Xerox Corp. (XRX) reversed a first-quarter loss caused by a
securities-lawsuit settlement as the company continues to struggle
amid the pullback in office-equipment spending.
As such, the company projected second-quarter earnings below
analysts' expectations and cut its full-year target. The 2009 view
was cut to 50 cents to 55 cents a share from January's downbeat
view of nearly $1; the forecast wasn't updated after Xerox slashed
its first-quarter outlook last month.
The company also projected second-quarter earnings of 10 to 12
cents a share. The mean estimates of analysts surveyed by Thomson
Reuters was 12 cents.
The drop in corporate technology spending, especially in Europe
and developing markets, "accelerated" during the quarter, Chairman
and Chief Executive Anne Mulcahy said Friday. She added: "As
disciplined as we are in cost management, we're equally determined
to invest in growth, ensuring that Xerox is in an advantaged
position as the economy improves."
The printer and copier maker posted net income of $49 million,
or 5 cents a share, compared with a year-earlier net loss of $235
million, or 27 cents a share. The company lowered its view last
month to 3 cents to 5 cents.
Revenue fell 18% to $3.55 billion, with one-third of the drop
due to the stronger dollar. Analysts surveyed by Thomson Reuters
had most recently expected $3.54 billion.
Gross margin edged down to 38.9% from 39.3% on the stronger
dollar, offset somewhat by cost savings.
Post-sale revenue - service, supplies and rentals - dropped 14%,
or 8% in constant currency. Equipment sales slumped 30%.
Xerox makes printers both for offices and large-scale
production, but garners most of its sales from its services
businesses, which include maintenance contracts, printing supplies
and lease revenues. The company is being pinched by the global
spread of economic weakness as well as by the stronger dollar,
since it gets most of its revenue from overseas.
The company said Friday it cut debt by $485 million in the first
quarter and plans to reduce borrowings more than $1 billion this
year.
Shares closed Thursday at $5.74 and were inactive premarket. The
stock is down 60% since Labor Day.
-By Mike Barris, Dow Jones Newswires; 201-938-5658;
mike.barris@dowjones.com