you observe? 468 00:23:22.865 --> 00:23:25.205 You observe that there is a consistency 469 00:23:25.205 --> 00:23:26.605 between these three figures. 470 00:23:27.115 --> 00:23:29.565 There's absolutely no recovery, 471 00:23:30.195 --> 00:23:34.005 potential recovery in the actual market to book as opposed 472 00:23:34.005 --> 00:23:35.565 to the market to book no growth. 473 00:23:36.265 --> 00:23:39.325 So this company is poorly performing 474 00:23:39.865 --> 00:23:44.085 and the market has absolutely no hope about producing a 475 00:23:44.325 --> 00:23:46.045 recovery out of the current situation. 476 00:23:46.305 --> 00:23:47.765 The only figure, which is I, 477 00:23:47.785 --> 00:23:51.085 but that's not a good news, is the leverage is the gearing, 478 00:23:51.105 --> 00:23:52.965 is the financial structure of the campaign. 479 00:23:53.825 --> 00:23:57.605 You remember that the cash conversion cycle is quite stable. 480 00:23:57.865 --> 00:23:59.245 The CapEx is not that big, 481 00:23:59.425 --> 00:24:02.405 but the company made a few acquisitions in the last year in 482 00:24:02.405 --> 00:24:06.045 order to try to find a a way to recover from, 483 00:24:06.825 --> 00:24:08.765 but basically it's paid in cash. 484 00:24:08.765 --> 00:24:12.845 Nobody wants to receive Xerox shares if you observe the 485 00:24:12.845 --> 00:24:13.845 version of the stock price. 486 00:24:14.265 --> 00:24:17.405 So at the end of the day, what happened, the debt to a bid 487 00:24:17.405 --> 00:24:20.285 that went up, the leverage went up to today, 488 00:24:20.285 --> 00:24:23.325 it represents six years of ebitda. 489 00:24:23.945 --> 00:24:26.125 Now you have to be very cautious about that 490 00:24:26.125 --> 00:24:29.645 because in the net debt there is some sales financing debt, 491 00:24:29.645 --> 00:24:31.965 but if you exclude a sales financing debt, 492 00:24:32.265 --> 00:24:34.565 if you exclude the EBITDA generated 493 00:24:34.625 --> 00:24:37.685 by the financing activity, you still get a net debt 494 00:24:37.685 --> 00:24:41.245 to ebitda, which is two point something about 2.3, 495 00:24:41.655 --> 00:24:42.885 which is quite high 496 00:24:43.265 --> 00:24:46.845 for a company whose prospects are not outstanding declining, 497 00:24:46.895 --> 00:24:48.765 gross declining performance. 498 00:24:48.995 --> 00:24:52.045 Wrap up of the financial analysis, revenues are down, 499 00:24:52.945 --> 00:24:55.005 EBITDA is down in percentage, 500 00:24:55.225 --> 00:24:58.365 and of course in DRIs the rose is down, 501 00:24:59.105 --> 00:25:01.165 the financial leverage is up 502 00:25:01.545 --> 00:25:04.205 and the stock market credibility, it's quite poor. 503 00:25:04.785 --> 00:25:06.765 So this capital is definitely in difficulty 504 00:25:07.305 --> 00:25:09.965 and it's very much weakened if you compare 505 00:25:10.115 --> 00:25:11.325 with the glorious times 506 00:25:11.345 --> 00:25:13.725 of the company when the return capital, 507 00:25:14.025 --> 00:25:16.685 the gross margin were absolutely outstanding. 508 00:25:16.985 --> 00:25:20.325 In order to get out of this situation, the company wanted 509 00:25:20.345 --> 00:25:23.125 to grow by acquisition, external growth. 510 00:25:23.625 --> 00:25:28.245 It tried to acquire the printers of HP in 2020 511 00:25:28.545 --> 00:25:32.285 for $31 billion paying in 512 00:25:32.285 --> 00:25:33.885 stocks, paying in cash. 513 00:25:34.625 --> 00:25:38.485 It failed as a consequence of the failure in this deal, 514 00:25:39.185 --> 00:25:42.085 the stock price market cap of Xerox went down 515 00:25:42.585 --> 00:25:45.165 and it was worse at the end 4 billion. 516 00:25:45.735 --> 00:25:48.045 Today it's less than 1 billion. 517 00:25:48.585 --> 00:25:51.525 The server acquisition attempt is Lexmark, 518 00:25:52.225 --> 00:25:56.005 and the moment which is supposedly implemented 519 00:25:56.005 --> 00:26:00.565 during the second half of 2025, its number $30 billion, 520 00:26:00.565 --> 00:26:01.805 which they cannot pay. 521 00:26:02.315 --> 00:26:05.525 It's $1.5 billion paid in cash. 522 00:26:06.065 --> 00:26:09.605 It was announced on the 23rd of December, 2024, 523 00:26:10.495 --> 00:26:11.925 about a couple of months ago. 524 00:26:12.185 --> 00:26:14.365 The beginning of the story of Flex Mark 525 00:26:14.505 --> 00:26:17.405 as an inept company is 1991. 526 00:26:17.945 --> 00:26:21.365 It was formerly the IBM printers division. 527 00:26:22.195 --> 00:26:24.965 It's absolutely not core business spun off 528 00:26:24.975 --> 00:26:26.165 individual company. 529 00:26:26.795 --> 00:26:28.045 Then a few things happened 530 00:26:28.745 --> 00:26:32.045 and in 2016 the company was acquired by a group 531 00:26:32.145 --> 00:26:33.485 of Chinese investors. 532 00:26:34.235 --> 00:26:37.565 They together paid $2.5 billion. 533 00:26:38.755 --> 00:26:40.725 Some are private, one is public. 534 00:26:40.785 --> 00:26:42.725 The name of the public company is nine star. 535 00:26:43.195 --> 00:26:45.605 Nine star is basically in the printer's business 536 00:26:45.785 --> 00:26:48.925 and also in the microchips business, especially 537 00:26:48.945 --> 00:26:50.805 for the internet of things. 538 00:26:50.825 --> 00:26:52.405 The IOT business, 539 00:26:53.265 --> 00:26:55.605 the company is still based in the United States, 540 00:26:55.665 --> 00:26:58.685 but it is listed on the SHE stock market. 541 00:26:59.565 --> 00:27:01.525 I tried to find the annual report, 542 00:27:01.965 --> 00:27:03.005 I found the annual report, 543 00:27:03.025 --> 00:27:04.405 but they are all in Chinese, 544 00:27:04.625 --> 00:27:07.565 so there's not much information you can get out of that. 545 00:27:07.625 --> 00:27:08.925 As far as I'm concerned. 546 00:27:09.175 --> 00:27:11.725 Still the market capitalization is known 547 00:27:11.905 --> 00:27:16.165 and it's $5 billion plus, so it's bigger than the rocks. 548 00:27:16.665 --> 00:27:19.485 The sales figures about 3.5 billion, 549 00:27:19.705 --> 00:27:21.325 so it's smaller than Xerox, 550 00:27:21.865 --> 00:27:24.605 and the price to book is 3.6, which demonstrate 551 00:27:24.605 --> 00:27:26.005 that the credibility of the company 552 00:27:26.545 --> 00:27:28.605 is much bigger than Xerox one. 553 00:27:28.865 --> 00:27:31.805 Now, Lexmark was acquired for $2.5 billion, 554 00:27:31.905 --> 00:27:33.445 but as a group of Chinese investors 555 00:27:34.025 --> 00:27:36.645 and it's now sold for $1.5 billion, 556 00:27:36.705 --> 00:27:38.645 but it's difficult to compare these figures 557 00:27:38.725 --> 00:27:40.645 because it seems that there were a few 558 00:27:40.835 --> 00:27:42.245 divestments in between. 559 00:27:43.145 --> 00:27:44.205 One thing is sure is 560 00:27:44.205 --> 00:27:46.605 that there has been agreements with Xerox. 561 00:27:46.715 --> 00:27:50.445 They know each other starting at least in 2021, 562 00:27:50.665 --> 00:27:54.725 and the contracts are about supplying about sales financing. 563 00:27:55.495 --> 00:27:59.485 Xerox does some sales financing for Lexmark equipments 564 00:27:59.505 --> 00:28:01.445 and so on, so they know each other quite well. 565 00:28:01.745 --> 00:28:04.845 We have some figures about Lexmark in the corporate 566 00:28:04.845 --> 00:28:08.765 financial communication of Xerox announcing the deal. 567 00:28:09.025 --> 00:28:11.485 You don't find any information on a nice 568 00:28:11.485 --> 00:28:12.685 stock corporate site. 569 00:28:13.415 --> 00:28:14.965 Where do we read? We read 570 00:28:14.965 --> 00:28:17.965 that Lexmark is much smaller than Xerox. 571 00:28:18.515 --> 00:28:22.125 Lexmark itself is ING revenues, which is one third 572 00:28:22.305 --> 00:28:25.765 of Xerox six point something, two point something 573 00:28:25.905 --> 00:28:28.405 for Lexmark, and the return says 574 00:28:28.405 --> 00:28:29.685 competi is the other way around. 575 00:28:30.075 --> 00:28:33.685 Ebit overseas operating can divided by sales is 576 00:28:34.515 --> 00:28:36.765 nine point something for next Mark 577 00:28:36.905 --> 00:28:41.365 and 4.6, 4.9 depending on how you calculate it for Xerox. 578 00:28:41.745 --> 00:28:43.685 So return says it's twice as March 579 00:28:44.105 --> 00:28:46.805 and revenues are divided by three. 580 00:28:47.145 --> 00:28:49.285 Now, when you make the announcement of an acquisition, 581 00:28:49.465 --> 00:28:51.965 you have to demonstrate that you pay the right price 582 00:28:52.745 --> 00:28:55.765 and it is demonstrated through synergies. 583 00:28:55.865 --> 00:28:57.285 You are going to reduce costs. 584 00:28:57.745 --> 00:28:59.805 So they give a list of synergies. 585 00:28:59.805 --> 00:29:03.085 They are going to reduce the cost by $200 million. 586 00:29:03.715 --> 00:29:05.045 It's quite good news by the way, 587 00:29:05.045 --> 00:29:09.125 because 200 millions of cost reduction is additional profit 588 00:29:09.305 --> 00:29:13.365 of the same amount, minus some taxes multiplied 589 00:29:13.425 --> 00:29:16.525 by the adequate price earning multiple or whatsoever. 590 00:29:17.105 --> 00:29:19.005 You understand that the price 591 00:29:19.065 --> 00:29:23.125 of $1.5 billion is significantly justified 592 00:29:23.265 --> 00:29:24.525 by the cost reductions. 593 00:29:25.375 --> 00:29:28.365 Other synergies, commercial synergies, oh, 594 00:29:28.385 --> 00:29:31.525 we are very complimentary, but they don't give any figure. 595 00:29:31.665 --> 00:29:34.525 The only figure which they give is about the cost savings. 596 00:29:35.665 --> 00:29:38.405 The other figure which they give is about the evolution 597 00:29:38.405 --> 00:29:39.765 of their leverage 598 00:29:40.355 --> 00:29:44.205 because the balance sheet of Lexmark is quite strong 599 00:29:45.105 --> 00:29:49.605 and as a company is generating some ebit, DA, it's going 600 00:29:49.605 --> 00:29:52.485 to complement to the existing EBITDA of Xerox, 601 00:29:52.545 --> 00:29:56.085 and at the end of the day, the net debt divided by ebitda, 602 00:29:56.745 --> 00:29:59.325 pro forma consolidated, it's going 603 00:29:59.685 --> 00:30:01.805 to be merged down compared to the six, 604 00:30:02.545 --> 00:30:05.365 and then to complete the argument saying that you are going 605 00:30:05.365 --> 00:30:06.885 to generate free cash flows 606 00:30:06.885 --> 00:30:08.965 and the free cash flow is going to be used in order 607 00:30:09.065 --> 00:30:10.085 to reduce a debt. 608 00:30:10.665 --> 00:30:13.205 So you now that in the future the gearing, 609 00:30:13.265 --> 00:30:15.685 the leverage is going to be further down. 610 00:30:16.515 --> 00:30:17.845 This is quite good news 611 00:30:17.845 --> 00:30:20.565 because definitely the current situation as far 612 00:30:20.565 --> 00:30:22.365 as the financial structure is concerned 613 00:30:22.745 --> 00:30:24.845 of Xerox is a bit risky. 614 00:30:27.545 --> 00:30:30.605 Now the rationality is economies of scale, 615 00:30:31.325 --> 00:30:34.685 quantified 200 million commercial complementarities, 616 00:30:35.225 --> 00:30:37.485 not quantified, or we are going 617 00:30:37.485 --> 00:30:41.245 to complement the business in emerging growth, et cetera. 618 00:30:41.905 --> 00:30:46.605 No figure better lower net to EBIT DA ratio. 619 00:30:46.905 --> 00:30:48.525 That's definitely one 620 00:30:48.525 --> 00:30:51.205 of the strong rationalities of this deal. 621 00:30:51.545 --> 00:30:53.285 Now, unfortunately for Xerox, 622 00:30:53.285 --> 00:30:56.365 this was announced on the 27 December, 2024. 623 00:30:57.305 --> 00:31:00.765 Now the company announced its 2024 results 624 00:31:01.345 --> 00:31:03.565 in January the 28th of January, 625 00:31:04.185 --> 00:31:07.565 and the cabinet says revenues are down by 10%. 626 00:31:08.145 --> 00:31:12.205 The operating margin is down from 5.6 to 4.9. 627 00:31:12.745 --> 00:31:16.485 The free cash flow is down by almost 30%. 628 00:31:16.825 --> 00:31:19.565 We have to divide the dividend by two. 629 00:31:20.705 --> 00:31:23.565 And last but not least, KA announces 630 00:31:23.565 --> 00:31:26.525 that there are $600 million 631 00:31:26.785 --> 00:31:31.645 of financial debt maturing in 2025 this year. 632 00:31:32.185 --> 00:31:34.445 So the liquidity risk is quite high 633 00:31:34.705 --> 00:31:36.205 and the company says we are going 634 00:31:36.205 --> 00:31:39.605 to restructure the debt most before the maturity, et cetera. 635 00:31:40.195 --> 00:31:42.925 Okay, is it wishful thinking? I don't know. 636 00:31:43.425 --> 00:31:44.725 The consequence is what, 637 00:31:45.115 --> 00:31:47.965 when the company is announcing its performance, 638 00:31:48.305 --> 00:31:49.525 the stock price is down. 639 00:31:49.905 --> 00:31:51.965 Now, what is a conse stock price? 640 00:31:52.065 --> 00:31:54.405 If you look at the last month, you understand 641 00:31:54.405 --> 00:31:57.485 that the company is announcing its performance 642 00:31:57.705 --> 00:32:00.605 and the stock price is down, then it's going to stabilize. 643 00:32:01.115 --> 00:32:02.605 Then the NASDAQ is down 644 00:32:03.145 --> 00:32:06.645 and Xerox is going to amplify the drop in the nasdaq. 645 00:32:07.345 --> 00:32:10.965 So if you look at the last month, NASDAQ is down by 4%. 646 00:32:11.415 --> 00:32:14.045 Xerox is down by 22.4%. 647 00:32:14.905 --> 00:32:16.885 So the credibility of the company is 648 00:32:17.445 --> 00:32:18.525 absolutely at its minimum. 649 00:32:19.195 --> 00:32:20.965 They announced plenty of things. 650 00:32:21.355 --> 00:32:25.325 This is going to be a great deal, maybe hopefully for them, 651 00:32:25.545 --> 00:32:29.085 but now everything has to be demonstrated 652 00:32:29.385 --> 00:32:33.045 and it is absolutely not the case today, unfortunately, 653 00:32:33.065 --> 00:32:36.205 for Iraq, whose history was so bright. 654 00:32:37.055 --> 00:32:37.845 Thank you very much.