WHAT HAPPENED TO XEROX: Have you ever heard of a company called Xerox?
Once upon a time, Xerox was a household name.
In fact, they were even more than a household name, they were a noun.
Whenever someone referred to a photocopy, they would often call it a Xerox, and that’s
still the case to this day.
While photocopies was what Xerox was most known for, this was by no means their only
contribution.
For example, they created a commercial computer, the Xerox Alto, before Apple and even IBM,
having released it back in 1973.
Xerox also created the first concept of a laptop computer in 1976.
On top of this, Xerox even invented the ethernet cable, and it was Xerox Altos that were used
to actually create the internet.
And those are just Xerox’s most notable contributions.
Xerox is also credited with inventing graphical user interfaces, laser printers, computer
generated bitmap images, modern text editors, and even object oriented programming.
And I think this statement from Bill Gates when questioned about stealing from Apple
really sums up the whole situation.
“I think it’s more like we both had this rich neighbor named Xerox and I broke into
his house to steal the TV set and found out that you (Steve Jobs) had already stolen it.”
Given the historic significance of Xerox, you would think that Xerox would be a trillion
dollar giant like Apple or Microsoft or atleast a background giant like Oracle, but none of
this is the case.
In fact, after the dotcom bubble, Xerox stock sold off and never recovered.
A similar story can be seen with their revenue numbers as well.
Within just the past 10 years, Xerox’s revenue has fallen by 70%.
At least the company was still able to consistently turn a profit, wait never mind, that just
changed as well.
In the last 12 months, Xerox has literally lost over a billion dollars.
And given that they only have $930 million left in cash, it seems like a bankruptcy is
inevitable for the company, especially with the recession.
So, how did Xerox go from being a household name responsible for leaps within the computer
industry to balancing on the verge of bankruptcy?
THE RISE OF XEROX: Taking a look back, the roots of Xerox date
back way further than any other tech company, mostly because they weren’t even created
as a tech company.
Xerox was established as a photographic paper and equipment manufacturer in Rochester, New
York in 1906.
Originally, they were named the Haloid Photographic Company, and honestly, they didn’t do anything
noteworthy for the first 30 years.
It appears that they were just a small company that stayed a small company.
It wasn’t till 1938 that the tide would start shifting for Xerox.
At the time, an independent physicist named Chester Carlson was working on an invention
that could print images using an electrically charged drum and toner.
This invention caught the eye of Joseph R. Wilson, the son of Xerox’s co founder.
Over the next several years, Joseph would try to convince Chester to turn his invention
into a commercial product.
Chester would finally agree to do so in 1946, and today, Chester Carlson is actually credited
as one of Xerox’ co founders.
At this point, Xerox finally had their hands on a ground breaking product, but this was
only the beginning.
They had to actually convince the public to buy and/or use the darn thing, and that’s
exactly what Xerox would focus on over the next few decades.
The first thing they did was come up with a name for the product.
Initially, they would land on the term Xerography which mean “dry writing” in greek.
This would eventually evolve into being Xerox.
The Haloid Company would officially debut Xerography at the Optical Society of America
on October 22, 1948.
But, at this point, Xerography was still very much just a concept.
While Xerox had a working prototype, there was still a long way to go in making it commercially
viable.
That was ok though, this presentation was mainly designed to simply generate and gauge
interest.
It appears that Xerox saw enough interest for them to go ahead and trademark the term
“Xerox” that same year.
Just one year later, Xerox would come out with the Model A which became the world’s
first xerographic copier.
But, this too was by no means optimal.
Generating a single copy required multiple steps, and the machine very much required
an expert to use.
But, Xerox kept iterating, and after another 10 years, they would create the world’s
first automatic, plain-paper commercial copier dubbed the Xerox 914.
That same year, they would create one of the most iconic commercials of all time: a simple
commercial showcasing how easy it was to photocopy a page from a book using the Xerox 914.
Nowadays, this seems like an ordinary day in the life of an office worker, but back
in 1959, this was truly a revolution.
For the first time, people could photocopy important documents and substantially lessen
the burden of record keeping.
The Haloid Company very much knew what they had created, and they were so confident in
the vision that they would change the name of the entire compay to Xerox in 1961.
And the rest?
Well, the rest is history.
PRINTING MONEY: Xerox was never that intent on selling the
914 itself.
They far preferred a renting model were users would have to pay a fee for each photocopy.
They charged users $25 per month to get access to a 914, and then they charged an additional
10 cents per copy.
Customers also had to pay for ink and paper as well which usually ran about 5 cents per
copy.
So, the all in cost was $25 per month plus 15 cents per copy.
This translates to $256 per month plus $1.54 per copy.
The only person who didn’t rent the 914 was the US government who refused to rent.
They wanted to buy 914s outright and the two would eventually settle on a price of $27,500.
That’s $281,000 per machine in today’s money.
Clearly, the 914 was by no means cheap, but that didn’t prevent it from becoming extremely
popular thanks to its usefulness.
Within just 2 years of launch Xerox would reach $60 million in revenue.
Xerox would double down on the marketing and make a commercial showcasing that even a chimpanzee
could use the machine.
Around the same time Xerox would be listed on the New York Stock Exchange which just
created even more hype for the company.
By 1965, they had pulled in over $500 million in revenue which translates to $4.7 billion
today.
Xerox would follow up the 914 with several iterations such as the 813, the 420, the 720,
the 330, and the 2400.
All of these had slight variations and were meant for slightly different purposes.
For example, the 2400 was a duplicator as opposed to a photocopier, but all of theses
machines had the same end goal in mind.
Make it cheaper and easier to reproduce documents.
And given that this had become an essential need for businesses and individuals alike,
Xerox was literally printing money.
But, while everything at Xerox was going great, Joseph Wilson was starting to get old.
He would step down from being CEO in 1967, but he would serve as the chairman up until
his death in 1971.
Before he died, he would oversee one last project called PARC or the Palo Alto Research
Center.
This is where all of the crazy inventions that we talked about would come from: computers,
laptops, ethernet, the mouse, email, file servers, and who knows what else.
It seemed like Xerox was very much planning to pivot to the PC industry.
They had the money, the expertise, and even the technology.
So, all they had to do was pivot and cash in, but this pivot would never come.
Instead, Xerox just pushed all of their inventions under the rug and focused on their photocopiers.
At first, this actually worked out fine.
Xerox was expanding internationally, and they were becoming a household name even in developing
countries.
As we discussed at the beginning, Xerox was basically synonymous with photocopies and
people would regularly refer to a photocopy as a Xerox.
For Xerox, it probably seemed like nothing could ever go wrong given that they had cornered
such an essential market.
But, as we now know, that was simply not the case.
THE BRUTAL FALL: Looking back, there was no pivotal moment
that screwed over Xerox.
Rather, it was just decades of complacency and ignorance.
I mean, outsiders understood Xerox’s potential better than Xerox themselves, and I think
the best example of this is a story with Steve Jobs.
In 1979, Steve agreed to give Xerox somewhere between 5-8% of Apple in return for a mere
$1 million.
The condition for this investment though was that Steve would get access to Xerox’s Palo
Alto Research Center.
Steve would end up ripping off the Window, Icon, Menu and Pointing Device systems from
Xerox into new Apple computers.
At this point, you can’t even blame Steve for copying given that Xerox literally opened
the doors for him.
Steve would later say quote “They just had no idea what they had.”
You could say the same thing about the Apple stake that they received as well.
Their stake would be worth a $150 billion today.
Xerox could’ve atleast waited for Apple’s IPO to sell the stake.
But, instead, Xerox would end up flipping the stake for a disgusting $1.2 million.
Yeah, Xerox truly had no idea what they were doing.
It seems that their leadership was just so high on their success within the photocopying
industry that they didn’t even care that they were squandering such massive opportunities.
Eventually, Xerox would try to take a step into the computer industry, but their attempt
was pathetic and ridiculous.
In 1981, they would launch the Xerox Star which was based on the Xerox Alto.
The computer worked just fine.
It had a nice user interface, respectable hardware, and productive software.
But, there was one major shortfall.
The darn thing cost $16,000 which translates to over 50 gs today.
Given that people could get a comparable machine from IBM for less than $1,600, I don’t think
you’d be surprised to hear that the Xerox Star flopped like a fish out of water.
The worst part is that Xerox didn’t even try to salvage the situation.
They basically went: Oh well, we tried and it didn’t work.
Back to photocopying.
And I think this mindset is what really killed Xerox.
They were just so comfortable with photocopying and it was so profitable that they didn’t
even care to expand.
This mindset was just made even worse by the fact that they didn’t face any consequences
for this behavior.
In fact, they were being rewarded.
As computers and the internet grew in popularity, so did the need to print and photocopy documents.
Combine this with the dotcom bubble and Xerox stock would go vertical.
Between 1982 and 1999, Xerox stock would rocket 900% despite making virtually no real progress.
After the dotcom bubble burst, however, Xerox’s house of cards would topple over and all that
remained was the real Xerox.
THE FATE OF XEROX: In the end, if Xerox had just leveraged one
of the many inventions that they helped create whether that be the computers, servers, or
the internet, they would be a mega giant today.
But, instead, they’re on the brink of bankruptcy with the same valuation that they were at
40 years ago.
Oftentimes, we hear about corruption, greed, and terrible reputations topple massive companies.
But, when it comes to Xerox, the factor that actually toppled them was simply too much
success.
The success blinded them from the need to continue innovating and expanding.
Instead, they just on their butts while their empire crumbled from underneath them.
With the rise of electronic documents, esignatures, and personal printers, people simply don’t
need to go to Office Depot to make photocopies.
In fact, if anything they’d prefer to back up all their documents to the cloud instead
of keeping track of physical copies.
At this point, Xerox is trying to sell an outdated product to a shrinking market, and
to be honest, there’s only one way this ends: bankruptcy.
But, that’s just what I think.
Did you realize how much of our modern technologies are attributable to Xerox?
Comment that down below.
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