Channel Insider content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

Xerox is moving away from its roots as a photocopier and
document management leader to full systems integration and IT services with the
acquisition of solution provider giant Affiliated Computer Services for $6.4

"By combining Xerox’s strengths in document
technology with ACS’
expertise in managing and automating work processes, we’re creating a new class
of solution provider," said Ursula M. Burns, Xerox CEO, in a
statement released this morning. "A game-changer for Xerox, acquiring ACS helps
us expand our business and benefit from stronger revenue and earnings growth.”

Xerox will hold a conference call with analysts and
investors this morning at 8:30 a.m. ET.

The Xerox acquisition of ACS comes
a year after printer rival Hewlett-Packard bought Electronic Data Systems for
$13 billion and just two weeks following Dell’s announcement that it is buying
Perot Data Systems for $3.9 billion. Large vendors have been scouting for
acquisition targets that complement their existing product lines with services
that provide recurring revenue streams. HP and Dell’s acquisitions were
designed to bolster their respective storage and data center businesses as well
as provide better competitive positioning against IBM’s
Global Services division, the market leader in enterprise services.

Based in Dallas, ACS is one
of the largest technology services and integrators in the industry. It boasts
more than 74,000 employees, providing it with a global reach in servicing
multinational enterprises and governments. ACS
generates more than $6.5 billion a year in gross revenue, of which 15 percent
is recurring revenue. The company primarily competes against HP Services
(formerly EDS), IBM Global
Services, Computer Science Corp. and others.

ACS is the
largest acquisition in Xerox’s history and will transform the company founded
on document management to one with capabilities in financial services, business
process and operational management, custom application development, IT
outsourcing, and systems integration. With ACS’
revenues included, Xerox will be a $22 billion company, of which 77 percent of its
revenue will be recurring.

"When ACS was
founded, we had a vision of becoming a best-in-class company by working harder
than our competitors. More than 20 years and 74,000 employees later, as the
world’s top BPO
company, we have now found a partner to help us reach even greater
heights," said Darwin Deason, founder and chairman of ACS, in a
statement. "This is a tremendous outcome for our shareholders driven by
the commitment of a strong management team and incredibly dedicated

The acquisition requires approval by both Xerox’s and ACS’ boards.
Shareholders stand to receive $18.60 cash per share and the balance of the
value in Xerox stock. The acquisition is expected to close in the first quarter
of 2010.

ACS is the
second large acquisition of a solution provider or integrator by Xerox. In
2007, Xerox bought Tampa, Fla.-based Global Imaging Systems for $1.5 billion.
That deal gained Xerox a greater share of the SMB printer and imaging
marketplace serviced by Global Imaging plus capabilities in data networking