The New Business of Printing

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1 Growth Opportunities: Color and The New Business of Printing Ursula Burns President, Business Group Operations

2 Today s Discussion Color Market Opportunities Market Trends Xerox Differentiators Customer Successes

3 Color Leadership Winning in Color requires: Market understanding Technology leadership World-class partners Broad and innovative product portfolio Channels that optimize value and reach

4 Market Opportunity Growth Opportunities Lead the Services Market Create the New Business of Printing Drive the Color Revolution $112B Services $20B Eligible Offset $17B Production $8B Office $67B Color Opportunities Color $10B B&W $7B Color $17B B&W $58B 2004 Source: Xerox Internal Analysis

5 Color Market Growth Drivers Key Drivers: $10B $17B Eligible Offset Production Office Office Eligible Offset Production Office $11B $34B Offset transfer Market and application development Mono to color transition Increasing use of color in business applications Improving ease of use Lower color run costs Source: Xerox Internal Analysis

6 Color Market Growth Dynamics Pages 20% 15% Color Pages % of Total Pages 17% Color page opportunity is huge In 2004 approximately 3 trillion total pages in market, excluding Eligible Offset 10% 9% Only 5% of 2004 pages were color 5% 0% 5% Color page growth rate is accelerating Color pages projected to grow to 17% of total pages in 2009 Source: Xerox Internal Analysis; consists of Production and Offi ce pages

7 Color Market Growth Dynamics 1.5M 2004 Color Installs A3 A4 1.8M Majority of activity in page printers Page Printers 1-10 ppm or > $150K Total Color Majority of revenue in 11+ ppm A3 MFD 2004 Color Revenue Eligible Offset is incremental opportunity $5.6B $17B $10B Page Printers ppm or > $150K Color Copiers / MFDs Total Color Eligible Offset Source: Xerox Internal Analysis

8 Xerox Focus in the Market 5.8M 4.7M 2009 Color Installs A3 A4 1.8M Color growing in installs, revenue and pages Page Printers ppm or > $150K Total Color We will aggressively compete in A4 and lead in A3 $10.6B 2009 Color Revenue $17B $34B $10B $11B Our sweet spots: 11+ ppm A3 MFDs Production color Eligible Offset Page 1-10 Printers ppm or > $150K Color Copiers / MFDs Total Color Eligible Offset Source: Xerox Internal Analysis lead in color page and color revenue share

9 Differentiators: Technology Customer-Driven Research Rich Patent Portfolio Xerox Core Technology Strengths R&D aligned with strategic planks Customer-driven research $1.5 billion total (Xerox and Fuji Xerox) in / 3 in color in 2004 ramping up services and workflow Strategic Planks Production Office Services Rich patent portfolio Over 500 new patents in ,000 active patents

10 Core Technology Strengths Customer-Driven Research Rich Patent Portfolio Strategic Planks Production Office Services Xerox Core Technology Strengths Solid Ink Proprietary Superior reliability Exceptional ease of use Scalable EA Toner Less of everything Cost effective Environmentally friendly Image on Image (IOI) Unmatched performance and quality at very high speeds Paper Handling Robust capability 50 to 350 GSM Continuous & cut sheet Document Management World-class controllers Productivity enablers Business process expertise

11 Xerox Core Technology Strengths Rich Patent Portfolio Best and Broadest Color Portfolio Customer-Driven Research Xerox Core Technology Strengths Solid Ink EA Toner Image on Image Paper Handling Document Mgmt. Strategic Planks Production Office Services

12 Differentiators: Best & Broadest Color Portfolio Office Production Laser Printer Solid Ink Color Laser MFD DocuColor igen3 Phaser 7400 WorkCentre C2424 DC3535 DC240 / 250 DC8000 igen3 110 Color Phaser 7750 Phaser EX7750 Phaser 8500 / 8550 WCP3545, 2636, 2128 DC7000 igen3 110 with UV Coater Phaser 6300 Phaser 6350 CopyCentre 3545, 2636, 2128 DC6060 Phaser 6120 Phaser 8400 DC12 WorkCentre M24 DC5252 Manual and Book Factory Software Steady Stream of Value-Added Services Offerings

13 Differentiators: DocuColor 240 / 250 MFD introduced mid-year Provides fast, flexible, reliable and affordable color Superior image quality For graphic communications, demanding office environments and central reproduction centers Outstanding face-off to Konica Minolta will take share in color

14 Xerox Core Technology Strengths Rich Patent Portfolio Best and Broadest Color Portfolio Customer-Driven Research Xerox Core Technology Strengths Solid Ink EA Toner Image on Image Paper Handling Document Mgmt. World-Class Software and Hardware Partners Strategic Planks Production Office Services

15 Differentiators: World Class Partnerships Role of Partnerships R&D Fuji Xerox Manufacturing Flextronics Workflow Adobe, EFI, XMPie, Creo, others Finishing Bourg, others Integrated solutions OmTool, Kofax, Equitrac, others Channels Leadership

16 Xerox Core Technology Strengths Rich Patent Portfolio Best and Broadest Color Portfolio Customer-Driven Research Xerox Core Technology Strengths Solid Ink EA Toner Image on Image Paper Handling Document Mgmt. World-Class Software and Hardware Partners Strategic Planks Production Office Services Broad, Coordinated Channels enable color leadership

17 Differentiators: Broad Go-to-Market Strategies Graphic Communications Dedicated industry experts Complementary channels Fully integrated solutions Large Enterprises Services-led Global account relationships Account intimacy Enterprise productivity focused Graphic Communications $25B Large Enterprises $46B Small / Medium Businesses $41B $112B Market Opportunity Small / Medium Businesses Direct and indirect channels Xerox and third-party branded products Channel-ready products and solutions Source: Xerox Internal Analysis

18 Office & Production Color Customer Success "From a product standpoint, color printing and copying is our top priority because it represents an opportunity to serve our business customers' growing needs. Xerox is helping us make high-quality color accessible and easy to use for all of our customers." Brian Norris, Senior Vice President, Print and Document Services Xerox Solution CopyCentre 2636 provided convenience color, ease of use, customer control DocuColor 250 in-store quality, speed and productivity DocuColor 8000 POD, high-volume production applications Customer Value Xerox enabled OfficeMax to be single supplier with multiple solutions for its customers Replaced convenience mono devices with Xerox color capable providing mono and color with one device Xerox DC250 increases capacity from 12-ppm to 50-ppm color Xerox DC8000 provides near offset quality

19 Production Color Customer Success Xerox Solution 24 igen3 Digital Production Presses Centralized credit card statement billing for 44 credit card companies Customer Value Approximately 9 million impressions per month Solid business partnership JAIS Sumitomo Bank, Japan

20 Summary We will win in Color because we have: Market understanding Technology leadership World-class partners Broad and innovative product portfolio Channels that optimize value and reach

21 Today s Discussion The New Business of Printing Market Opportunities Market Trends Xerox Differentiators Customer Successes

22 The New Business of Printing Strategy Growth Opportunities Lead the Services Market Create the New Business of Printing Drive the Color Revolution $112B Services $20B Eligible Offset $17B Production $8B Office $67B 2004 Complement traditional offset with digital printing capabilities Provide the industry s broadest, most advanced product portfolio Strengthen our leadership position in monochrome and color Leverage the power of FreeFlow Streamline customer print operations and create new business opportunities

23 The New Business of Printing Major Trends Run Lengths are Getting Shorter! Over 48% of printers cite shorter run lengths. Source: NAPL* Turnaround Times Most Important! Timely delivery of customer communications is the #1 concern among industry print buyers. Source: EDSF 2005 Trends Survey Variable Content Creating Growth! Enabled 28% price premium. Source: InfoTrends / CAP Ventures - June 04 Digital Investments Important! Digital Printing Growing! Digital printing presses/systems were the #1 investment priority - 58% over the next 5 years. Source: NAPL* *The NAPL State of the Industry Report, National Association for Printing Leadership, Paramus, N.J. Digital printing revenue to double to 14% from 2004 to 2007 as a % of printer s total revenue. Source: NAPL*

24 The New Business of Printing Value Chain DEMAND GENERATORS DEMAND SPECIFIERS DEMAND FULFILLERS Lower costs Higher response rates Quick turnaround Value Chain Requirements Increase value add for customers Personalization New sources of revenue and profit Marketing Managers HR Managers Book Publishers MIS Managers Business Owners Graphic Design Advertising Agencies Corporate Design Commercial Photography Commercial Printers Service Bureaus Direct Mail Printers Book Printers Quick & Franchise Printers Data centers In-Plant/CRDs requires the Right Technology, Right Workflow, Right Value Proposition

25 Differentiators: The Right Technology Color Mono igen3 DocuColor Xerox Nuvera TM DocuTech HLC 4110 TM Benchmark image quality Outstanding application breadth Maximum uptime Productivity for the customer and for Xerox provides competitive advantage and customer value

26 Differentiators: The Right Workflow DEMAND GENERATORS DEMAND SPECIFIERS DEMAND FULFILLERS Customer convenience and turnaround time Xerox FreeFlow Enables Variable data to create personalized communication Automatic correction of print file problems before printing FreeFlow helps customers reduce production costs and improve efficiency by streamlining workflow a key strategy that drives profitable business for printers. Source: InfoTrends/CAP Ventures January 2005 reduces costs and increases productivity across the value chain

27 Differentiators: The Right Value Proposition DEMAND GENERATORS DEMAND SPECIFIERS DEMAND FULFILLERS Market Development Educating Demand Generators on value of digital: This campaign accomplished what I was trying to do better than anything I ve done in the past. Doris Brown, Vice President, Marketing, Pantone, Inc. Educating and training Demand Specifiers on how to design for digital: Xerox provided a platform for discussion and the exchange of information and ideas that could help us all do better, more effective work. Doug Campbell, Creative Specialist, New York Life Insurance Co. Business Development Providing tools and resources for Demand Fulfillers to create new and profitable business opportunities: (Xerox has) the most comprehensive program in the industry Mike Pannagio, Direct Mail Express increases customer revenue and profits

28 The Right Technology, Workflow, Value Proposition and the Right Business Partners Color Mono igen3 DocuColor Xerox Nuvera DocuTech HLC 4110 Workflow Business Development make Xerox the leader in the New Business of Printing

29 New Business of Printing Customer Success Xerox Solution igen3 Digital Production Presses DocuTech, DocuPrint Continuous Feed and Xerox Nuvera Production System Xerox FreeFlow workflow solutions When you look at digital technology and the way the digital world will continue to evolve, it is clear there are great opportunities before us. Joe Makarewicz Executive Vice President Customer Results With Freeflow we are: Improving turnaround time from 7 days to 1 day Growing from 100s of book titles to 1000s of titles Growing from 1.5B pages per year to 5B pages per year

30 New Business of Printing Customer Success Xerox Solution igen3 Digital Production Presses Xerox Nuvera Digital Production Systems We re filling a huge demand in the marketplace and driving very profitable growth for TED Gigaprint and our partners. Tico van der Linden Sales Director, MyPhotoFun Customer Results Created web-based business unit MyPhotoFun Allows customer to arrange digital photos into high quality bound albums and calendars Print volume doubled in each of first few months of operations leading to the installation of a third igen3 Digital Production Press

31 Xerox is the Leader in the New Business of Printing #1 #1 #1 Total Color revenue share Mono 91+ high-end cut sheet High-end Color 60+ppm 41+ppm Color #2 It s no exaggeration that Xerox is the king of high-end cut sheet printers. Jon Bees, Better Buys for Business June 2005 Xerox greatly upped the ante with its igen3 a digital machine in a class by itself. Graphic Arts Monthly, 2005 Over 16,000 DocuColor family sold to-date Over 800 igen3s sold to-date 10 billion Production Color pages expected in 2005 > 3 billion pages to date on igen3 - unmatched combination of page volume and performance The igen3 looks like offset printing but you be the judge. The igen3 is in a league of its own. The results show Xerox color science and engineering deliver key technical breakthroughs in a field Xerox invented. Henry Freedman, Technology Watch Sept 9, 2005 Market Share Data as of 1H05 for US and Europe combined Sources: IDC Webtracker ; Infosource for Europe, Xerox Internal Analysis

32 Summary We will continue to lead the New Business of Printing by: Focusing on the entire value chain Offering the most comprehensive set of products and solutions Providing the Right Technology, Right Workflow and Right Value Proposition