Xerox Fourth-Quarter Profit Rises on Sales of New Equipment
Jan. 25 (Bloomberg) -- Xerox Corp., the largest seller of copiers in the U.S., said fourth-quarter earnings rose on accelerating sales of new equipment, lower costs and the weaker U.S. dollar.
Net income rose to $240 million, or 24 cents a share, from $222 million, or 22 cents, in the same period a year earlier, Stamford, Connecticut-based Xerox said today in a statement sent over Business Wire. Per-share earnings reflect the payment of preferred-stock dividends. Sales rose 6o $4.3 billion from $4.29 billion.
Chief Executive Anne Mulcahy's cost cuts are allowing Xerox to sell new lower-priced products to compete with Canon Inc., Ricoh Co. and Hewlett-Packard Co. Xerox wants more equipment in the field to benefit from the profitable after-sale purchases of ink, paper and services. Mulcahy in November told investors full-year sales will rise in 2005 for the first time since 1999.
``They've cut costs substantially, the pricing is about where it should be and the company is improving not just in price but also in innovation,'' said Brian Eisenbarth of Davidson Investment Advisors in Great Falls, Montana, which owned 863,225 Xerox shares as of Sept. 30. He spoke before the earnings were released.
Xerox in November forecast profit of 20 cents to 22 cents for the fourth quarter. It was expected to earn 22 cents on sales of $4.32 billion, the average estimates of at least eight analysts surveyed by Thomson Financial.
Color, Digital
Xerox shares fell 45 cents to $15.29 in New York Stock Exchange composite trading yesterday. They jumped 21 percent in the fourth quarter, outperforming the Standard & Poor's 500 Index's gain of 8.7 percent.
The company is focusing on digital color products, which can be as much as five times more profitable than black-and-white machines because of costs for ink and servicing. It's introduced more than 35 products this year, including the WorkCentre line of machines that perform multiple office tasks. Some new products sell for less than $1,000, compared with $2,200 for a comparable older model.
Multifunction, digital and color products make up more than two-thirds of the company's revenue. Among machines introduced last quarter was the DocuColor 8000 digital printing press. That and the release of the NuVera digital printer in Europe contributed to sales, said Caroline Sabbagha, an analyst with Lehman Brothers in New York, in a Jan. 19 note to clients. She rates Xerox ``equal weight.''
Dollar's Drop
Sales also were helped by the weaker U.S. dollar, making foreign revenue more valuable when converted into U.S. currency. The dollar fell 7.5 percent against a basket of six major currencies in the quarter from a same period a year earlier, and lost 9 percent of its value against the euro.
Xerox forecast in November that earnings this year will be 90 cents to $1 a share, while sales will climb 3 percent from 2004. Sales in 2006 should rise 5 percent, Mulcahy said then.
Mulcahy, 52, has spent more than two years reining in expenses, paying debt and cleaning up accounting practices from her predecessors. She has cut at least 17,000 jobs and hired other companies to make Xerox products to reduce costs. Some of Xerox's new equipment has as much as 40 percent fewer parts, making manufacturing cheaper and maintenance easier.
Xerox in 2002 restated revenue for 1997 through 2001 and paid a $10 million fine as part of a settlement of fraud allegations by the Securities and Exchange Commission. The company didn't admit or deny wrongdoing.
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