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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2005

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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from: to1-4471 (Commission File Number)

XEROX CORPORATION

(Exact name of registrant as specified in its charter)

New York 16-0468020

(State of incorporation) (I.R.S. Employer Identification No.)

P.O. Box 1600, Stamford, Connecticut

(Address of principal executive offices)

06904

(Zip Code)

Registrant’s telephone number, including area code: (203) 968-3000Securities registered pursuant to Section 12(b) of the Act:

Title of each Class Name of Each Exchange on Which Registered

Common Stock, $1 par value6.25% Series C Mandatory Convertible Preferred Stock New York Stock ExchangeChicago Stock ExchangeNew York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes:

No:

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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes:

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No:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days. Yes:

No:

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, andwill not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by referencein Part III of this Form 10-K or any amendment to this Form 10-K.

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Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act RuleLarge accelerated filer:

Accelerated filer:

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Non-accelerated filer:

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Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct) Yes:

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No:

The aggregate market value of the voting stock of the registrant held by non-affiliates as of June 30, 2005 was:$13,231,185,100.Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

Class Outstanding at January 31, 2006

Common Stock, $1 par value 931,310,151 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated herein by reference:

DocumentPart of Form 10-K in WhichIncorporated

Xerox Corporation 2005 Annual Report to Shareholders I & IIXerox Corporation Notice of 2006 Annual Meeting of Shareholders and Proxy Statement (to be filed notlater than 120 days after the close of the fiscal year covered by this report on Form 10-K) III

Forward-Looking Statements

From time to time, we and our representatives may provide information, whether orally or in writing,including certain statements in this Annual Report on Form 10-K, which are deemed to be “forward-looking”within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Litigation Reform Act”). Theseforward-looking statements and other information are based on our beliefs as well as assumptions made by ususing information currently available.The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions,as they relate to us, are intended to identify forward-looking statements. Such statements reflect our currentviews with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one ormore of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual resultsmay vary materially from those described herein as anticipated, believed, estimated, expected or intended. We donot intend to update these forward-looking statements.In accordance with the provisions of the Litigation Reform Act, we are making investors aware that suchforward-looking statements, because they relate to future events, are by their very nature subject to manyimportant factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this Annual Report on Form 10-K and other public statements we make. Suchfactors include, but are not limited to: the outcome of litigation and regulatory proceedings to which we may be aparty; actions of competitors; changes and developments affecting our industry; quarterly or cyclical variations infinancial results; development of new products and services; interest rates and cost of borrowing; our ability tomaintain and improve cost efficiency of operations; changes in foreign currency exchange rates; changes ineconomic conditions, political conditions, trade protection measures, licensing requirements and tax matters inthe foreign countries in which we do business; reliance on third parties for manufacturing of products andprovision 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” sectionand other sections of this Annual Report on Form 10-K, as well as in our Quarterly Reports on Form 10-Q andCurrent Reports on Form 8-K.2

PART IItem 1.

Business

Overview

References herein to “we,” “us,” “our,” the “Company” and “Xerox” refers to Xerox Corporation and itssubsidiaries unless the context specifically states or implies otherwise.Xerox is a $15.7 billion technology and services enterprise and a leader in the global document market. Wedevelop, manufacture, market, service and finance a complete range of document equipment, software, solutionsand services. We operate in over 160 countries worldwide and distribute our products in the Western Hemispherethrough divisions, wholly-owned subsidiaries and third-party distributors. In Europe, Africa, the Middle East,India and parts of Asia, we distribute our products through Xerox Limited and related non-U.S. companies(collectively “Xerox Limited”). We had approximately 55,200 employees at December 31, 2005.Our international operations represented approximately half of our total revenues in 2005. Our largestsubsidiary outside the United States is Xerox Limited, which operates predominately in Europe. We conduct ourLatin American operations through subsidiaries or distributors in over 38 countries. Fuji Xerox, anunconsolidated entity of which we own 25%, develops, manufactures and distributes document processingproducts in Japan, China, Hong Kong and other areas of the Pacific Rim, Australia and New Zealand.The document industry is transitioning from older technology light lens devices to digital systems, fromblack and white to color and from paper documents to an increased reliance on electronic documents. More andmore people are creating and storing documents digitally and using the internet to easily exchange electronicdocuments. We believe these trends play to the strengths of our product and service offerings and representopportunities for future growth within the $112 billion market we serve. (This estimate, and the market estimateswhich follow, is calculated by leveraging third party forecasts from firms such as International Data Corporationand InfoSource in conjunction with our assumptions about our markets.) In our core markets of Production ($8billion) and Office ($67 billion), we believe we are well placed to capture core growth opportunities by leadingthe transition to color and by reaching new customers with our broadened offerings and expanded distributionchannels. We are expanding our core markets with Document Services ($20 billion) and we are creating newmarket opportunities with digital printing as a complement to traditional offset printing, which we refer to as the“Eligible Offset” market. Our Document Services are organized around three offerings: Xerox Office Services,where we help our customers reduce costs and maximize productivity by optimizing their print infrastructure;Document Outsourcing and Communication Services, which focuses on optimizing the production environment;and Business Process Services, where we show our customers how to improve their processes by using digitalworkflow. Within the Eligible Offset market, which is estimated at $17 billion, we offer leading digitaltechnology, led by our market-making Xerox iGen3

technology and accompanied by the industry’s broadestmigration path to digital, which meets the increasing demand for short run, customized and quick turnaroundoffset quality printing.Our products include high-end printing and publishing systems, digital multifunctional devices (“MFDs”)(which can print, copy, scan and fax), digital copiers, laser and solid ink printers, fax machines, document-management software, and supplies such as toner, paper and ink. We provide software and workflow solutionsthat can help businesses easily and affordably print books, create personalized documents for their customers andscan and route digital information. In addition, we provide a range of comprehensive document managementservices, such as operating in-house production centers, developing online document repositories and analyzinghow customers can most efficiently create and share documents in the office.Our business model is an annuity model, based on increasing equipment sales and installations in order toincrease the number of machines in the field (“MIF”) that will produce pages and generate post sale andfinancing revenue streams. We sell the majority of our equipment through sales-type leases that are recorded as3