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Xerox Corp. (BB63)

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Wednesday 12 December, 2001

Xerox Corp.

Talks re Alliance

Xerox Corp
11 December 2001


For additional Information contact:

Leslie F. Varon            James A. Ramsey              Cynthia B. Johnston
Vice President & Secretary Director, Investor Relations Manager, Investor       
                                                        Relations
203-968-3110               203-968-3807                 203-968-3489
[email protected] James, [email protected]                          
                                                    Cindy,[email protected]
Fax (203) 968-4301         Fax (203) 968-3944           Fax (203) 968-3944


XEROX TO CREATE INDEPENDENT RESEARCH CENTER FROM FAMED PALO ALTO LABORATORY

Xerox Will Maintain Access to Research;
Discussions Continue with Potential Partners

PALO ALTO, Calif., Dec, 11, 2001 - Xerox Corporation (NYSE: XRX) today announced
it will create an independent company from its Palo Alto Research Center (PARC).
This initiative sets the stage for strategic partners to share in the benefits 
of PARC'S renowned innovation while ensuring that Xerox maintains access to the 
center's research and technology.

Xerox announced last year that it would seek strategic, non-competitive partners
for PARC, one of several elements in Xerox's turnaround plan to focus on core 
growth areas. The company confirmed today that active discussions are under way 
with key potential investors.

The new company is expected to begin operations after Jan. 1 as a wholly owned 
Xerox subsidiary. In this structure, PARC will continue to generate a stream of 
inventions, creating opportunities for Xerox and future investors to 
commercialize PARC-developed technology.

'Establishing an independent entity builds the foundation for our plans to seal 
strategic partnerships with external companies, ultimately allowing Xerox to 
fully capitalize on the PARC research it needs while opening the wealth of PARC-
generated innovation to new avenues of opportunity,' said Herve Gallaire, 
president, Xerox Innovation Group.

It is expected that PARC employees will transfer after the first of the year 
from Xerox to the new company. An external search for a chief executive officer 
of this company is under way.

'The current PARC organization will be the nucleus of the new company, but we 
intend to augment it with business development and management functions,' said 
Gallaire. 'We have developed a model that will preserve the culture and 
innovative capacity of PARC.'

Founded in 1970, PARC is one of seven Xerox global research centers that 
contribute to Xerox's approximately $1 billion annual commitment to research and
development. Even while Xerox has focused on driving down costs, the company has
maintained its R&D investment at about 6 percent of revenue.

The Xerox Innovation Group drives invention, innovation and integration 
throughout the corporation. It also manages intellectual property, patent 
licensing, business development, and new technology ventures and spinoffs.


For additional information about The Document Company Xerox, please visit our 
Worldwide Web site at www.xerox.com/investor.

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-Q for the quarter ended 
September 30, 2001.

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


                                                                                
                                                                       

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