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Xerox Corp. (BB63)


Friday 15 June, 2001

Xerox Corp.

Re Business Segment exit

Xerox Corp
14 June 2001


     Decision Is Consistent with Plan to Focus on Core Growth Opportunities,    
              Will Achieve Significant Earnings and Cash Improvements

STAMFORD, Conn., June 14, 2001   Xerox Corporation (NYSE: XRX) today announced
its exit from the small office/home office (SOHO) business segment in a move
that sharpens the company's focus and supports its turnaround strategy.

Over the next six months, Xerox will discontinue its line of personal inkjet and
xerographic products sold primarily through retail channels. However, the
company will continue to provide service, support and supplies for its customers
who own Xerox SOHO products.

'This was a difficult but necessary decision that is consistent with our resolve
to execute an effective turnaround by focusing on core office and production
growth opportunities,' said Paul A. Allaire, Xerox chairman and chief executive
officer. 'While Xerox was engaged in active discussions with potential equity
partners, the slowdown in the economy and its impact on the PC and SOHO markets
prevented these companies from making what was once considered a compelling
investment in Xerox's SOHO business.'

'By exiting the SOHO business, Xerox will generate significant cash savings and
improved earnings that are incremental to our previous expectations to return to
profitability in the second half and for the full year,' said Anne M. Mulcahy,
Xerox president and chief operating officer.

The inkjet model required an upfront financial investment, which turns to
high-margin profitability as an increasing equipment population drives the
recurring and profitable sale of supplies.

'In a short period of time, the market for inkjet has changed dramatically, and
recent data indicates that the slowdown will continue,' added Mulcahy. 'Xerox is
therefore making the right decision at the right time. We will be better
positioned to build the new Xerox around our core strengths in the production
printing and network office environments, focusing on high-growth opportunities
in color, solutions and services.'

In the first quarter of 2001, the company recorded a $82 million pre-tax loss in
its SOHO business. Revenues for SOHO were $139 million, representing 3 percent
of total first-quarter revenues. Xerox expects its second quarter pre-tax SOHO
operating loss to be similar to the first quarter.

The accounting treatment and a related charge will be announced with the
company's second-quarter results.

The company confirmed its unwavering commitment to the office printing business,
building on its successful acquisition of Tektronix's color printing and imaging
division. Xerox will continue to fuel future growth in color and monochrome
printers designed for networked offices and sold through indirect channels

Service and support centers for customers who own Xerox SOHO products will
remain operational, and the company will continue to manufacture and market
supplies during a phase-down period to meet customer commitments. SOHO product
research and development in North America will cease operations immediately.
Xerox is beginning consultation with European employee worker councils to
discuss changes for the SOHO European business, including its inkjet
manufacturing facility in Dundalk, Ireland.

Xerox intends to sell its current inventory of SOHO products through existing
retail and other channels worldwide.


For additional Information about The Document Company Xerox, please visit our
Worldwide Web site at

This release contains forward-looking statements and information relating to
Xerox that are based on our beliefs as well as assumptions made by and
information currently available to us. The words 'anticipate,' 'believe,'
'estimate,' 'expect,' 'intend,' 'will' and similar expressions, as they relate
to us, are intended to identify forward-looking statements. Actual results could
differ materially from those projected in such forward-looking statements.
Information concerning certain factors that could cause actual results to differ
materially is included in the company's Form 10-K for the year ended December

XEROX(R), The Document Company(R)and the digital X(R)are trademarks of XEROX


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