Xerox officials, however, have denied that a relocation is in the works. Officials concede, however, that some Stamford-headquarters employees could be transferred to Rochester.

Driver: First Quarterly Loss in 16 Years

Behind this hubbub is another unfamiliar activity for Xerox: losing money. Just as "Xerox" became a synonym for "photocopy," Xerox and profit have long been linked.

For third-quarter 2000, though, the profit-turning didn't collate. In late October, Xerox reported a net 3Q loss of $167 million -- the company's first quarterly loss in 16 years. Chairman and CEO Paul Allaire wasted no time in trumpeting a "turnaround program." That program, he said, will include asset disposals to raise a projected $2 billion to $4 billion. Allaire projected that another $1 billion would be realized from corporate cost cutting - which will almost certainly translate as major layoffs.

"It is clear that just fixing our operational issues, although critical, is not sufficient," Allaire said. "We must fundamentally resize our cost base, cut our investment levels and significantly improve our balance sheet with asset sales and alternative means of providing customer financing."

What's on the Block

Disposing of $2 billion to $4 billion in assets, of course, stands like a giant whirlpool - and one that may engulf a vast array of Xerox properties and operations.

Xerox has already revealed part of that array. The company said that it is "actively engaged in discussions" to sell:

• Xerox (China) Limited, established in 1995;
• A portion of Xerox's ownership in Tokyo-based Fuji Xerox,
• Xerox Engineering Systems, and
• Xerox's interest in a number of spin-offs, with ContentGuard and Inxight apparently leading that list.

The seriousness of Xerox's cost-cutting intent was underscored by its announcement that it's actively seeking a joint-venture partner for the Palo Alto Research Center (PARC). Established in 1970, PARC is credited with being the birthplace of myriad high-tech inventions, including the laser printer, the computer mouse and the graphical user interface. Xerox, however, stipulated that it's looking only for "non-competitive partners" for its PARC operations.

Similarly, Allaire emphasized that the asset offloading won't be a bargain-basement affair. "We do not intend to fire-sale our assets," he asserted.

Rumors Harder to Offload?

Stopping a rumor sale, on the other hand, may prove to be a tougher task.

The New York Times, for example, reported that one venture capital firm recently looked at PARC with the intent of buying. Xerox has had no comment on that issue.

And while Xerox denies the Rochester relocation, the company did note in announcing 3Q 2000 results that it plans to get out of the equipment financing business, which is headquartered in Stamford. The 150-employee equipment financing unit, however, has only "a handful" of workers based in Stamford, officials said.

Like a nasty cold, the Rochester rumors are likely to persist until Xerox's performance takes an upturn. After all, Rochester still has some 14,000 Xerox employees, and the philanthropy of the company's two founders dots the city's landscape.

Even a struggling Xerox, however, remains a formidable presence, with $13.58 billion in revenues for 2000's first nine months. And Xerox officials have stressed that the company "has adequate liquidity, including underutilized capacity" and "is in compliance with all of its covenants."

Vowed Allaire, "None of these efforts will compromise our core strategy, each will contribute to our turnaround and all are designed to enhance value for all stakeholders -- customers, credit providers, shareholders and employees."