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It is Bloomberg BusinessWeek. That's Carol, I'm Tim. Shares of Xerox falling today as much as thirteen percent did close out the day lower by about five point eight percent. The company did report adjustin earnings per share for the fourth quarter that missed the average analyst estimate, though revenue did beat analyst estimates. We've got with us Steve Bandrzak, the CEO of Xerox Holdings Corp. He joins us here in the Bloomberg Interactive Brokers Studio.
Steve, good to see you. How are you great to have me? Thank you doing well? Hey?
So, you said in the earnings release that we continue to see steady progress in our reinvention, reflecting the res resilience of our team and initiatives taken to date.
Where are you right now in your reinvention? Yeah? So reinvention is a three year journey.
The three year program that we set up and it's all about getting Zerox back to revenue growth and getting back to double digit operating profit. And so we're about two thirds into that journey. But really the important part is we're set the foundation of the overall reinvention strategy. The first is getting our core stable and growing again, and we put a bunch of different things around what we do in our operating model, what we do with our sales team, what we're doing with our channels, new
product introductions, and so forth. Second piece is we have to get twenty percent of our revenue that is growing faster than the decline in the print industry. So we've acquired a company called it Savvy, which is a really IT solution. So if you think about a services led software enabled business, a tech powerhouse that drives productivity in a workplace, that's where we're going.
And one of the things we're really so diversifying into consulting.
Diversifying into services and software. So if you think about all the different tools that you have in the IT space, we have and have the ability to bring it into SMB medium and smaller business units, where.
You have the relationships with the businesses already because they have your printer products.
Being two hundred thousand clients that we have in that space, and we talk about relationships. It's not that we ship them stuff. We actually people ten thousand service technicians on the ground inside of the facilities where we have long term relationships and we trust it. So we're now bringing other services, things like network as a service, security is
a service. Many of these companies do not have the IT capabilities of very large companies like Bloomberg, where they have tremendous IT assets and they can take advantage of all these technology trends. If you're a school, you're a university, you're a medical center, you're a strip mall, you're a hospital,
you don't have those capabilities. So you can talk about AI all you want, but if you don't have the infrastructure and you don't have the ability to orchestrate all that data and serve it up into AI, it's completely useless. So we're excited about playing in that space.
So you're two thirds of the way into your plans, and I think when it comes to your priorities, your reinvention plans deep it is about that it's you know, your acquisitions, How do you want investors to measure success when they look at your company? Right now? Investors, if you look at the reaction today, not so key on what they heard. So how should investors measure your success at this point?
A couple of things. First of all, when you think about a journey of a reinvention, you've got to get your core fundamentals right, and that's what we're doing in the first part of it. So you're starting to see things like twenty percent sales productivity. We're seeing that, we're seeing double digit placement of units in the in the Q four where you have that where you place a unit, and then you see long term supplies as you go forward, So signs of how do we get our core business stable. Second,
the acquisitions. You think about lexmod acquisition right right when we go and make that acquisition, it is immediately a creative.
You with two.
Hundred million dollars percentages about a dollar EPs, it's a creator will actually lower our debt. So the acquisition strategy strengthens our core diversifies our business. The other thing is we have digital services, right you talk a lot about AI digital services, the ability to take data. You think about AI without data is completely useless. Well, we play in that space.
But how much data? I mean, if you listen, we talk about this NonStop. In terms of the power of AI is based on the data it can acquire. There are so many data providers and to be fair, probably bigger than you guys. So how do you compete in terms of the quantity and clarity and quality of your data?
Not the data providers, it's the data that our clients own. So if you think about hospitals, you.
Think about managing their data.
Helping them orchestrate it. It's really important.
Right.
You could have it on physical files where it's paper based, right, it could be in share points, it could be in all over. Think about things like video. Nobody thinks about data in terms of video, things like censor data.
Right.
We help our clients orchestrate all that and then serve it up on top of AI. So we're using the data that our clients have, even data that they don't realize that they need to drive differentiation use it AI. So think about video data, right, and you put AI on video data and you send somethings wrong in a campus, Well, that doesn't do anything unless you can have it to the appropriate alert systems. We do that every day with our workflow and our processes.
You mentioned you want revenue to outpace the decline of the actual print and paper business.
Does that hit a floor.
Somewhere where Yes, people are using more electronic communications, so they're not printing as much.
But when does that decline stop?
So two things prison A print is not dead, which is really interesting.
People look at print. It is not dead. A ton of print.
It's a shift right, even the badge coming in right, you think about the bridges coming into this bound in print. So print even you take a look at ups boxes, Amazon boxes, we're printing a ton. So print isn't debt. We have to move where print is. When you take a look at TAGA decline in print over the next couple of years, it's two to three percent decline. So we want to decline slower than us who we're actually
gaining market share. But the other real thing is when you think about print, there's a tremendous amount of value inside of print value and invoices, valuing contracts value in medical records. We can help our clients to unleash that that particular data, unleash that power of that data and actually turn into something that's actionable. And that's what we're working on helping our clients.
You know, looking at your stock, it's been on a somewhat steady, you know, decline. Let me just throw it out. It lost fifty four percent last year. It is up eight percent a year to date. About seventeen percent though of the float is shorted. So there's a real negative skew in terms of what investors expect from you guys as part of the strategy. Ultimately, is someone buying you guys out? I mean, have you had interested suitors? Is that it?
You know, just the opposite. We're going to be the consolidated.
I know you've been buying, but I'm just curious, have you had anybody?
No, we want to be a tech powerhouse. We want to drive productivity in the workplace. We've got an incredible brand. Do you think about Xerox. In the history of Xerox, We've got ten thousand plus partners. You don't build that channel partnership overnight. We have tremendous go to market assets, tremendous assets what we do. So No, we're going to be the consolidator in our industry?
Would you implore explore doing something even larger to kind of scale does matter in this? Forsture, I don't know what to tell you.
Look, I did the IBM PC spin out as part of the team that built Lenovo, so I understand what consolidation takes and what it looks like. We will be the consolidator in our industry. We're going to be a tech powerhouse again.
How much?
Because right now you're about a one point one billion dollar marketing, Like what's your anticipation of like kind of where you go if you think about the market.
Camp today for the we think we're tremendously on the values from a market cap perspective.
You just take investors short. Yeah, right, But that's okay.
That's why I talk about the reinvention to three year strategy. You know, I'm not trying to build something for tomorrow. I'm trying to build something long term, sustainable growth and something that puts us back in the tech powerhouse position. What I love to see if you take a look at it, savvy and you take a look the partners that we have in the ecosystem and the reason why they're coming to us is because we can reach clients they don't read right.
And so when you.
Think about the office space, you think about hospitals, you think about all the places that we service, we can bring tremendous amount of value by bringing us partners into that ecosystem.
I want to talk a little bit about the balance sheet. Buybacks have stopped, dividends on the decline, partly due to acquisition. Yes, free cash flow now targeted toward debt reduction. How much debt do you think you can pay down over the next two years and give us an idea of your ultimate capital structure goals. And why even keep a dividend at this point?
Yeah, So a couple of things.
So first of all, we just recently announced that we cut the dividend half, trying to get it back to a normal ratio in terms of what was what would we look like? And so we're really focusing on now is how do we lower our debt. And one of the things that people don't realize if you take a look at out total debt. Inside of that total debt, we have we call finance receivables where we have taken leases or we've taken manage print services put it on our balance sheet.
We flip that.
Strategy a couple of years ago and we called forward front agreement. So what happens at the end of each quarter, we have a company that actually buys those receivables, we get that cash back in and so today we started that journey and we said we had about one point four billion that we can actually put cash back onto
the balance sheet. We have about two years left of that, so that gives us, if we do nothing other than continued a strategy, roughly four hundred million dollars for the next two years that we put on a balance sheet, and we're using that to drive our reinvention. We're using that to drive our acquisitions. We're using that to.
Reduce our debt.
So we loaded the dividends so that we can help pay back our debt when we do. The Lexmann acquisition will accelerate that.
So you paid down how much debt in the of the next two years, only got.
About ten to y Yeah, the goal is to get around three to three and a half percent.
Okay, reduction, reduction, Okay, all right, good to know we've ran out of time. We had a million more questions come back, Hopefully you'll come back.
I look forward to so much for having me on.
Steve, of course, is the CEO of Xerox Holdings Corporation, joining us right here in our Bloomberg Business Week studio. This is Blueberg.
Carol, I don't know you. You were listening to Caroline Levitt earlier of the UH I almost said to buy the Trump and administration.
She's the White House Press secretary, right, you heard that little bit. She was asked, I know we were preparing for a show.
Yeah, to be fair, but we were listening.
Yeah.
Yeah, because it.
Was the first White House Press briefing.
Yeah, exactly.
She said that the National.
Security Council is studying concerns associated with the Chinese AI company Deep Seek. That's according to the White House Press Secretary. She was asked about it todayt her first press briefing.
Yeah, it's interesting, right, and we've had Trump's ais are David Sachsing and Fox News that there is substantial evidence at Deep Seek distilled knowledge from open a Eyes.
Model, so dust is settling.
You know, well this listen, We've talked about this with our own Rachel Metz. That Open Ai, according to someone in the know, a person familiar that they seem to be looking into exactly how deep seek did what they did and whether or not they tapped into a open
aies model. So it's interesting and I think this is part of what we're trying to figure out in the last twenty four to forty eight hours since the story hit yesterday about deep Seek's capabilities and being able to do what it did in terms of creating a chatbot add a much cheaper it seemed like investment input. Uh, and so we're trying to understand did it really cost that little? Are the capabilities on par with open aies chatchypt.
I don't know. There's a lot of questions we're trying to figure out, and what did they use to do it.
That was a point that Ian King also made to us earlier in the program. He said, well, if they indeed were able to use these degraded Nvidia GPUs that are not subject to export restrictions, then that would be pretty remarkable, right right, because that would show you don't need the compute that you thought you needed in order to do something to the scale.
Yeah, exactly. So, I mean, I feel like there's still a lot of questions and we're getting more information, so too, this is going to be there's going to be more to come curate.
I'm curious what Michelle Geida thinks about it. She's CEO of the Croc Institute for Tech Diplomacy at Produce. She's also former Assistant Secretary of State for Global Public Affairs. She did that in the first Trump administration from twenty eighteen to twenty twenty. She joins us from Nashua, New Hampshire this afternoon. Michelle, how did you look at the news about deep Seek that really we learned last week but really came to the fore yesterday.
Yeah, as you guys were just saying, there are were and still are a lot of question marks around deep Seek, in particular, how much did it really cost for them to develop this new quote unquote cheap model that they've self reported. Did they do it without in video chips or the advanced in video chips? Did they do it
without subsidies? So still a lot of question marks. I think the most important thing to focus on is what's ahead, And regardless of whether this was an effort in which a Chinese government had a hand or not, the Chinese government will have a hand in it going forward. Because if it is as strategic as it sounds, deep Seek is a game changer, could be a game changer for the overall AI ecosystem and being able to more efficiently
compute than we've done before. And so we can anticipate that the Chinese government is going to co opt this and start to use it to its strategic advantage for civil military fusion where there are no barriers between a consumer app and what China wants to do with a military and that has implications for our national security all right.
But at the same time, you know, most nations would say I'm gonna play Devil's advocate a little bit, right, the US is trying to be the best as well when it comes to AI. Right, this is what just goes on around the world. I'm sure Europe wants to make sure that they are, you know, in the game as well when it comes to AI. I understand not all parts of the world collaborate, certainly on advanced technology,
and there are national security concerns. So what's the right policy going forward where a certain amount of collaboration is required, especially you know, whether it's you know, nuclear warheads or AI, we need a certain amount of collab aberration to make sure that the world can survive going forward.
Yes, you're exactly right, and that's what tech diplomacy is all about, is how do we get trusted partners and allies that includes the europe and like minded partners who ultimately believe in freedom, who ultimately believe in the dignity of individuals, who do things like abide by the rule of law. So we're looking for those trusted partners. Europe is a great example. Indo Pacific partners are a great example.
The challenge with China is that they have proven time again that they are in authoritarian state and they have a different value set that they want to advance through the use of emerging technology. So you're exactly right. The more allies that we can get behind trusted technology that advances things like liberty and security, the better.
Is there a concern that in this administration we could potentially alienate some of our allies. We saw what happen over the weekend with Columbia. There's a real tit for tat going on there Mexico. In sending these planes of migrants back, We've i know, ruffled some feathers there to the north with potential tariffs on Canada. What about when it comes to parts of Europe with discussion of Greenland, the Panama Canal as well in the you know, in
Central America. Is there a chance that we could alienate allies who might be important when it comes to tech diplomacy.
Well, this is what diplomacy is all about. It's the art of being able to advance your own national interests at the same time, you can do it in collaboration
with trusted partners and allies who have similar interests. And let's not forget in the first Trump administration, the founders of the Kroc Institute, Keith Krack and Mung Chang At, the president of Purdue University, built the Clean Network to secure five G that had sixty countries and two hundred telecommunications companies all working together to put trust at the center of five G and not use untrusted vendors like Huawei.
So well, there is a case study on how to work together with sixty countries at least to secure critical technology. And I think there's a similar opportunity to do that now.
So Michelle, let me ask you. You have some insight having been a member of the Trump administration the first first go round. And I'm just curious that the diplomacy that we're seeing so far out of the White House feels like it can be somewhat combative even to former
US allies. You sound like you are arguing that we should be, you know, if anything, reaching out perhaps to our European allies to make sure that we are working together, to collaborate on something like AI, to make sure that there is supremacy for the United States as well as
with our allies against maybe other foes. So how does the diplomacy that we might get or lack thereof, out of this current administration perhaps maybe is problematic, especially when it comes to something like AI, development, supremacy, security.
Well, remember that diplomacy as a means to an end. Diplomacy doesn't happen for diplomacy's sake. It's ultimately to advance the interests of the United States. And when you think about the case study with the clean network in twenty twenty in the last the first Trump administration and what we stand to do now remember it's also really early
in the administration. But diplomacy as a means to an end, and so the ultimate measure of success is did we advance the interests of the United States and ideally our partners and allies at the same time, And there's different methods for doing that. And when you have trusted partners and allies, you can be open and honest and have direct conversations around how you achieve these ultimate goals.
Well, what insight can you give us about having been part of the first Trump administration in terms of I think it's fair to say I've been talking with a lot of CEOs, we have organizations saying it's early days, as you said, in the administration, But how do you from someone who has some inside knowledge of kind of what is maybe just talk are speaking, you know, kind of harder, and what is the things that really will become actions and policy that will impact businesses and markets
and relationships.
Yeah, well, it's always hard to tell them. I'm not in government right now, and so the thing to know is that there are generally multiple channels of communication, whether it's coming from the State Department or other agencies, but there are multiple lines of communication, and so all of
those things happened together to help advance America's interests. What I can say is under this administration, what we've seen so far when it comes to the leading theme for this administration, when they say America First, we've seen that it also means innovation first, and when it comes to artificial intelligence, that means supporting and advocating for projects like
the Stargate project that was announced last week. Up to half a billion dollars being dedicated toward American leadership and artificial intelligence.
That is, though if the government, that is, if company right after that. But that's if companies spend it, right, I mean, there isn't any government money, and some taxpayers might find that to be a good thing, But I mean, having said that, it's there are questions, even Elon Musk's question, whether or not the companies have the money to actually spend on that. So if we leave it completely in
the private sector, could that be problematic? And if so, what role should the government have in supporting something like AI?
But I think you hit the nail on the head, and the point there is that the government is unleashing the private sector and laying out the vision and the mandate for American innovators, not American regulators, American innovators to make sure that we're leading an artificial intelligence, and we know through the course of our history that is how we lead, and that is how we win and compete.
We will not regulate our way to becoming the world capital of AI together with our partners in ally so unleashing the private sector and launching the next few stargate projects would be the most effective thing the government can help catalyze right now.
Michelle, you mentioned you're not currently in government. You're a former Assistant Secretary of State for Global Public Affairs from twenty eighteen to twenty twenty in the first Trump administration. We haven't spoken since the new president. The president has been sworn in again, would you go back and work in his administration again?
You know, it was an honor to serve the first time. My family came here from Vietnam. My father served in the Vietnam War, and so I believe fully that it is an honor to serve your country at any time. But look, the work that we're doing the CROC Institute
for Tech Diplomacy at Purdue is really vital. We are making sure that we're working with partners and allies in the private sector and as well as with government to make sure technology advances freedom, Perdue is doing extraordinary work graduating more engineers than any other top university in the country in order to advance national security. So I'm honored to be doing this work right now.
All right, we're going to leave it on that note. Michelle, thank you so much, really appreciate it. Michelle Gaide she CEO of the Kroc Institute for Tech Diplomacy at Purdue and, as we said earlier, former Assistant Secretary of State for Global Public Affairs from twenty eighteen to twenty twenty. So that was during the first Trump administration. Joining us from New Hampshire.
You know, we haven't talked a lot about Eco data every since. It's kind of it's been wild.
I was thinking about getting ready for this segment. I'm like, oh yeah, Eco Data fed me like it's just.
Always saw Mike m Key earlier today. Yeah, he's on his way to DC right now for tomorrow. Right, that's how he rolls.
Yeah, maybe he's listening or watching right breaking down that Mike. US home price gains picked up pace in November as buyers remained on the hunt for properties even in the face.
Of higher borrowing costs.
We're talking about the national gauge of prices the SMP core Logic Case Schiller, rising three point eight percent from a year earlier. It was larger than three point six percent annual increase back in October.
All right, so we want to talk about housing. And this is a favorite guest. Katie Hubbard watches all of this closely. She's executive vice president of Capital markets over at Walton globally Walton Global, excuse me. They are a
privately owned asset and real estate investment company. They've got nearly four point four billion dollars worth of land under management, nearly ninety thousand eight under management across the United States, and they operate in the retail, industrial, and commercial sectors. But it's a great read on housing in particular. Katie joining us from Denver. Katie, good to have you back
with us. We talked to you periodically. How would you describe the housing market and the market for development and building of homes right now?
Yeah, So the year ended high, Carolyn, Tim, thank you so much for having me. I mean, all of all of the sentiments were up. Homebuilders sentiment is up, a new home sales are up, prices and also resale is up, and so that's trickling as you see into the Case Shiller numbers. The reason the prices are up on Case Shiller is because there is a supply issue. So as we've talked about before, it's definitely regional and its seasonal.
So New York posted high the highest games is seven point two percent your over year, Chicago coming in second, just over six percent, in Washington behind that just under six percent. However, Tampa came in at negative zero point four percent you and that's just because of the supply in those markets. We're Chicago's just over two months, just two months of supply, New York at historical low supply, and Tampa's hovering over nine months of supply. And so
that's that's feeding into the price. The price is that you see there.
How are you seeing this play out in your world? Because you're you're very far from the world of single family homes. You're from the world of you know, large tracts of land that are sold then to the folks who build those developments that have those single family and multi family homes. How does the data that we get on a month to month basis affect the decisions that you make at Walton.
Global yeah, Tim, So we are feeding land to the public homebuilders. That's what we do a Walton. We have over one point eight billion dollars currently under contract for over sixty thousand lots, so we're very close to what the home builder sentiment is and they need more land.
And as you know we've talked about before, there's an affordability issue and unless rates drop dramatically, which we know that's not going to be happening anytime soon, or prices drop and with low inventory, prices aren't going to drop. We just we need more homes, We need more home supplied. We need builders to build more homes to keep the
affordability in check. And so our largest client is the our hoard in the number one home builder and they're really closing that affordability gap where twenty eight percent of new homes sold last year were sold at the three hundred to three hundred and ninety nine thousand dollars price range, So you can see people targeting that affordable house and that's that's up in that category to twenty eight percent of all home sold, which is a big jump since twenty twenty one.
How cautious, Katie, are builders when it comes to building. They never want to overbuild, right because that's going to hurt them. So how cautious? Because I feel like we have been talking about the lack of supply, the lack of affordable housing forever. So how careful are they? I understand permitting in regional variations, but to be fair, how careful?
And I understand they have to be when publicly held, but how careful are they to make sure that they don't overbuild and so that maybe holds back supply?
It does. I mean, our builders are the largest, our clients are the largest builders, and they're definitely bullish on what's happening because in order for people to get that home, they're buying down mortgage rates and they need land to be able to build the homes they're going to. I mean, deer Horn's gonna build over ninety thousand homes this year and sell ninety thousand homes. Where smaller builders are absolutely more cautious. They don't have the ability to finance land
off balance sheet. They have to really build and sell as they go, and so they can't get caught with too much inventory or the public builders they can go to a private equity firm investors and say hey, we've got too much inventory, and sell chunks of homes at a time if needed, so that they don't go into
spring season having too much inventory on their books. So they're watching it closely, but they have levers to pull because they've got very strong margins, and so they've got just different ways the big builders in order to be able to manage that supply and control the land to keep building homes and keep that supply.
So in New York, you mentioned numbers in New York in terms of housing supply and what's going on. Your governor Kathy Hochel has proposed restrictions on large financial firms buying homes. State legislators of Virginia and Nebraska have had similar ideas. The ideas that you know, investors are buying out, reducing the supply. What is your take and what you
are seeing? Do homebuilders want to make sure that private equity is still in that market so that if they have over supply, they're in there to pick up.
The homes, not necessarily in those urban infill locations where they're constrained. I'm talking about, you know, building large master planned communities more on the outskirts of you know of the outskirts of the core, but as far as New York goes, I would say one thing that is keeping the prices high in supply low is that only nineteen percent of the entire state have mortgages over six percent, so you're really seeing a lock in rate effect in that market.
Kidding the price, Katie, I want to talk a little bit about what the federal government could do to increase housing supply in this country. We heard Jdvans bring it up actually at one of the the only vice presidential debate, talking about the idea of selling federal fund for federal lands rather or building homes on federal lands. Are you thinking about that realistically as a way that the federal government increases housing supply in this country.
Well, you know, we heard President Trump at Davo say that he's just going to demand that interest rates come down, So it's definitely top of mind for them of how they can increase the affordability. We're really to wait and see with what the government policies are going to do, whether it's tariffs that could cause the material prices to go up and then that would cause inflation, and inflation comes in, then mortgage rates will increase. Obviously they're talking
about mass deportation, which there's already a labor shortage. We already can't build enough homes, I mean, building a million homes a year now is difficult because of labor. I mean, so if there's an even further labor shortage, that could drive prices up. And then on the flip side of that, talking about you know, government spending, tax cuts, deregulation, so making building easier. Those are all things where our clients
are at a wait and see. We're going to see what happens with those policies, and they'll have to report back on the government selling their land.
All right, good stuff, A big overview and such an important part certainly of the US economy. Katie Hubbard is executive VP of Capital Markets over at Walton Global, joining us on this Tuesday from Denver, Colorado. Katie, thanks again