Anne M. Mulcahy – Chairman and Chief Executive Officer Lawrence A. Zimmerman – Executive Vice President and Chief Financial Officer

Shannon Cross - Cross Research Ananda Baruah - Bank of America Securities Ben Reitzes - UBS Carol Sabbagha - Lehman Brothers Bill Shope – JP Morgan Matthew Troy - Citi Investment Research Jay Vleeschhouwer - Merrill Lynch

Good morning and welcome to the Xerox Corporation fourth quarter 2007 earnings release conference call hosted by Anne Mulcahy, Chairman and Chief Executive Officer. She is joined by Ursula Burns, President; and Larry Zimmerman, Executive Vice President, 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 will be tape recorded. Other taping and/or rebroadcasting of this call are prohibited without express permission of Xerox. After the presentation, there will be a question and answer session. (Operator Instructions) 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 Mrs. Mulcahy. Mrs. Mulcahy, you may begin. Anne M. Mulcahy: Thank you Lauren, and thanks to all of you for joining us today. If you will turn to slide four, we will provide you with summary of our fourth quarter performance. We delivered Q4 EPS of $0.41 at the high end of our guidance resulting in full year earnings growth of 13%. It is consistent, steady momentum that reflects the effectiveness of our annuity based business. Total revenue including the benefit of acquisitions was up 11% this quarter to $4.9 billion. Post sale revenue, which accounts for about 70% of our total revenue, grew by 12% lead by a steady pace of install activity, color, and document services. And currency gave us a 4 point benefit. New color products and high take volume from Xerox color systems continued to generate positive results. Color revenue grew 14% in the quarter and it now represents 40% of total revenue. Our gross margins were 40.5% in the fourth quarter, down about half a point from Q4 ’06 and in our range of expectations for the year. Selling, administrative, and general expenses were 24.3% of revenue, up about a point. Our balance sheet remains exceptionally solid. The closure from our annuity resulted in significant operating cash flow. We generated $1 billion in Q4 alone and $1.9 billion for full year 2007. And we used our financial strength in 2007 to build value for shareholders to $631 million in stock buy-backs, declaring a dividend, and investing in growth by funding $1.6 billion in accretive acquisitions. And our board just approved another $1 billion for share repurchase. So we are heading into 2008 with the benefit of a stronger business. The industry is [inaudible] for technology and document services, and significantly expanded distribution to businesses small to large. We operate a global business with more than half of our revenue generated from customers outside of the US. From the small and medium businesses, and the public sector, to the large enterprises, and commercial printers, we serve a wide range of markets, giving us diversification globally and in market scope. We are seeing steady improvement from our operations in Europe, and the key developing markets like Russia, Eastern Europe, and India. Most importantly that is a benefit for the healthy annuity stream. With recurring revenues and a disciplined approach to managing cost, we remain committed to delivering on our 2008 full year EPS guidance of $1.31 to $1.35. Larry Zimmerman is going to provide you with more details on our financial position in a couple of minutes. Ursula Burns is also with us this morning and we will all take your questions in a bit. So if you will turn to slide five, we will have our overview of your fourth quarter revenues. With Global Imaging in our core business, we are competing aggressively to increase tightness in Xerox systems through new products and expanded distribution. The growth in the install activities is a direct driver of increased annuity. And we saw the benefit of this trend continue in Q4. This chart shows the year-over-year compare and actual cost in currency. The adjusted column on the right assumes that Global’s revenue for Q4 ’06 is included in our results for the same period. Again total revenue was up 11% in the quarter to $4.9 billion. When we adjust to compare for Global Imaging, revenue was up 5% with 4 points of positive currency. Equipment sales were flat in the quarter, adjusted for Global Imaging, and down 4% in cost of currency. However, the more significant revenue driver, post sale was up 12% in the quarter. Adjusting for global and the benefit from currency the post sale was up 3% in Q4 continuing the positive trend and reflecting the clearest picture of growth for our company. In fact, we added more than $1 billion to our annuity stream for 2007 including the benefit of Global Imaging. So we remain quite confident that our annuity based business model is working. The focus on increasing activity through both our core business and acquisitions is generating more pages printed on Xerox systems. And of course these pages translate into post sale dollars that continue to fuel our business for the long term. At the same time we are growing annuity revenue through multi-year, multimillion dollar services contracts. In 2007 services generated $3.4 billion in annuity revenue, an 8% increase over 2006. By targeting more document intensive vertical markets, like healthcare, legal and financial services, we grew the value of services signed by 18% last year. Color was also a highlight in our revenue story, and gives a big boost to our annuity. So if you will turn to slide six, we will take a look. With color, the power is always in the pages. This past year more than 40 billion pages were printed on Xerox color systems. That’s an increase of 30% over 2006. We are miles ahead of our competitors on color pages. But most importantly, pages remain the best source of our double-digit color annuity growth. Color page volume was up again this quarter, growing 34%. It now represents 14% of total pages that is 4 points more than Q4 of 2006. Revenue from color this quarter was up 14%, which includes a 6 point currency benefit. Again we are seeing the benefit of our annuities here with total sale from color up 17% in the quarter. And that is without factoring any benefit from Global Imaging. Color now accounts for 40% of our total revenue, but only 14% of our total pages, indicating a tremendous opportunity for Xerox going forward. Last year we made a strategic move in solid inks that made the cost of printing the color pages affordable as black-and-white. And we have broadened our color portfolio with 18 new products. We will continue fortifying our leadership position in color this year, steadily growing the number of pages printed on Xerox color systems. Now if you will turn to slide seven, we will take a look at our production business. Color production revenue grew 5% including a 6 point benefit from currency. Equipment sale revenue was down 4%. Again the focus here is on post sales where we see the benefit of tremendous page volume. Xerox production systems generate the most digital color pages in the entire industry and that is fueling the 9% growth in our production annuity. And it is a leading indicator for strong production revenue growth going forward. We saw accelerated demand for the DocuColor 7000 and 8000AP series in Q4, as well as continued growth for the new Xerox Nuvera system. This growth only partially offset declines in our light production business, which will be a key focus area for the company in 2008. We know we can do better in light production. We have broadened the portfolio and are offering customers more choices at more price points in the important segment six markets. The success of Xerox iGen3 continues to lead the industry in digital color production, printing and in pages. We have now installed over 2000 systems worldwide. Of those, 126 iGen customers are printing more than a million pages per month on their systems, and 275 customers now own more than one iGen3 to continue boosting their digital color businesses. As the market for photo applications continues to grow you will see Xerox continue to make strides in this industry and be partnered with companies like Fuji Film to expand our footprint in imaging. We are also aggressively targeting the digital continuous feed market with the recent announcement of color, and black-and-white systems. Our innovation in this space redefines the standard for speed and quality, and gives Xerox competitive advantage as demand grows. Production sales are also on the rise in developing markets, up 11% alone in Q4. If you will turn to slide eight we will review the office segment. With the benefit of Global Imaging in our results, total office revenues were up 14% in the quarter and 9% in cost in currency. Our competitive play to install more and more Xerox units helped to boast post sales which was up 13% in the quarter and will continue to be a driver of total office revenues. Equipment sales were up 16%. The acquisition of Global Imaging has more than met our expectations. They continue to expand their business acquiring four more companies in the short time that they have been part of Xerox with more to come. More than 50% of the document technology they sell is now Xerox, significantly expanding Xerox’s presence in small and mid-size business markets. Consider that just a year ago, Global Imaging didn’t sell any Xerox devices. With more than half of their equipment sales now carrying the Xerox brand, we see a strong return on this investment. While activity was up 6% for office black-and-white MFD’s, it soared for color multi-function. Installs were up 67% in Q4, 65% for the full year, largely due to the success of our WorkCentre and DocuColor families and continued demand for our new solid ink systems. 2007 was a very strong product launch year, 39 new products that garnered more than 190 awards. And we are ready for a similar aggressive launch schedule this year. It is all about increasing activity and annuity through new technology in services, expanding distribution, and growing our presence in developing markets. We are clearly seeing the benefits. In quarter four office equipment sales were up 4% in developing markets. If you will turn to slide nine we will take a closer look at the developing markets. Revenue from our developing markets operations is up 14% with post sale up 18%, and equipment sale revenue up 6%. As I mentioned in the production and office overviews, DMO sales growth has an increasingly more significant influence on our overall performance. Growth is largely driven from our stronger presence in Eurasia, Central and Eastern Europe, the Middle East, and Africa. While our install activity is weighted towards products for small and mid-size businesses, we are seeing increasing growth for our production devices and higher end multi-function systems to benefit the emerging market’s leapfrogging technology. So in summary, annuity, acquisitions, color, and services were all key drivers of growth in Q4 and for full year 2007. Our investments in innovation and expanded distribution opened new markets for us, and strengthened our brand. As a result we have built a global business that succeeds through recurring revenues, with steady margins generating significant operating cash flow. And that is a good place for me to hand it over to Larry. He has more to share on the dynamics of our post sale results and a review of our financials. And I will be back to wrap up and discuss Q1 expectations, and then Larry, Ursula and I will take your questions. Larry? Lawrence A. Zimmerman: Thank you, Anne, and good morning. Fourth quarter results continue our earnings expansion and cash generation performance. 13% adjusted EPS growth for the year, and $2.1 billion of core cash flow generation driven by earnings. These results coupled with a positive trend and growth of our annuity revenue stream position us well for 2008. In addition to the annuity model, our broad set of products, and our global diversified customer base provide us the confidence that our model will continue to yield. Slide eleven; we have an annuity business model that provides a consistent and profitable stream of revenue that drives strong cash flow. The leading indicators for our annuity continue on a positive trend. As we go through the scorecard keep in mind that machines in the field (MIF), as well as page data, do not include printers or developing market segment or Global Imagining Systems (GIS), and all revenue measures exclude GIS. Inclusion of these items would improve the results. Starting in the top left box, for the full year digital revenue was up 7%, 4% of cost in currency. MIF also was up 7%, and digital pagers were flat. And if we were to look at fourth quarter itself, digital revenue was actually up 5% cost in currency. MIF was up 7%, and pagers were up 1%. Color continues to drive growth with 18% revenues, 35% MIF, and 31% page growth. This growth, combined with the positive impact of color on price per page, makes this a huge opportunity in 2008 and beyond as color represents only 17% of MIF and 12% of the pages. Black-and-white digital is stable with slight declines in pages, but continued growth in MIF. Along with our strong color growth is a positive indicator for future annuity. And light lens, the analog transition to digital that has put a drag on post sale revenue is now down to only 2% of our total annuity revenue. We also continue to see strong growth in another of our key growth strategies, services. Services annuity is up 8% for the year and that is compared to 1% growth in ’05, and 6% growth last year. There remains strong demand from our customers to have Xerox help them optimize and simplify their document processes while lowering their costs. These leading indicators as well as our performance in DMO and Global reflect well on continued annuity performance. Slide twelve, the annuity scorecard points to positive post sale and financing revenue growth. And as this chart shows the trend also indicate positive growth for the future. Adjusting 2006 for Global, we grew annuity revenue 7%, 3% in cost in currency. The trend of improvement reflects the effectiveness of our business model and a 3% cost in currency growth we continue to not only sustain but to improve performance. Digital and DMO annuity are the largest contributors to growth. The digital growth is driven by color and services. DMO has had three quarters in a row of double-digit growth built on strong product placements through their tier two channel. Light lens was only $46 million in the quarter and one point drag on results. Though the metrics in revenue transport positively, we believe annuity going forward will continue to drive our business model in cash generation. Slide 13; now let’s take a look at the fourth quarter P&L as well as the full year. Anne and I have covered revenue so let’s go to the key ratios. Gross profit margin in the fourth quarter was 40.5%, right in the middle of our model range of 40-41%. Margin had a tough year-over-year two tier on the quarter as mix of products in growth segments varied driven by strong growth in DMO’s, services, and office. We see much less variation for the full year of gross profit margin, 40.3-40.6%. We believe quarter-to-quarter, 40-41% is the correct model range to run our business. RD&E was down on a ratio basis, but our investment was basically flat in dollars for the quarter and the year. Our SAG ratio for the quarter increased as we continued to make distribution systems and marketing investments in our business. Full year SAG ratio improved slightly. The dollar growth in SAG was primarily caused by currency and not having Global in 2006 results. Net income grew slightly in the quarter. Leading to tough gross profit compares as well as lower OID last year into the headquarter sale and lower ’07 interest income. Full year net income grew 8%. The tax rate was a slight help compared to ’06 for the quarter, and was a negative for the full year compared to ’06. Equity income grew $8 million in the fourth quarter but was down $17 million for the year due to Fuji Xerox restructuring. For the quarter EPS grew 8% to $0.41 versus $0.38 on an adjusted basis, and full year 13% earnings expansion to $1.19 versus $1.05 on an adjusted basis. The bottom of the slide adjusts for fourth quarter 2006 and full year exactly as we did it in last year’s report taking out one-time items, favorable tax audit benefit, restructuring, and a charge for litigation matters. There were no adjustments for any quarters in 2007. Even normalizing for Global, gross profit grew significantly in ’07, and along with good expense performance, was a primary driver of earnings growth. This operational performance along with share repurchase delivered 13% earnings expansion for the year, delivering on our commitment to shareholders. Slide 14, our cash flow performance for the quarter and the year was outstanding, over $2 of cash flow per share. Cash flow from core operations was $1.3 billion in the quarter and $2.1 billion for the full year. It was driven by our earnings and shows the cash generation capacity of our annuity driven business model. We also had extremely good working capital execution. Accounts receivable, inventory, and payables were all managed well. Full year cash from investing was driven by our acquisition of Global Imagining and Advectus, and $359 million of CAPEX in internal use software. Cash from financing was all about short-term borrowing from Global and paying it off as of year end, and trading secured for unsecured debt. Our cash flow gave us the ability to acquire Global, a great company, pay for it in a little over two quarters. And at the same time repurchase 631 million in shares with a $1.1 billion balance, and about the same level of debt 12/31/07 as 12/31/06. Given these results, the board of directors authorized a total of $1.37 billion for share repurchase, $1 billion new, $370 million remaining from the prior authorization. In the first quarter we expect to aggressively buy shares. We are also raising our full year outlook on core cash flow from about $1.6 billion to $1.8-2 billion. This a perfect slide to finish my comments on because it demonstrates one of the key strengths of our annuity model, cash. We are confident we can deliver expanded earnings and with our cash generation, we have all the tools to grow our business and deliver to our shareholders. Thank you and now I will give it back to Anne. Anne M. Mulcahy: Thanks, Larry. So to wrap it up, we had a very good year and a very solid quarter. Our performance in 2008 will be driven by strong, profitable annuity, built by color and services it continues the business model discipline. The resiliency of this model and the execution capabilities of our teams will deliver double-digit earnings growth and significant operating cash flow. And with our strong balance sheet we will focus even more on share repurchase. We will be opportunistic in making acquisitions. So in short, here is why I am confident Xerox will increase value for shareholders. We are an investment grade, global firm serving diverse markets. We are an annuity based business that continues to boost recurring revenues. We are generating strong cash flow. We are investing in our business and in our stock. And we are well positioned to build on this solid momentum in 2008. So for Q1, we expect to deliver earnings in the range of $0.25 to $0.28 per share. And we remain firm in our guidance to deliver full year earnings in the range of $1.31 to $1.35. Thanks for listening. Now Larry, Ursula and I would be pleased to take your questions.

(Operator Instructions) And your first question comes from the line of Shannon Cross with Cross Research. Shannon Cross - Cross Research: Yes, good morning. Anne M. Mulcahy: Good morning, Shannon. Shannon Cross - Cross Research: Just a few questions, Anne, maybe you can provide some context a minute. The digital page growth, the pages where you are now flat, can you provide some context on how that has trended over the last few years just to give us an idea of how it meets up with the improvement in the machines in the field. Anne M. Mulcahy: Yes, absolutely. If you look at 2006 and where we ended up, you would have seen that total pages were negative. They would have been down 2%. If you look at where we come from there up until third quarter ’07, they were down 1%. Q4 ’07 is the first time that digital pages have turned flat. And that is really driven by the color page growth of 34% color page growth. So, we are pleased that we have turned the corner on that but when you get your population growing and your pages growing, this is a science. And it drives annuity growth. Shannon Cross - Cross Research: Okay, and then as we look at pricing because obviously there has been pressure on pricing on the equipment side. Can you talk a little bit about what you are seeing out there and then I think that [Icon] just talked about some pretty aggressive pricing in black-and-white equipment on their calls. And then also on the page side, what were the [inaudible] especially color pages? Anne M. Mulcahy: So I would look and say that pricing really didn’t change a lot for us in terms of price investments. We have been basically talking about a 5-10% range of price investments, literally the last few years. And we saw the same exact kind of price investments in Q4. So, I think that we would suggest that we see actually deeper discounts on the color side than the black-and-white side. But when you add it all up, its 5-10% and we’ve not seen any significant shift in terms of price. And that is the equipment pricing investment. On the page pricing, very consistent, we see declines in the price per color page but no accelerating trend in price declines. And obviously we are part of the driver of that, particularly when you look at color from the price of black-and-white, our investment in color page pricing is going to accelerate the adoption of color. Shannon Cross - Cross Research: Okay and then one final question just in sort of a macro sample because I’m sure that there is going to be lots of questions on the economy. [Inaudible] in the quarter, any fall-off? Again the comments out of [Icon] were that they saw some push-back on large deals at the end of the quarter. Anything that lead you to believe that things were slowing down? Anne M. Mulcahy: I think that we had some mixed signals, obviously, because of the diversity of our business. So we don’t see the same concentration as other businesses do in specific segments or geographies. I think that we saw, perhaps, a little bit of a slow down in some of the corporate environments. But on the other hand, we’re really pleased with our services signings which full year grew 18% with a very strong fourth quarter in services signings. So, clearly I think that we had some mixed signals. By the way, Global had a very, very good fourth quarter. And so the small and medium-sized business environment was staying quite robust. You would have seen an increase in activity in color printing for us from the previous quarter as well. And that is not just OEM, but our own branded color printing business was up 7%, which is quite a nice bounce back from some of those declines we have seen in color printing. So, I would call it mixed at best, I guess. And for us because of the diversity of our segments and our geographies, and the annuity based business, we were not linked to any particular aspect of the economy that would have been a big issue for our results. Shannon Cross - Cross Research: Okay, great, thank you. Anne M. Mulcahy: Thank you.

And your next question comes from the line of Ananda Baruah with Bank of America. Ananda Baruah - Bank of America Securities: Hi, thanks guys for the question. Just to start off on operating margins, came in a little bit lighter than we had modeled. Just wondering sort of the blend and then the different product areas came in a little bit lighter pretty much across the board than had modeled. Just wondering if this is sort of consistent with what you are expecting going into the quarter and maybe our forecast was just a little on the heavy side. And then if in fact margins did come in a little bit lighter than you had expected, reiteration of the full year guidance, might we think about sort of the way that we get there is changing slightly versus when you guys provided the forecast back in November. Anne M. Mulcahy: Okay, so let me talk about margins a little bit. The first thing that I would probably look at and say, in our business sometimes 90 days presents some anomalies and I would say that if you looked at Q4 ’06 it was the high point for margin of the year. It was a very, very strong quarter. So it was a tough compare. And that is why we were not surprised or disappointed with margin, simply because it was within our range. And if anything the strength, in particularly our DMO and our services business kind of would dictate that that range is one that we think is reasonable for our business. So nothing, I think, surprising about it to us. And clearly probably the biggest factor was just the strength of Q4 ’06 margin which was kind of above the range that we normally expect. In terms of full year guidance, obviously we have reaffirmed our full year guidance. Once again I think that we can look at it and say that if you look at the percentage of earnings delivered quarter-by-quarter, 2008 will be a pretty consistent year for us. Although 2007, our first quarter was particularly strong as well. But having said that, the range of guidance that we are presenting is certainly very consistent with the kind of earnings growth that we expect and it absolutely is supportive of the full year guidance that we are delivering. Ananda Baruah - Bank of America Securities: Thank you, that’s helpful. I guess along the same lines, is it still reasonable to assume that you would expect some operating margin expansion for the full year 2008? Anne M. Mulcahy: Yes, I think that we have basically set a goal 10-12% operating margin and making steady progress if you look at where we ended up in 2006 full year. Was it 8.7%, we improved that by half a point to 9.2%. So we still think that there is opportunity there. Ananda Baruah - Bank of America Securities: Okay, great, thank you. And then just quickly one thing if I could, post sale, post sale growth trends certainly appear to remain flat, perhaps to even improve on the margin. It’s interesting if you look at production post sale versus production equipment growth, it looks like production equipment was down a little bit more relative the last couple of quarters. And I’m just interested in getting your take on if anything has changed in production equipment this quarter versus the last couple of quarters. And then maybe in office equipment as well, and if so, do you think that might be indicative, or what it may be indicative of? Anne M. Mulcahy: Well if we kind of look at production business in Q4, we were really pleased with Nuvera and continuous feed. So the high end of production was strong and we performed very well. Our soft spot was light production. We brought new products in the market and we didn’t have the full attraction in the quarter. We think we can do better in light production. But that really was, if there was a “light” part of the production business, it would have been in black-and-white light production. Our color production full year was fabulous. Q4 2006 was like outside the realm of fabulous. We really skewed most of our activity to Q4 ’06. This was a little bit more balanced, but we still grew color production installs by 3% in the fourth quarter. And then we look at it full year and say to grow pages by over 30% to get to 40 billion color pages is really what we look at in terms of want for health of the business. So, nothing there that would be alarming because we do think that we have some catch up on the black-and-white light production side that would have improved the overall equipment sale performance in the production business. Ananda Baruah - Bank of America Securities: Okay, great, thank you. Anne M. Mulcahy: Thank you.

And your next question comes from the line of Ben Reitzes with UBS.

Hey Ben. Benjamin Reitzes - UBS: You had some mixed signals in the economy et cetera and obviously I would like to hear a little bit more about that by geo, because I don’t think we have a Europe number in here. Maybe we do and I didn’t see it? That is the first part of the question. The second part is with regard to keeping your guidance for the year and with the back drop of mixed signals in the economy in the corporate space, it looks like you are going to increase the pace of your share buybacks is not only because of the good cash flow, but because of where the stock price is and the authorization. So, is the share buyback necessary to hit the guidance, is it incremental? I mean this a back door way of asking the EBIT question. Do we have a year where you missed EBIT, but you hit earnings because of these mixed signals? So that’s the long question. I have a follow-up on color.

Let me just start on economy, and then I will turn it over to Larry just on the position of share buyback and how it influences earnings. When I look at economy, I would look at it and say we saw strength in Europe. We don’t break out Europe specifically but there was nothing that we saw in Europe that wasn’t a continuing trend of good results, great strength in our developing markets led by Eastern Europe and Eurasia. Very good performance in our US channels and global, and a little bit of softness in the corporate environment, but once again the services pipeline and services signings were very strong. When you add that all up, we can clearly still deliver good performance even if there is a little bit of softness in the corporate environment. But, Ben, our business is really interesting, because a lot of it’s not capital acquisition any longer, it’s operating lease. Our services contracts are ways for our clients to reduce expenses, which quite frankly plays well to a weakening economy. So we think we can play to our strength and we feel very confident then about being able to deliver the earnings even with perhaps a little uncertainty in the economy. That’s the way we’ve have assessed it. Larry, on share buyback?

Ben, on share buyback, I think I would say, number one that our plan was always to be very aggressive on share repurchase given that we sort of traded off between Global Imaging and share repurchase in 2007. The first point is we always were going to be very aggressive. I think the share price just makes it, if you could be more aggressive, you will be more aggressive; you do have limits on how much you can actually buy compared to the volume in the marketplace. So it is aggressive. I think we are planning on profit growth and we are still planning on profit growth. We have not adjusted that in any way. If we are able to be a little bit more aggressive on share repurchase, it will help us. Benjamin Reitzes - UBS: Just it’s hard to say right now, I guess, whether it means there is upside to the guidance with it if you increase the pace I guess and the trade-offs?

I think there is over 11 months of actuals to go. Benjamin Reitzes - UBS: Just on color, if I take out currency growth of 8%, with all of the crosscurrents with what’s coming out of Ikon I want to make sure that that’s in line with your expectations and what you think the long-term growth rate is for color. Also iGen, you gave an interesting number of 2,000 installs. If I take five-and-half years, that’s roughly on average of 360 units per year. I know early on in its life you had goals for 300, and then maybe even took that to 500 at one point. Is iGen meeting expectations and is it a growing business to what you thought, going in? Am I reading it right that it’s kind of at a run rate of 360, now you have a lower priced product. Given the goals early on were to be 300 and now maybe on a 360 run rate, am I looking at this right, am I looking at it wrong? Is iGen actually growing faster than that 8%? What is your view on that 8% just going forward on an organic kind of color growth rate if currency were to take itself out of the equation long-term?

I’m going to have Ursula address maybe iGen first and then color.

So iGen, Ben, is on a growing rate. The 2,000 installs that we have achieved are at or beating our expectations. We are very very pleased with the iGen install rate, but also the iGen average monthly page rate. You can’t really just take the 2,000 and divide it by the number of years that we have been selling it. Clearly, the back end years we sell more than we did in the beginning years. So, iGen is exceeding our expectations both on installs and on AMPV, average monthly page volume. Benjamin Reitzes - UBS: Thanks. So it’s growing faster than your color average or you don’t want to get that granular?

No, it is growing faster than our color average for sure.

And color, just color in total, we look at the color growth rate, we were quite pleased. I mean, one of the things that’s even more important than just the activity rate in color growth is page rate growth. If you look at the page rate growth, it actually accelerates. I mean with 31% growth rate full-year ‘07 and 32% in Q3’07 and 34%, this quarter. So, where we make our money is in the pages and pages have accelerated. Clearly we are making some investments on the equipment side to make sure we get the placements out there. So, you got to look at really two things I think in that; post-sale and pages and we are really pleased with the pace in both of those. Benjamin Reitzes - UBS: So the high single digits? I’m just trying to I guess get a feel for if we took currency out of the equation and just taking all the comments from all of these other companies that are much more negative than yours, what kind of growth rate is color? It sounds like you are saying it’s still kind of close to where you reported and that’s what I’m trying to get out of you.

Absolutely, we’ve been consistently growing double-digit at constant currency with just slightly below that in Q4, but it came off a wildly successful Q4 ‘06 and so I don’t think there is anything in absolute terms that we are not pleased with in terms of color contribution right now.

Including the go-forward opportunity, it’s only still 14% of the pages are color, so there is still a large amount of opportunity ahead of us.

And your next question comes from the line of Carol Sabbagha - Lehman Brothers. Caroline Sabbagha - Lehman Brothers: Thank you. I am just trying to marry what you said you are seeing in the broader market and what your equipment sales number showed, which was a little weaker than what we thought and I think you had easy compares. The weakness didn’t seem to be as much in the office where I would guess you would see more the corporate spending but in production. Would you characterize what you saw in production and you touched upon light production as more internal or external factors that drove it?

Well, I think we would definitely characterize it as more internal, because the weakness for us was black-and-white light production, Carol, and I think that was more product-driven. Our growth in both Nuvera and continuous feed, particularly continuous feed by the way where we are now installing our new black-and-white systems was quite healthy and we were very pleased with it. If I look at color production, we grew installs but I do think that was virtue of a very difficult compare on production color year over year, because we look at the growth rates on production color for the full year and just the pace of activity that we were quite comfortable. I should also mention operating leases where we have been kind of accelerating the use of operating leases, which is a great way quite frankly to accelerate placements without capital acquisition on the part of the customer; it costs us at about 2 points of equipment sale in the production market and nothing in the office market. So in order to get the placements, we’ve used more operating leases in the production market but that’s really we think a very smart strategy, because it’s terrific for production annuity. So with the new products on the light production side, we think we can bring back better equipment sale performance on production. But overall, there was nothing that we thought was really market-driven or economy-driven that we would point to. Caroline Sabbagha - Lehman Brothers: Looking at a little bit on the negative that these products don’t take hold in the market, could you make your numbers for the year with equipment sales ex global, ex currency sort of down in that 4% range that you saw in the fourth quarter?

: I think that our business model with over 70% of revenues in annuity, I mean, clearly gives us the opportunity to weather volatility in equipment sales much more than other companies. The other piece is that we have a very disciplined approach with the business model. We know how to clearly get productivity, reduce cost, and manage in a tougher environment. So clearly as Larry said, we are one month into the year. We don’t have a ton of visibility, but we do know how to manage this business model and deliver bottom-line results. I think that’s a great advantage of having an annuity-based business. So can we weather continue pressure in the equipment sale area? Yes, but remember this well that we will be looking in a much more focused way on activity versus equipment sale. What I would look for and really watch is kind of the activity numbers, which we think have been quite strong and which really are the indicators of continued wholesale strength. Caroline Sabbagha - Lehman Brothers: Going to the annuity scorecard on Page 11, just if you look at the three boxes you put on top, digital MIF is up, color MIF is up and black-and-white digital MIF is up but in all those three, the pages are down more than the MIF. Should I assume that underlying what’s happening in your MIF is a little bit of a mix to lower and equipment overall and then trying to marry that with your digital revenues that are stronger than the page the growth for most of it except for color are on black-and-white at least is the price per page actually increasing? I don’t know from reading these things from those three boxes, I guess?

: Clearly, price per page is increasing and that’s due to the mix of color. So there is no question that with the MIF penetration we have in color now, I think something like 19% of the MIF is now colored as we continue to improve that, the price per page is going to go up. So that’s an absolute scenario. On the pages versus the MIF, I mean it depends; if you look at for example, black-and-white digital MIF, I think you will find a lot of that in kind of A4 and low-end driven and clearly and even light production quite frankly, a little bit of a pages will not grow as fast as the MIF, because of the mix there. I think in color you’ll find it, it moved back and forth quite frankly, but color is much closer, I mean the strength of our production color business is keeping the MIF growth and the color page growth much closer together and that’s where we want it, because that’s where the money is. I think it would be yes on the black and white side, but not really on the color side. Caroline Sabbagha - Lehman Brothers: One last quick question, your overall MIF for the parts of the company that you measure, I presume that was up year-over-year, but rough percentages?

: Overall MIF is up 2%, digital MIF is up 7%, and color MIF is up about 35%.

Your next question comes from Bill Shope – JP Morgan. Bill Shope - JP Morgan: I have a few questions. Anne, first I want to dig a little more into the macro area, I know obviously we’ve seen a lot of questions there, but I think there are still a lot of concerns there. Obviously, I think your commentary and your results suggest that you didn’t see any issues on a macro basis for the December quarter and I think we’ve heard similar commentary out of other large companies that are exposed to the US corporate space. But I think the obvious concern from investors out there is that we could be facing pretty rapid deceleration in spending levels in ‘08 and that’s obviously always hard to see. Now Anne, in your conversions with your customers, are you getting any sense that their budgets are being impacted due to macro concerns or that budgets are maybe a bit more fluid at this time of the year than they have been in years past?

: What I hear from customers is pretty consistent with what I’ve been hearing from customers in the last few quarters and that is the ability to do business under a services contract versus just a capital acquisition contract is preferable in large enterprises, because you can actually reduce overall bottom line spend. The services businesses clearly is faring well in an environment where perhaps, capital expenditures are coming under a little bit of pressure. The second piece is that, in particularly in the graphic arts marketplace which is really strong for us, the ability to do operating leases is enabling the graphic arts marketplace to get into quite frankly, the digital technology side of this without big capital expenditure. So I think that is a big help. The other thing is, and global is a great indicator for us because it’s a small and medium size market, they had a fourth quarter that quite frankly was on their trend even prior to the Xerox acquisition in terms of growth. We were really pleased with the fact that they actually did not reduce sales at all and didn’t see anything that put any pressure on their business. So all in all, I think if we are seeing perhaps some pressure on the capital acquisition side, that we are prepared to provide clients alternatives that they find attractive in that kind of environment. Bill Shope - JP Morgan: On the annuity stream, obviously your significant exposure to an annuity stream is the key reason why the model is at least somewhat counter cyclical if we do get into tough times. Can you helps us understand within the annuity stream outside of fixed contracts, how much of that annuity stream is based on activity that could be somewhat sensitive to the economic conditions? From what you have seen in the past.

: I would say all of the annuities, with the exception perhaps of just individually purchased supplies is under four and five year contracts for the most part; certainly three to five years and lot of our supplies are now bundled along with financing into a single contract. So the vast majority of the annuity are revenues under contract for multiple years. We talked about a services business that’s now reached $3.5 billion that would be characteristic of a long-term contractual relationship. We finance the great majority of our business, so our financing contracts are also multiyear generally three to five year contracts. As I said, a lot of our supplies business is now is bundled into those kinds of contracts. The answer is it’s financing, it’s supplies, it’s consulting services, it’s technical services, and it’s financed equipment all in the annuity stream and the vast majority of that is under contract for multiple years. Bill Shope - JP Morgan: Finally on the increasing authorization obviously its clear the share repurchase remains at the top of the priority lists for use of cash. Can you help us understand where this puts you on your appetite for acquisitions in 2008?

I think we still have an appetite for acquisitions, it is just that they take a longer time and we are obviously really careful as we look at them. So we are still looking and we are still doing a lot of work; it’s unlikely we’d have something the size of global so right away that gives you a lot of access the cash and share repurchase. I don’t think it will change any trajectory of share repurchase; we are going to be aggressive. If we see something on the acquisition side, we will do it and there is enough cash to do both.

Your next question comes from Matthew Troy - Citi Investment Research. Matthew Troy - Citi Investment Research: Larry, I had a question for you on the cash flow guidance. Obviously going from 1.6 to midpoint of your new range 1.9, 300 million is a nice increase. I was just wondering, you said several times in the call that we are only one month into the year. You were just in town six weeks ago to give us the original guidance. What’s changed? What makes you more confident this early on in the year that the cash flow guidance can go up at that material level?

Well, first of all, we finished ’07 where we had spectacular results. So if that wouldn’t give me confidence I don’t know what would, first of all. I think looking at that and what we were able to do on working capital gives me more confidence. Remember when we prepare for the investor conference, you are back in September, so there is a lot of months under the belt here that we’ve seen good cash performance. I think I also said at the investor conference it was a conservative estimate of where I thought we would be. So, I don’t really think we are raising it that much; I think our performance dictates that we do that. Matthew Troy - Citi Investment Research: Then on the solid ink side, Anne, you launched a new product in September, a platform bringing color pricing closer to black and white. If you could just update us there in terms of what that experience has been like in the fourth quarter and the solid ink outlook for 2008? I think we were expecting to see some more products per your guidance earlier. What has it been like thus far and what does the roadmap look like from here?

Bob the pickup we announced in the third quarter color for the price of black and white as you remember on our product set that we sent to the market and the pickup is, I will put it in three different buckets, very good across all three. One is the understanding and acceptance by the industry analysts and the customers is exceptional. The pickup of the product, we launched the MFP product in the latter part of the year and we actually sold out of that multifunction product that we introduced in the marketplace; very good pickup, very good acceptance. We launched a printer a little bit earlier on a worldwide basis and that flow has been strong. We will add more channels to the printer to expand our reach to the customer base. But, the flow has been good. If you remember this is the start of a communication and a marketing strategy for solid ink that we will strengthen as we go forward in 2008 with new products and new offerings. As for new products, we have told you before that we will move solid ink up line in 2008 and we will do that for sure. It will happen in the second half of 2008 towards the latter part of 2008 with a full line higher-end multifunction products. Matthew Troy - Citi Investment Research: Ursula since you are here, next week’s PMA, could you just give us an update in terms of the new incremental? Not new, you’ve been there for now almost a year and a half, two years and learning rapidly. But, just in photofinishing, photo books, greeting cards market projected to go to a $1 billion within the next two or three years, all greenfield for Xerox; dialog with partners and the retail channel, how is it going and what can we expect at PMA?

An exciting show next week at PMA; we will be there in full force. We will clearly discuss applications in PMA, clearly Print Engines which you already know about, color print engines both in the office and in the production space. But, the big push at PMA will be how do we allow customers, either end user customers or retail providing customers to actually do this photo work easier. A lot of application work will be discussed. Our iGen3 enhancements will be discussed and shown there and some of our office color products will be shown there as well in partnerships with our partners including FUJI Film.

We just announced a plug-in module for our work center line that brings photo finishing down from the iGen and Docucolor line into the work center line which we think is the big deal and we are partnering with FUJI Film on that. So, you are right, it’s new business and it’s new opportunity for us. Matthew Troy - Citi Investment Research: And certainly a positive pre-announcement with [inaudible] camera I think recently coming out of Fuji?

Yes. Matthew Troy - Citi Investment Research: If I understand that you guys will put on a unified front, you are sharing a booth at PMA for the first time?

Absolutely.

We are.

Your final question comes from Jay Vleeschhouwer - Merrill Lynch. Jay Vleeschhouwer - Merrill Lynch: I would like to ask a couple of questions around the channel and market coverage. First for Larry, what is your thinking now about the earnings accretion you could foresee from global in ‘08 as compared to what that estimate of global accretion might have been when you closed six months ago? In addition, with regard to the channel could you, Anne, comment on other resellers, other VARs outside the global channel, since you haven’t really said very much about them since you began some initiatives there just about a year ago?

On global, I think as Anne said, I mean they are performing if anything better than expectations given some of the disruption that happened at the beginning of the year. They are accretive modestly in ‘07 and they will be accretive to more extent, which is factored in the guidance for ‘08. So, we are confident of their performance.

in terms of other channels Jay, I would say first of all that we’ve got continuing good news coming from DMO in Europe, the vast majority of our office business now is through distribution in those geographies and we are really pleased and you can see a lot of that in the office performance. In the US, I would say couple of things. One is the increase in branded color printers is a good indication that we are getting traction literally with the VARs and the resellers as it relates to the Xerox technology and we’ve also done a lot of work in some of the up market opportunities with regard to some of the multi-function distribution and packaged services that is starting to take off as well. They are clearly looking for new sources of revenue and the Xerox relationship is a good place for them to go in terms of the breadth of what we’ve got to bring to the channel. So we are pretty pleased. We think it continues to bring opportunity and slowly but surely we keep adding new relationships and also broadening the products and services that we bring to the channel. But we were pleased with their fourth quarter performance and full year. Jay Vleeschhouwer - Merrill Lynch: A question about competition and some recent announcements. Shortly after IKON pre-announced earlier this month, in fact I think the same day, Canon USA announced a re-org of the company-owned resellers. If you had any comments on that what it might mean competitively of anything? Similarly with respect to corporate relationships, Oce seems to be getting closer to Fuji in terms of some product partnering and as well closer as well with Konica. Do you see any marginal changes in either respect in terms of competition?

Let me start with the Oce relationship with Fuji, I mean it’s a tactical point product. I certainly wouldn’t characterize of its strategic and we source products from lots of different places, so that’s really not something that I would say is unusual. Oce and Konica, I mean we obviously know them as competitors very well. Apart or even collaborating, we think we are really well positioned with the product line up and capabilities we have to compete in the marketplace. We are confident about the distribution capabilities we have now to face off against some particularly with the addition of Global. From a product perspective, we are in great shape and we said it earlier, but we intend that 2008 is going to be a strong product year from a product launch perspective in 2007. So, we don’t expect to see a material difference in the competitive environment based upon that relationship. Jay Vleeschhouwer - Merrill Lynch: On the Canon side?

Canon, really no change. I think we saw some activity from Canon 7000, but it was really more on the upgrading of their own fleet than it was quite frankly impacting us. So, nothing that we saw that would suggest that we are losing any ground in terms of either competitive replacements or our ability to continue the pace of growth we are seeing with our production color business.

Even our office color business, Jay, 67% activity increase.

It has been great.

Phenomenal performance on our side, so we are confident.

Thank you very much and thanks to all of you for participating today. We really appreciate your interest. Have a great day.