Copy That: Xerox Still Heavy On Research
Monday October 13, 9:58 am ET
By Nick Turner
Sophie Vandebroek moved excitedly around the room.
The chief engineer of Xerox Corp. (NYSE:XRX - News) was showing off the company's latest breakthroughs and could barely contain her zeal.
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"You have to see this - it's really neat," she said, stopping by a display on printed organic electronics.
There was a lot to see. Despite Xerox's financial struggles in recent years, it remains an innovation powerhouse. Vandebroek and her fellow researchers gave a lengthy tour of their brainchildren Wednesday in San Francisco.
Xerox has always focused on finding the next big idea. Its iconoclastic spirit is part of its DNA, since the company was founded on an idea - xerography - that few thought would work as a business.
Xerox also has a long history of failing to capitalize on its good ideas. As Xerox sets out to remake itself, the pressure is on the company to improve its track record.
Some of Xerox's big research breakthroughs include the laser printer and the graphical user interface for computers. Both those ideas, however, lined the pockets of other companies.
Its Alto computer, created in its Palo Alto (Calif.) Research Center in the 1970s, could have given Xerox a jump on Apple Computer Inc. and IBM Corp. But Xerox decided to shelve the project in 1977, the same year Apple incorporated. It didn't fit with Xerox's existing business, the company's leaders figured.
In later years, Xerox went too far in the other direction, trying to do too much too soon with its research, says Peter Grant, an analyst at Gartner Dataquest, a market tracker based in San Jose, Calif.
Desperate not to lose any vital ideas, Xerox spun off research projects into separate companies.
"They wanted to turn every technology into a (separate) business," he said. That was a costly strategy, with lots of risk.
Teams Up On MEMs
Now, the company seems content to forge partnerships with existing businesses, Grant says. That lets Xerox limit its exposure. Take the field of MEMs, or microelectro-mechanical systems.
MEMs are tiny machines that are built with chipmaking equipment. They're used, for example, to improve color image quality in laser printers. The devices hold huge promise, but they're a risky proposition. It's expensive to develop and produce MEMs, and demand hasn't grown as quickly as some expected.
But Xerox is tackling MEMs via the Infotonics Technology Center. That's a nonprofit consortium backed by Xerox, Corning Inc., Eastman Kodak Co. and others. The effort should help defray the costs as MEMs get a chance to catch on.
That's not to say Xerox has abandoned the idea of spinoffs. Take Gyricon LLC, which started in 2000 in Ann Arbor, Mich. The company is trying to market Smart Paper, another product Xerox developed at its Palo Alto Research Center - better known as Parc.
Smart Paper displays various images using tiny two-color beads. Electrical stimuli move the beads around to form messages. Unlike regular electronic displays, the system draws power only when the message is being changed. Otherwise, it looks like an ordinary sign.
Gyricon officials say SmartPaper signs would be natural for retailers. Store managers could use them to change price signs remotely. The company says it's in talks with large retailers, but it won't name names.
Xerox's bread and butter has remained photocopiers and printers. That was OK in years past, since those were lucrative businesses. But with its markets slowing and profit margins shrinking, Xerox suffered big losses in 2000 and 2001.
Not counting nonrecurring charges, Xerox lost 48 cents a share in 2000 and 12 cents in 2001. Sales fell from $19 billion in 1999 to $17 billion in 2001.
Chief Executive Richard Thoman left the company in May 2000 after failing to turn things around. Those were dark days, made worse by accounting irregularities. The company ultimately had to restate earnings and even consulted with bankruptcy advisers.
Anne Mulcahy, who took the reins after Thoman, has started on a comeback. Xerox earned 2 cents a share last year, and analysts expect a profit of 55 cents a share this year.
Sales, though, haven't rebounded. They fell to $15.8 billion in 2002 and look to be flat this year.
With the company in such dire straits in recent years, some observers speculated that Xerox would drastically scale back its legendary Parc and other research and development. That hasn't happened.
The company spends 5% to 6% of revenue on R&D, in line with IBM Corp., Hewlett-Packard Co. and other large tech outfits.
Patent Count At 15,000-Plus
"Anne Mulcahy could have cut the R&D budget significantly, but she didn't," Vandebroek said.
Xerox's commitment to innovation drew Vandebroek to the company - twice. She first came to Xerox in 1991 after a stint at IBM's T.J. Watson Research Center in New York.
After leaving to serve as chief technology officer for Carrier Corp., she came back to Xerox in January 2002. "I left Xerox for a while, but came back because of its focus on innovation," she said.
Whether they'll see the light of day as products, Xerox inventions are bountiful. The company notched its 15,000th patent last year.
Here's a sampling of recent ideas:
-GlyphSeals. This technology aims to help people recover damaged paper documents. It relies on glyphs - tiny printed codes that contain lots of information - which Xerox developed years ago.
By encoding a document's information inside these glyphs and then printing them on the back of the document, there's less risk that the information will get lost.
Let's say a document gets burned or ripped. If it had a GlyphSeal on the back, you could scan the remainder of the document, and Xerox's software could recreate the full original. You'd then simply print out the fresh copy.
-Printed organic electronics. Liquid crystal displays and other flat-panel monitors are increasingly common. But they're still expensive to manufacture.
With printed organic electronics, or POE, Xerox looks to use printing technology to create organic or plastic transistors. Those would let people print out an integrated circuit sheet, which could be used as a display.
Ultimately the technology could help pave the way for electronic paper - flexible displays that could fold like a newspaper.
-Switch-A-View. With this technology, Xerox scientists print two images on the same piece of material. You see only one at a time. Each is in a different color and can be clearly viewed in the right light.
The technology is designed to be used in packaging. At a movie theater, for instance, your popcorn tub could be covered in Switch-A-View patterns. When the light from the projector switched to a different color, your tub would suddenly look quite different.
Robert Loce, a principal scientist at Xerox, also sees the technology going into children's books.
The books could be bundled with special flashlights to make the images come alive.
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