David Fried develops model portfolios based exclusively on stocks undergoing corporate buyback or repurchase programs; here, the editor of The Buyback Letter, looks at a company undergoing a transformation.

Xerox (XRX) may conjure up images of old-school photocopies, but this 109-year-old company is in the long process of moving beyond its copying roots.

Xerox is transforming itself from a print and copy powerhouse into a software company targeting businesses and local governments.

For instance, Xerox is the company behind the payment processing for California's Medicaid enrollees, as well as the electronic tolls used on some of Texas' highways.

Xerox is also pushing to move into the cloud, especially in the healthcare sector, where everything is moving toward a digital and easily accessible environment.

To wit, Xerox recently acquired health assessment and risk management company RSA Medical, as part of a plan to revamp its healthcare IT business.

While Xerox moves to become a service-oriented business, its legacy printing business is still generating substantial cash flow in the meantime.

Xerox has generated close to $1.9 billion in operating cash flow over the trailing 12-month period.

Analysts say the company's strengths can be seen in several areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, and expanding profit margins.

Several years cutting expenses are expected to yield a more efficient business primed to deliver robust profits and dividends.

Meanwhile, Xerox has reduced shares outstanding by 8.44% in the past 12 months.

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