By Kshitiz Goliya and Liana B. Baker
(Reuters) - Xerox Corp (XRX.N) will split into two companies, one holding its legacy printer operations and the other its business process outsourcing unit, it said on Friday, in a bid to be more nimble after years of trying to integrate the businesses.
Activist investor Carl Icahn, who first revealed a stake in Xerox in November, will get three board seats on the outsourcing company. He tweeted on Friday that "the separation will greatly enhance value for Xerox Corp shareholders."
Xerox shares rose nearly 6 percent to $9.78.
Xerox Chief Executive Officer Ursula Burns said in an interview on Friday that the strategic review had been underway before Icahn publicly revealed he had bought Xerox shares.
"The reason why it was easy to get to a decision is because we do have two businesses that rotate around two different axes," Burns said.
Xerox also posted fourth-quarter results, with profit rising 42.5 percent and costs and expenses falling 7.3 percent.
The company, whose shares had fallen more than 30 percent in the past 12 months, has tried to turn itself around by focusing on software and services as customers cut printing costs.
The document technology company, which will make printers and copiers, will have annual revenue of $11 billion, while the business process outsourcing company will have $7 billion in revenue.
Regarding the two companies potentially attracting interest from buyers, Burns acknowledged that Xerox's board and executives would speak to anyone interested.
"They are both strong and both large companies. But this would not be a small buy at $11 billion and $7 billion," she said.
Susquehanna Financial Group LLP analyst James Friedman said he thinks Xerox's services business once it separates is "an easy acquisition for someone but they will try and grow it themselves."
Xerox had been trying to turn itself around, shifting focus to software and services as corporate customers cut printing costs and consumers shift to mobile devices.
Burns, who took the helm in 2009, said on Friday the leadership and names of the new companies were yet to be decided.
Xerox also increased its quarterly dividend 11 percent to 7.75 cents per share, payable on April 29 to shareholders of record on March 31.
Under Burns, Xerox took a leap into the services market in 2010 with its $6.4 billion acquisition of Affiliated Computer Services Inc.
Burns said the services business has changed over the years and is not just the old ACS asset. In December 2014, it sold its informational technology outsourcing arm, previously part of ACS, to France's Atos SE (ATOS.PA) for more than $1 billion.
The split, expected to be complete by the end of 2016, will deliver $2.4 billion in savings over the next three years, Xerox said.
Lazard and Goldman Sachs were advisers to Xerox while Centerview Partners advised the board of directors.
(Reporting by Kshitiz Goliya in Benagaluru and Liana B. Baker in New York; Additional reporting by Supantha Mukherjee in Bengaluru; Editing by Saumyadeb Chakrabarty and Jeffrey Benkoe)