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Activist Investor Icahn Buys 7 Percent Stake In Xerox

Carl Icahn and his company, Icahn Capital, intend to talk with company leadership about improving operations.

Activist investor Carl Icahn has purchased a stake of more than 7 percent in Xerox Corp., which lost $34 million in the third quarter amid declining revenue.

Icahn’s firm, Icahn Capital, reported the investment of 7.13 percent of Xerox stock in a filing earlier this month with the U.S. Securities and Exchange Commission.

The loss by Xerox -- whose global services division is ranked at No. 7 on CRN’s 2015 Solution Provider 500 -- marked a $300 million reduction from the third quarter of 2014, when it reported net income of $266 million. But the loss was in line with company expectations. Its revenue for the quarter, $4.3 billion, while also in line with expectations, represented its worst quarter for revenue since 2009.

[Related: Xerox To Launch Operations Review After $34M Quarterly Loss]

In its filing with the SEC, Icahn’s firm said it intends to sit down with Xerox representatives to discuss possible operational improvements and strategic alternatives, as well as possible representation on the Xerox board.

Xerox stock spiked in after-hours trading after the news. After the stock advanced nearly 3 percent on the New York Stock Exchange to close at $10.76 a share, the stock shot up as high as $12.11 before retreating to around $11.50 at about 5:30 p.m. Eastern time.

Xerox, based in Norwalk, Conn., said in its third-quarter report that revenue in its technology division fell for the fourth consecutive quarter, dropping $200 million, or 10 percent, from $2 billion in the third quarter last year to $1.8 billion. Meanwhile, the services division, which accounts for 57 percent of company revenue, dropped 8 percent, or $200 million, from $2.6 billion to $2.4 billion.

In the company’s quarterly earnings call with analysts in late October, Chairman and CEO Ursula Burns said the board of directors has approved a review of operations -- including its business portfolio and capital allocation -- in an attempt to grow sales.

"We are looking into what we can do differently," Burns said, adding that the board will be looking into many options, but selling the company is not one of them.

In a statement released early Monday evening, Xerox acknowledged Icahn’s bid. ’Xerox welcomes open communications with shareholders and values constructive dialogue,’ the statement read. ’Our board and management team are committed to improving performance and creating value for shareholders and will continue to take the actions to advance these objectives.’

Icahn, a 79-year-old New York native, has been viewed as both a corporate raider and a force for activist shareholders, according to a brief biography on the website Investopedia. In the 1980s, he took over the now former airline TWA and later took it private. The airline ceased operations in 2001.

In July 2013, Icahn launched an attempt to acquire Dell, fighting in vain to prevent the then-public company from going private. During that takeover battle, Icahn publicly denounced the company on Twitter.

In an interview with CRN a year later, Dell CEO Michael Dell called Icahn "a bad guy."

"He lies, he has no ethical boundaries, he'll say anything, do anything, I have no time for him," Dell said.

PUBLISHED NOV. 23, 2015

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