The journey to Palo Alto begins unremarkably enough: take Highway 280 from San Francisco and head south past the dreamily named coastal town of Half Moon Bay.

After 30 miles of rolling landscape, grazing cattle, kiting eagles and giant sequoia trees, Coyote Hill suddenly comes into view. Just a few minutes later and, nestled amid horse fields, deer creeks and distant mountains, you've arrived.

This, then, is Xerox's legendary Palo Alto Research Centre, or PARC as it's more generally known - the place where the Alto, the world's first personal computer, flickered to life way back in the 1970s along with sibling technologies such as prototype mouse devices, Windows-type screens and ethernet cards.

In short, PARC is where Xerox's boffins, often armed with little more than a soldering iron and their own talents, pursued a strategy of science for science's sake and, in so doing, inexorably changed the course of society.

It was PARC too, where this time last year, Richard Thoman, Xerox's chief executive, stood four square with Steve Ballmer, Microsoft's president. He waxed lyrical on how, as the old world of analog photocopiers gave way to the new age of digital documents, their respective technologies were converging - the fruits of these labours now reflected in Xerox's latest 'document centres' that would work with Windows NT to seamlessly integrate emails, fax machines, PCs et al.

PARC keepers
Such was the success of the dynamic duo's PARC presentation that a repeat performance was scheduled for this month, focusing this time on Xerox's ContentGuard software - a technology in which Microsoft has a partial stake and which is designed to protect internet content from illicit copying.

But at the last minute came the news that the presentation had been cancelled. A few days later the reason became clear - Thoman had "stepped down" from his post after just 13 months in the job.

It was the sort of news that immediately sent Xerox's share price plummeting and again placed a question mark over its strategy - a strategy that has seen its profits drop by more than a third during this quarter alone compared to the same period in 1999.

So just what is going on? Most industry observers believe that Thoman had little option but to jump ship - a victim of internal politics and an increasingly desperate Xerox board, but above all sacrificed on the altar of his own strategy that had arguably left the company worse off than when he joined from IBM in June 1998.

Some say that, despite being IBM's chief financial officer and having formerly been under the wing of Lou Gerstner, IBM's chief executive, Thoman remained first and foremost an accountant: a bean counter who knew how to minimise losses by cutting back, but lacked the inspiration to create profit.

In his short duration as chief executive, Thoman slashed the number of Xerox's administrative centres from three dozen to a mere three, at the same time laying off 10,000 workers mainly in Europe.

Focusing on solutions
But the flipside of this measure was that the Xerox sales reps found they spent almost as much time sorting out the paperwork as they did selling. Then last year, Thoman re-engineered the sales model so that the new focus was on providing solutions rather than just selling boxes on a regional basis.

For sales executives, that meant a new strategy of pitching cross-platform solutions to large corporate accounts rather than bothering about specific photocopier or printer products. Combined with all the red tape, some believe it was a transition too far.

Connie Moore, an analyst with Giga Information Group, said: "Xerox totally underestimated the amount of effort required. The result has been major disruptions in the company's sales efforts and below-par revenues."

Just how dire the situation was getting is reflected in the fact that only last month Xerox unveiled plans to slash a further 5000-plus jobs globally in a bid to save nearly $400m over the next 18 months.

But it is now Thoman who appears to have been on the receiving end of the knife. Whispers already abound that he was the victim of a boardroom coup and one in which perhaps the sharpest blade wielded was that of Xerox's chairman Paul Allaire, who now resumes his former role as chief executive.

But just as intriguing is the part played by Anne Mulcahy, president of the company's general markets operations and a veteran of the company. She is now in line to take the helm of Xerox once the dust has settled - a move that would make her Xerox's first female chief executive in its long and illustrious history.

Among those who believe Thoman was given the option either to jump or be pushed is Gregory Gieber, an analyst with Brown Brothers Harriman. "I think it most likely he was forced out," Gieber told Reuters. "At least that's the way it reads. After all, Rick was only there for 13 months."

As might be expected, though, such talk is being played down by Xerox. A UK spokesman said: "It's unfair to say Rick was pushed. The guy didn't decide in isolation to leave. It was a mutual decision."

"If you look at our share price, it's now around half of what it was 12 months ago. The recovery has been slower than we would have liked, so there was certainly pressure on the board of directors to deliver to investors. But it wasn't a case that people conspired to get rid of Rick - he was part of that conversation," he added.

He also admits that undue pressure was put on Xerox's sales reps, particularly in the US, as call and administration centres were closed down. But he claims that a different tack was taken in Europe - namely that instead of closing down the centres in one fell swoop, they are continuing to be closed down on a country-by-country basis as the new, multi-lingual Dublin facility comes fully on line.

This phased approach to closure, in stark contrast to the big bang strategy adopted in the US, has given European sales reps some breathing space, he contended.

But the spokesman does defend Xerox's decision to rationalise even the European centres. "In Europe, we used to average more than one per country and it was just too expensive," he said. "Apart from the huge cost, the other problem was that our corporate customers didn't want to have to deal with umpteen service people worldwide - they just wanted a single, multi-lingual point of contact. So that was a further reason to rationalise."

"But in the US, we made the mistake of switching overnight from multiple centres to just a handful, and we didn't get it right. People weren't sufficiently skilled or trained - in short, we misread the situation and reps spent up to 40 per cent of their time trying to resolve customer billing issues," he added.

It's a blunder that Thoman himself appears to admit to. In an open letter to fellow Xerox workers just before he stepped down, the former chief executive recounted how he had tried to turn the company around, but also commented on the sluggish pace of change and the high cost of implementing the measures.

"My major regret is that the timing of these transformations has taken longer, and had a greater financial and human impact, than I would have liked," he conceded.

Digital competition
More pertinent for Xerox, meanwhile, is whether it can now recover sufficiently from the past few years of turbulence to make the transition from analog technology to digital - a world where it clashes head on with fellow US companies like Hewlett Packard (HP) and mighty Japanese leaders such as Canon and Epson.

On the plus side, while sales of traditional monochrome photocopiers are on the wane, this is offset in Xerox's case by growing demand for both high-speed, colour digital models and cheap printers.

Recent figures from IDC, for instance, show that global printer sales for the third quarter of last year were 12 per cent up on 1999, with more than 16 million units shipped.

The bad news for Xerox though is that HP continues to dominate the market, closely followed by Epson and Canon. In January this year, however, Xerox concluded its acquisition of Tektronix in a $925m deal, giving it both a technological building bridge to move more swiftly into smaller colour printers, along with a stronger foothold in the small and medium business market.