Xerox to Acquire XMPie; $54 Million Acquisition Strengthens Link Between Personalized Publishing, Digital Printing and Web Marketing

One-to-one software fuels use of digital presses, enables cross-media campaigns

STAMFORD, Conn., Oct. 03, 2006 -- Building on the growth of personalized printing and multimedia direct marketing, Xerox Corporation (NYSE: XRX) has agreed to acquire XMPie for $54 million. A privately held company, XMPie is a leading provider of variable information software, which enables cross-media, personalized marketing programs. These programs combine communication outlets such as digitally printed direct mail, the Web, e-mail and other methods to reach customers with customized marketing materials that are relevant to the individual recipient and generate higher response rates.

Based in New York, XMPie specializes in software that allows graphic designers, marketing companies and print providers to create marketing pieces with an individual’s name along with information and images based on buying preferences and personal interests. In addition to creating targeted print communications like brochures, direct mailers, and catalogs, XMPie software can automatically generate related e-mails that drive customers to Web pages filled with information specifically designed for them. These integrated marketing campaigns rely on digital printing systems like the Xerox iGen3™ Digital Production Press to produce customized, high quality marketing collaterals.

The market for variable data printing that depends on software like XMPie to personalize applications is projected to triple in the U.S. at a compounded annual rate of 26 percent from $5.3 billion in 2004 to $16.6 billion in 2009, according to industry research firm InfoTrends.

“As XMPie’s largest reseller, Xerox has long served customers’ growing demand for variable information software integrated with on-demand printing technology, Web and e-mail applications to create powerful marketing programs,” said Ursula M. Burns, president, Xerox Business Group Operations. “Through this acquisition we are bringing the intelligence of data collection together with the quality of digital printing to provide complete, measurable solutions for multimedia marketing campaigns.”

The XMPie software suite is compatible with industry-standard printing technologies from companies such as Adobe Systems Inc. XMPie can develop customized Web sites for online purchases and use a single database to generate both print and Web pages, tracking response rates and Web traffic to measure the effectiveness and profitability of marketing campaigns.

XMPie’s award-winning image personalization software, called uImage™, helps marketers extend the capabilities of personalization by including personal messages in documents such as magazine covers, direct mailers, children’s books, calendars and travel brochures. Personal information can be embedded within photos and into designs on windows, street signs, clothing, buildings, automobiles and other objects.

LXMPie will maintain its brand name and function as a standalone software unit, continuing to serve the entire graphic arts market and supporting current customers and business partners as well as Xerox. Jacob Aizikowitz will head up the unit, reporting directly to Burns. Aizikowitz is a founder of XMPie and has served as its chairman and chief technology officer since April 2005.

Founded in 2000 and funded by Jerusalem Venture Partners, XMPie is a global operation with about 60 employees. XMPie will keep the company’s headquarters in New York and its research and development facility in Netanya, Israel. The vast majority of XMPie employees are expected to join Xerox.

Xerox’s all-cash purchase of XMPie is expected to close in the next 30 days, subject to receipt of regulatory approvals and customary closing conditions.

Through its acquisition strategy, Xerox is identifying successful companies in niche markets that align with Xerox’s commitment to innovation, personalized service, and document management offerings. XMPie is Xerox’s second acquisition this year. In July, Xerox acquired Amici LLC, a leading provider of electronic-discovery services, primarily supporting litigation and regulatory compliance.

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NOTE TO EDITORS: This release contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect management’s current beliefs and expectations, and are subject to a number of factors that may cause actual results to differ materially. These factors include but are not limited to the outcome of litigation and regulatory proceedings to which we may be a party; actions of competitors; changes and developments affecting our industry; quarterly or cyclical variations in financial results; development of new products and services; interest rates and cost of borrowing; our ability to maintain and improve cost efficiency of operations; changes in foreign currency exchange rates; changes in economic conditions, political conditions, trade protection measures, licensing requirements and tax matters in the foreign countries in which we do business; reliance on third parties for manufacturing of products and provision of services; and other risks that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Results of Operations and Financial Condition” section and other sections of our 2005 Form 10-K and second-quarter 2006 Form 10-Q filed with the SEC. Additional information concerning these and other factors is included in the company’s 2005 Form 10-K and second-quarter 2006 Form 10-Q filed with the SEC. The company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.

XMPie® and uImage® are trademarks of XMPie.

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Christa Carone

Media Contact

Xerox Corporation

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