Good morning and welcome to the Xerox Corporation fourth quarter 2009 earnings release conference call hosted by Ursula Burns, Chief Executive Officer. She is joined by Larry Zimmerman, Vice Chairman and Chief Financial Officer. During this call Xerox executives will refer to slides that are available on the web at www.xerox.com/investor. At the request of Xerox Corporation, today’s conference call is being recorded. Other recording and/or re-broadcasting of this call are prohibited without express permission of Xerox. (Operator Instructions) Some of the subject matter that is discussed during this conference call is addressed in the Registration Statement on Form F-4, filed with the Securities and Exchange Commission, that includes a joint proxy statement prospectus. We urge investors and security holders at Xerox to read the joint proxy statement prospectus because it contains important information. You may obtain free copies of the joint proxy statement prospectus and other documents filed with the SEC by Xerox and Affiliated Computer Services through the Internet site maintained by the SEC at www.SEC.gov. During this conference call Xerox executives will make comments that contain forward-looking statements which, by their nature, address matters that are in the future and are uncertain. Actual future financial results may be materially different than those expressed herein. At this time I would like to turn the meeting over to Ms. Burns. Ms. Burns, you may begin.

Good morning and thanks for joining us today. We’ll get started on Slide 3. In a tough year, we delivered a strong close to 2009 with results that reflect our disciplined approach to managing cash and reducing costs. Full year adjusted earnings came in at $0.60 per share, above our guidance of $0.55 to $0.57. In Q4 we delivered $0.25 per share, above our expectations of $0.20 to $0.22. The results exclude a $0.05 charge for the acquisition related costs we disclosed last month. The ACS acquisition is on track to close in early February and we’re making excellent progress on our synergy initiatives. We’ll talk more about that after the Quarter 4 review. Cash from operations was very strong. We generated $967 million in operating cash during Q4 and $2.2 billion for full year 2009. That’s $500 million better than our previous guidance. Total debt came down $1.1 billion in 2009. This excludes the $2 billion of ACS related notes issued last month. The company ended the year with a cash balance of $3.8 billion, which includes the financing raised to support the acquisition. Selling, administrative and general expenses were up year-over-year by $23 million, driven by currency. And SAG as a percent of revenue was 26.7% in the fourth quarter. Gross margin of 39.9% improved 2 points in Q4. So we’re pleased with our progress in delivering solid, bottom line results and operating cash, the result of heavy lifting and cost and expense management and across the board operational improvements. The results also reflect the modest improvement we’re seeing in revenue. Modest is the key word here. During the quarter, our developing markets improved relative to the major downturn in these geographies last year, but we have not seen a significant or consistent shift towards increased spending on…

Thank you, Ursula, and good morning. 2009 presented our business and management team with significant challenges, a worldwide recession driving down demand and volumes; a credit crisis impacting access rates and creating liquidity pressures on our channels and customers; and the negative effects of currency changes on our revenue and costs. We reacted by taking actions on cost and expense and cash management which enabled us to deliver above expectations given the economic realities. As we go forward we intend to keep the same discipline in place to insure positive returns for our shareholders. Fourth quarter and full year earnings are very positive. Our revenue trends have stabilized and we did see some improvements. Currency had a positive effect on revenue and the general trend of decline moderated. With our focus on cost reduction all year, we delivered solid gross profit margin for the quarter and the year, almost 40% and grew gross profit dollars by $25 million in the quarter. The strength of the yen continues to pressure our costs, but our actions have been successful in containing them. We continue to manage our expenses, RD&E and SAG with full year declines at constant currency of $414 million excluding bad debts. Fourth quarter improvements are consistent with the full year’s performance but appear lower due to currency and a year-over-year one time adjustments. Operating margin was 7.9% in the quarter, 6.8% for the year, driven by our cost and expense actions. Other net was adjusted by $63 million or $0.05 a share to recognize the acquisition related costs associated with ACS. We had previously forecasted $0.06. We saw improvements in our equity income driven by Fuji Xerox as a result of their restructuring. They also had modest restructuring in the fourth quarter worth [inaudible]. Our fourth quarter adjusted tax…

Thanks, Larry. That’s a good lead in to a status on our acquisition of ACS. As I mentioned earlier, we are on track to close this transaction early next month. The shareholder meeting for both Xerox and ACS are February 5 and our acquisition operations office is making significant progress on the revenue and cost synergy projects we outlined last quarter. We’ve delivered over 60 initiatives that are managed across four teams, corporate governance, delivery and infrastructure, sales and innovation. Through these initiatives we remain confident that we’ll deliver $100 million in profit synergies during year one, ramping to over $375 million by year three. Here’s a quick snapshot of our progress to date. Our corporate governance team has created new organizational models to support the combined governance structure. Our delivery and infrastructure team has prioritized the areas where we can achieve productivity improvements through outsourcing and implementation of ACS’s proprietary activity based compensation. The sales team has focused on everything from the sales process to compensation to customer engagement and is prepared to implement cross selling opportunities for our client relationship managers. More than 90% of ACS’s business is in North America and only 20% of our customers overlap. We’re ready to start pursuing this major market opportunity as soon as the deal closes. And our innovation team has tested and validated Xerox technology that will help ACS automate current manual based work processes and create differentiated new offerings to help their clients reduce costs. So I’m very pleased with our progress to date and remain confident in the great value this acquisition brings to our business, our customers and our shareholders. Let’s turn to Slide 11 to wrap up, then Larry and I will take your questions. During a very challenging year, we focused our priorities on generating…

(Operator Instructions) Your first question comes from Shannon Cross - Cross Research.

Ursula, I need some more color on revenue during the quarter, you know, linearity, geographic trends, trends on verticals, comments from customers, just any color you can give us from a sequential standpoint.

It was okay from a sequential standpoint and we did see some strengthening of revenue, particularly in DMO where the revenue as you know in the previous quarters, particularly in Quarter 4 of 2008 and [inaudible] 2009 were significantly pressured by the downturns [inaudible]. We did see improvement in just about every country in DMO from a revenue standpoint and activity standpoint for sure, so that was a good significantly. We also did see an improvement in supplies. Our SMB business channels that cover our SMB marketplace improved slightly as well. We still see pressure in U.S. and in Europe, particularly in large enterprises and we still see pressure almost across the board in our black-and-white high end production business. Color by the way, color at the high end especially with the new 7002 and 8002 and in the office with the Color Qube is trending better. And so overall, you know, kind of a balanced picture in some geographies picking up, some not so much and color the place where we’re investing a lot of energy doing a lot better.

Was there any difference in terms of linearity this year versus other years?

There was. Quarter 4 always sequentially is always better than Quarter 3, but this Quarter 4 was better than a normal Quarter 4 over Quarter 3, particularly in equipment. We saw it across the board, but equipment improvement was strong. Generally Quarter 4 is about, let’s say about 20% higher than Quarter 3 but we did see this quarter about 40%, so 20 additional points of improvement. So not a normal Quarter 4 for us, a stronger Quarter 4 on a lower base, though, but a stronger Quarter 4.

Larry, can you talk a little bit about sustainability of cash flow? Clearly some of the working capital improvements probably won’t necessarily repeat themselves, but how should we think about cash flow from a core Xerox standpoint and then is there anything that we should keep in mind with regard to cash flow as we look forward through the year as you incorporate in ACS?

Thank you, Shannon. Well first of all, I think the first thing is to look at the last seven years and we consistently every year that we have a good year with cash the question comes up about sustainability. And so I think sustainability of this cash model after seven years speaks for itself, number one. Number two, we’re committed to the $2.6 billion that we forecasted back in October. We’re reconfirming it now which is the combined companies. And you know I see improvements across the board. Obviously we had tremendous working capital improvements in the fourth quarter so you would expect this of 2010 to be delayed towards the end of the year. And if you look at 2009, if you looked at the first quarter you wouldn’t have projected $2.2 billion for the year. So I think we’re going to see a build up and a skew of cash in 2010, especially as we take on ACS for the 11 months of it. But we’re confident we can make our projections here.

Your next question comes from Benjamin Reitzes - Barclays Capital.

With regard to your slideshow from actually three months ago, I just wanted to go back to a couple of things you said. You’ve reiterated your view for the combined company of $0.75 to $0.85 but then at that time you also laid out $0.95 to $1.05 for 2011 and $1.10 to $1.20 for the combined company in 2012. So given that you overachieved in the fourth quarter, how do you feel about the numbers for 2011 and 2012 now that you’ve overachieved in the fourth quarter and you’ve got more of the planning process under you?

We remain extremely confident about our 2011 and for that matter 2012, I know it’s a little bit far out, EPS numbers, cash numbers, the model that we laid out three months ago and even five months ago actually is doing nothing but strengthening as we work more and more with ACS and we manage our business on a daily basis. So there’s $0.95 to $1.05 and $1.10 to $1.20 and the $2.6 billion in cash in 2010 and $2.8 in ’11 are numbers that we remain committed to and are confident in.

So obviously when ACS reports tonight no surprises and kind of steady as she goes?

We expect none but a basic report.

I just wanted to go through something with regard to your core gross margin. Obviously the yen hurt you on the cost side but is the yen causing your competitors to price more benign in this environment? When they have to bring back overseas sales for them it’s a hit so you know is the yen actually causing the pricing environment in the market to be more benign than it usually is and is that keeping gross margins stable at all? And can you talk about the pricing environment as it relates to that?

Ben, it’s interesting that we’ve seen stability throughout this recession in the pricing environment. We see price declines of around 5% to 10%. This is kind of in the range that we’ve seen for every quarter in 2009, you know, up or down a little bit on the edges but we’ve seen no significant change in trend in pricing in the marketplace.

Larry, blended tax rate for the combined company, what’s your best view of that?

32%.

And blended gross margin just a little higher than the average?

Blended gross margin is between 33% and 35%.

Your next question comes from Ananda Baruah - Brean Murray, Carret & Co. Ananda Baruah - Brean Murray, Carret & Co.: Ursula, just if you could, maybe give us a little bit more detail for what you guys saw in the small medium business, the improvement there and in the supplies as well. I guess where did you see it specifically and then maybe on the supply side since it sounds like its more SMB related do you think that the sell in that you saw is indicative of sort of what year end demand is or do you think there could be some channel fill there?

I’ll start with DMO first. I mean DMO is a market that is essentially a small to medium business market and we did see improvement in our product set and our activity levels as I said in just about every country in DMO that was a good indicator for the small to medium business market in that segment of the world. In our North American and European countries we did see stronger performance in our channels business. It’s hard to say strength but stronger performance in our channels business. So this is our resellers. We did see a stabilization of the stocking levels that our channels have. As you know through 2009 we went through a significant destocking in the channels and where they’re at now, where they were actually in Quarter 3 as well is a level that’s been maintained. So we expect for that to grow as the economy improves. We don’t expect additional significant degradation of that and we do believe that some of it is sell through, not only sell in. The economy is still fairly cautious out there and our resellers are very aware of cash, so we do not believe they are buying ahead of the curve. They’re buying to supply customer demand. So we think that there is a real pick up in business there, a real pick up in activity there. And end user usage. Ananda Baruah - Brean Murray, Carret & Co.: On the enterprise you’re not feeling it’s actually doing much better but are you more optimistic sort of going into 2010 about potentiality of enterprise spending? Are you getting any anecdotal feel reaching your customer base, I suppose?

Yes, I think what we’re seeing is the continued pressure on the black-and-white business in large enterprises and the graphic arts segment. But we’re seeing some good news in color as we continue to push the envelope in newer and better technologies. Our 7002 and 8002 is doing extremely well in the marketplace. iGen 4 interestingly enough in Quarter 4 had a really good quarter, page volumes, activities, etc. So I do believe that we’re seeing a little bit of loosening but the pressure is still there, particularly in the very large geographies in the U.S. and in Europe. So it’s mixed. Black-and-white is still down, color stabilizing, seeing some bright spots in the marketplace. Ananda Baruah - Brean Murray, Carret & Co.: And if I could just ask on the March quarter guidance, given I guess I’d say through the organic or secular strength in the core business for December you know it feels like there’s maybe, well I just want to make sure there’s nothing built in to the March quarter guidance that kind of implies maybe some softening in the core business because it seems like you guys if you wanted to you could have maybe guided a little bit higher. I’m not saying you should have. That’s why I want to make sure the pushes and pulls there’s nothing that we’re not clear on in the March quarter guidance.

Well I can assure you that we’re going to try to get the highest actuals in the first quarter that we can but when you look at the combined companies and you look at getting two months of ACS, when you look at the fact that the synergies come later in the year, when you look at the fact that the restructuring helps us later in the year, I think it’s a really good representative guidance. Ananda Baruah - Brean Murray, Carret & Co.: Larry, it feels like there’s a couple of things that have happened that could serve as sort of tailwinds, at least on the margin, that probably weren’t baked into the original 2010 combined company EPS guidance. I guess one would be a little bit lower financing cost and it seems like after today’s report and your comments about what to expect from the JV perhaps a little bit of an incremental benefit there that wasn’t baked in. Is that a correct assumption?

Well I think you’re pointing out positive things but whether or not they were baked in, I mean we bake in a lot of assumptions. Some get a little better, some get a little worse and you know our expectation is that we can, you know, these are again projections out in time. Our expectation is that we need those kinds of improvements as part of the numbers because there’s always something going the other way.

Your next question comes from Chris Whitmore - Deutsche Bank Securities.

Larry, are you still comfortable with the $22 billion revenue target for the combined company in 2010? And what is implied for core Xerox growth rate but baked into that number?

Yes, the first question I am comfortable with the $22 billion. You know some of this is adjusting for currency here, so we have to be careful. Who knows where the currency goes? But you know the two businesses together will be around $22 billion for sure, so I’m comfortable, number one. Number two, I think we can assume that from a core business standpoint we expect to see modest improvement going forward that hopefully will get better as we go through the year and the economy gets better.

Do you expect core Xerox to grow constant currency basis in 2010?

Yes.

I wanted to get more color on restructuring. How many heads are coming out? What are the primary areas of focus in terms of headcount reduction? And can you split that between restructuring of the core Xerox business and integration or restructuring related to the combination?

Of the $250 million that we referred to as happening in Quarter 1 that’s all core business restructuring, Xerox restructuring. It’s about 2,500 people. It’s split about a third of the benefit, the cost line, is in R&D, a third will be in gross profit and then a third in SAG. The areas that we’re focusing on are the supply chain, obviously manufacturing to the supply chain is something that we continually focus on; the back office functions; technical service and managed services and that’s driven primarily by efficiencies; technology efficiencies, you know, machines break less and so on and so forth and we’ve become more efficient; and then we have done a pretty big infrastructure change in Europe and that will allow us to reduce some of the heads there as well. And then obviously in development and engineering costs on the R&D side.

I guess I’m trying to reconcile the relatively positive outlook for revenue with incremental restructuring. Why isn’t that incremental restructuring flowing through into better earnings guidance going forward?

First of all we did, if you looked at our guidance, we did contemplate significant cost reductions in 2010. The restructuring is a way to get at those cost reductions. The reality is that we are about a $2 billion plus company smaller than we were when we entered 2009. And the restructuring is to assure that we can do some of the good things that we should be doing, which is invest a little bit more in our people and just a little bit in the business; keep our margins strong; keep our earnings strong; and size the business for our $15 billion revenue stream growing versus a $17.5 billion revenue stream. It’s that simple. That’s what we’re trying to do.

Your next question comes from Keith Bachman - BMO Capital Markets.

Just to follow on from Chris, Larry did you say that the $250 million restructuring or $280 million in restructuring this year for core Xerox that that would translate into $200 million in annual savings? Did I hear that right?

Yes.

That is correct. It’s $250 for core Xerox, $30 million when we join the companies together. That will be from the core Xerox and from ACS, the additional $30 million.

But its $200 million in annual savings and what I really want to try to get to, Ursula, so that $200 million in annual savings is in addition to the $100 million identified from the synergies. Correct?

Absolutely.

And Larry, in terms of the EPS guidance that you’ve provided, could you give us what you think? The deal hasn’t closed yet. What core Xerox is in terms of EPS guidance?

I don’t think that’s a productive thing to do personally. I mean we’re going to be a combined company and to split EPS when you’ve put two companies together is just not a productive thing to do. So our guidance is with both companies together. You just can’t go forward when you start to mix companies and break out what somebody’s EPS would have been had you not been together. It’s just not. Productive is the best word I could use there.

The savings that we have, just to make sure that we’re clear on this, the $140 million of the savings in this year, $200 million is the going rate, full flight savings of the restructuring on an annualized basis.

The machines in the field and pages, Ursula how do you see page growth in particular unfolding during the course of CY ’10?

Let me just give you some color about what happened in CY ’09. Total digital pages were down in line with what we had spoken about in the previous three quarters, around 8%. It was about 6% in the previous quarters. Color pages were up in this quarter and were up throughout the year. So I expect the trend to remain the same, improving slightly in the black-and-white space, but not significantly, and improving in the color space. So more color page growth in 2010 versus 2009. Machines in the field are stable, color miss is growing, digital miss is growing so we expect even though we’re pressuring on the black-and-white high end business, we expect the pages to stabilize at a slight decline and color pages to continue to grow.

So total pages a slight decline for CY ’10, Ursula?

Yes, for CY ’10, yes. I think total digital pages will continue to decline in CY ’10.

Larry, during the Q4 you’re factoring or receivables went up quite a bit. I think year-over-year it would contribute about $257 million of incremental cash flow. How does that relate to the target for 2010? In other words does the factoring receivables go up or stay about these levels and how do you think about that transition?

Well the factoring year to year helps us $100 million in the fourth quarter and $100 million for the year. We were about even for three quarters. It’s not $250 million year to year.

Yes, that’s about what it says in the footnote is in terms of the amount factored, but perhaps.

You said year to year, right?

Yes. I’m just looking for it now. The factoring receivables we sold $600 million of accounts receivables, right, sorry, in third quarter 2009. So yes, it was about $257, you’re right, sequentially.

Yes. So, well sequentially is a different subject. I mean we always do more, there’s more receivables in the fourth quarter. But year to year we did increase $100 million in the fourth quarter and that same $100 million is for the full year. And for 2010 we’re going to have program consistent, whether or not it ends up $50 million more than the year before or $50 million less. We’ll have to see how it goes. These programs are done quarter by quarter but my expectation is it will be around you know the same kinds of numbers that we did this year.

Okay. Fair enough. Thanks very much, guys.

I just had one other point I wanted to make. When I was asked about the gross profit margin of the combined companies I said $0.33 to $0.35 and that includes keeping the core business in the range of $0.39 to $0.40. ACS has a margin in the services business. You know they have a lower SAG and they have a lower gross profit margin and they actually end up with a very good operating margin. Their gross margin is around the 18% to 20% range. So when you weight the profit dollars you get the $0.33 to $0.35. So there’s no decline really in the base business or the others. They just have a lower SG&A as it relates to gross profit margin.

Your next question comes from Mark Moskowitz - J.P. Morgan.

I wanted to follow up on Chris’s and Keith’s questions earlier, Larry, if I could, regarding the incremental restructuring of the core business for 2010. I just want to get a sense since you’re not really going to update the EPS guidance, the incremental cost savings, are you going to reinvest that in sales coverage? Is there something we should think about in terms of maybe trying to get a little more out of the gate in terms of momentum when you close ACS? In terms of getting out there and spreading the word? Or is this more of a signal that you’re still a little cautiously optimistic about the large enterprise coming back this year?

No. It’s none of the above. You just have to go back to 2009. We entered 2009 and we tried to do as many cost and expense actions that we could that would offset revenue decline and not use up cash. So they generally were not associated with restructuring. They were things like reducing the 401(k). They were things like having no salary increases. They were things like not giving raises to people, cutting travel, all those kinds of things that generally are not sustainable forever. Our people have done a great job. They deserve to get raises. They deserve to have some of their 401(k) come back. So there’s a lot of positive things that have to be done here. In addition to this, a little bit of what Ursula said, when we did these cost and expense actions we didn’t know the revenue was actually going to end up $2.5 billion down between currency and demand. And so when you look back at what we did to make 2009 a really good year in this environment, we have to make trade-offs now going forward to get our going forward cost base consistent with $15 billion of Xerox business. You know we still have 100% of the cost actions we took and we had all this restructuring. Some of those cost actions are going to go back to normal cycle and we needed restructuring to downsize ourselves consistent with the revenue. So that’s pretty much the story. You have to tie 2009 actions to 2010.

The other question revolves more around the install activity, the longer term contracts that you’ve entered into in the recent months. Ursula, can you talk about the economics of years 2, 3 and 4? Are you having to throw in more goodies to get folks to sign on for multi-year engagements? Or are you kind of holding the line there in terms of the economics? Just trying to get to the margin. I’ll take it terms of years 2, 3, 4 and 5.

So the way I characterize it for our management services business and then I’ll do our equipment business. By the way, they’re not too distinctly different from each other. We have not needed to change a normal practice that we have with the clients and that by the way that normal practice is that when you renew a contract, you renew it if it’s the same exact business at a lower price than we did when we first signed on. Generally when we renew we add more services to that contract and so the total price and total cost of the contract actually does not change significantly materially. But we’ve not seen a change in trend at all. We have not had to lengthen our signings or throw in more goodies as you say. It’s a pretty normal business environment from that perspective. We sell equipment for 3 to 5 years. They take it. We manage it for that long and we set a price over the years. Same thing with managed services contract. When we renew, we have to give them more value and with that more value comes the same price or a slightly higher price.

Your next question comes from Shannon Cross - Cross Research.

Ursula, can you talk a little bit about the competitive environment, what you’re seeing out there from you know the Canon Océ deal and [Reko Ikon] and anything HP’s doing? I’m just kind of curious as to how you’re thinking about market share and shifts in a different segment.

Good question. Thank you. Good question to close on as well. What we’re seeing from competition, let me take it into the segments that you’ve kind of divided it into. I’ll start with the Japanese competitors, Reko and Ikon the combination has put as you know quite a bit of pressure on Canon. And Canon and Reko therefore are kind of duking it out to fight for the old Canon [miff] that Ikon used to cover. That is not really impacting us differentially. We do sometimes see some aggressive pricing between those two and when we come in we actually have to be engaged in that price. We’re increasing coverage. We have a great set of offerings. Not just the Color Qube but a whole color fleet that we launched in 2009. So our activity and our participation in that market is stronger. It was stronger in 2009 than even in 2008 and you’ll see in both black-and-white office and in color office that we’ve either maintained or grew share. So I’m pretty pleased competitively how we’re positioned in that space. At the higher end, we had some weakness as you recall. At the low end of the inter-production color [face] and actually at the high end we reset the entire product set. At the high end, the 7002, the 8002 just hit the market not too long ago and iGen 4 is going very, very well. So our share in those segments of the marketplace should be strong, particularly in Quarter 4 and Quarter 1 of 2010. Competition there is not any more aggressive than it’s always been. It’s been fairly aggressive but our product set, our coverage, etc., puts is in good stead. Océ Canon, we really haven’t seen anything on Océ Canon. It hasn’t closed and if anything it’s been an opportunity for us as the Océ guys are trying to figure out who they belong to. Our continuous feed products continue to gain share, continue to do very well from an install base and a page volume base and continue to gain share. So from the competitive standpoint fairly good. HP, we don’t really see them a whole lot across the board. I mean they’re obviously out there. They’re a very good company, very large, but most of our battles on an equipment base is with the Japanese competitors not with HP that much. And then on the services side we’re doing extremely well in managed print services. Gartner just gave us yet another accolade as being the number one provider in this space. So our services signings are the highest signings level in the Quarter 4 time for the whole year. Services are doing well. But believe it or not, from a competitive position we’re holding our own or doing better.

Great. Thank you.

So that closes our review of fourth quarter earnings. My thanks to all of you for joining today. Have a great day.

Thank you for joining today’s conference call. You may now disconnect.