Xerox Forms Internet Group

The unit's mission will be to develop new e-business and e-service products more aggressively.
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Xerox

(XRX) - Get Report

, the beleaguered copier giant, said Thursday it was beefing up its Internet-related activities with the formation of a new Internet business group.

Analysts and investors, who were shocked earlier this month when Xerox unexpectedly disclosed that its fourth-quarter earnings were likely to come in 40% below Wall Street's estimates, were not overly impressed by the latest announcement.

Xerox, which has seen its share price plunge from a 52-week high of 63 15/16, reached in May, was trading down 1/8, or 1%, at 21 9/16 in morning trading Thursday. (Xerox settled up 3/16, or 1%, to 21 7/8.)

"This is totally immaterial to the company," Alex Henderson, an analyst at

Prudential Securities

, said of the new Internet group.

"This is a company that does not have an Internet business," he said. "They really don't have the products yet."

Prudential rates Xerox a hold and is not an underwriter for the company.

A Xerox spokeswoman, Christa Carone, said Xerox would invest an unspecified fraction of the $200 million it earmarks annually for developing Internet-related technologies in the new business group.

The group's mission will be to develop new e-business and e-service products more aggressively, and spinoffs could eventually be in the offing, Carone said, adding that Xerox was in negotiations with some potential partners.

The group will also be responsible for further developing Xerox's Web site and increasing its range of on-line services.

But when asked why it had taken so long for Xerox to decide to boost its Internet efforts, Carone replied, "That's a good question."

Analysts said the Internet initiative reflects Xerox's awareness that it has to try to do something to jumpstart its sagging business but noted that it would take time before the Internet group reaped any rewards.

"In the near term it will probably do nothing," said Benjamin Reitzes, an analyst at

PaineWebber

. He has a hold rating on Xerox and has not done any underwriting for the firm.

In the longer term, Reitzes said the group might be able to develop its Internet assets to the point where a spinoff or initial public offering would be possible.

The Internet unit will be headed by Michael Miron, formerly senior vice president of corporate business strategy and development.