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CEO Striving to Put Xerox Back in Full Working Order

Technology: Since Mulcahy took over the helm last year, she has proved that she knows how to handle crises, analysts say.


Xerox Corp. Chief Executive Anne M. Mulcahy opened a speech before a group of business executives in March by citing a Chinese curse: "May you live in interesting times."

Then the woman named by Fortune magazine as the sixth-most powerful female executive in the country quipped: "I'd like to try living for a while in less interesting times."

That's unlikely, particularly given Friday's disclosure that the world's biggest copier maker inflated revenue by $6.4 billion over five years. But those who know the low-profile Mulcahy said she had proved that she can handle crises, perhaps even better than the top woman on Fortune's list.

"When you compare her to [Hewlett-Packard Co. CEO] Carly Fiorina, I give Anne higher marks," said Gartner Inc. analyst James Lundy, who worked with Mulcahy when he was an executive at Xerox. "Carly took over a company that was in pretty good shape. When Anne took over Xerox, it was almost ready to go bankrupt. Today, they are on their way back to being investment quality."

Mulcahy, 49, was largely unknown to outsiders when named president of Xerox in May 2000. She had been practically a lifer at the company, having begun her career there a quarter of a century before as a copier saleswoman.

Things couldn't have looked worse at that point. The once- mighty company was about to announce its first quarterly loss in 16 years. Debt was piling up. Morale was plummeting. And the Securities and Exchange Commission had launched the accounting review that led to Friday's disclosures.

There was little in Mulcahy's employment background--most recently as vice president for human resources--to demonstrate she could deal with the morass.

"There was real, well-founded doubt that she couldn't get things to the point where Xerox could be turned around," said Dan Schick, stock analyst with financial research firm Morningstar Inc.

Mulcahy started by working the trenches. "She literally went out to all the branch offices to bring up morale, having hundreds of meetings," Lundy said. "She was completely hands on."

So much so, that she steered away from schmoozing with analysts--who were then courted like royalty--when there was work to be done.

"I remember once we were having a corporate analysts briefing," Lundy said. "She presented there and then excused herself to leave because she had a meeting with one of the company's European clients that was to take place in Rochester. Not everyone would have up and left an analyst meeting for that. I was impressed."

In addition to the feel-good activities, Mulcahy oversaw the sale of $2.3 billion of assets. She spun off several of Xerox's established divisions, including one she had helped build up--the inkjet printer unit.

She inked new contracts, such as a four-year, $109-million agreement with OfficeMax Inc. And she helped launch new products and partnerships, including a joint venture with GE Capital to provide financing for Xerox customers.

"She knows how to interact but she can also be tough," Lundy said.

Mulcahy oversaw changes in the executive ranks, including the resignation of former Chief Financial Officer Barry Romeril. She tapped veteran Xerox executive Lawrence A. Zimmerman as his replacement.

A year ago, she ascended to the position of chief executive, taking over from Paul Allaire, who stayed on as chairman. Allaire had agreed to take the CEO spot on an interim basis at the same time Mulcahy was named president.

According to documents filed with the SEC, Mulcahy's base salary last year was $1 million and she received an additional $2.5 million in bonuses and stock. In January 2001, Xerox stock was trading at $8.17 per share on the New York Stock Exchange. It closed the year at $10.42.

On Friday, shares fell $1.03 to $6.97.

With all her accomplishments, Mulcahy will now face a new round of tests. No matter how bad the accounting adjustments were in reality, they were made worse by happening at a time when scandals at WorldCom Inc. and other companies have shocked the country.

If Mulcahy takes her own advice, she will approach the crises methodically.

"I've been at Xerox for 25 years, most of my business career," she told executives in March. "I feel like I've grown up in the company. And so there's a tendency to think you know all the answers. Combine that with a strong desire to make quick decisions in a time of crisis and you have a recipe for potential failure."



Chairwoman and chief executive, Xerox Corp.

Age: 49

Background: Born in Rockville Centre, N.Y. Her husband is a retired Xerox sales manager, and her brother is head of the Global Solutions Group.

Education: Bachelor's degree in English and journalism, Marymount College in Tarrytown, N.Y., in 1974

Professional: Joined Xerox as a field sales representative in 1976. Became vice president for human resources in 1992. Stepped into the role of CEO Aug. 1, 2001. Was named the company's chairwoman Jan. 1.

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