Xerox Profit Rises on Printer Sales
Thursday October 21, 2:14 pm ET
By Franklin Paul
NEW YORK (Reuters) - Xerox Corp. (NYSE:XRX - News) on Thursday said third-quarter net income rose 39 percent as it cut costs and the sales of its more-profitable color digital printers improved.
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The office-equipment maker also said net income would be below analysts' views, because of its plan to spend more in the fourth quarter on restructuring and marketing. But its outlook, excluding those one-time costs, remained on track with Wall Street.
"Our expectations were not that dissimilar from where the Street was. We added some additional investments in there which made it a little lower," Xerox Chief Financial Officer Larry Zimmerman told Reuters in an interview.
Analysts were impressed with Xerox's sales of new equipment, such as color machines, whose printed pages are five times as profitable as black-and-white pages.
"Xerox's trends are positive, and their color (products) sales were strong. The razor-and-razor-blade model remains intact," said analyst Shannon Cross of Cross Research, referring to the trend in which customers buy new equipment, then buy higher-profit supplies and services over the long term.
But the company continues to be dogged by declines in "post-sale" revenue, which includes supplies and service sold to customers who still use Xerox's older machines.
Stamford, Connecticut-based Xerox shares were off 13 cents, to $14.41, in mid-afternoon activity on the New York Stock Exchange.
Xerox said net income after payment of preferred dividends was $148 million, or 17 cents a share, compared with $92 million, or 11 cents a share, a year earlier. Including the dividends, net income was $163 million, up from $117 million.
The quarterly profit included a benefit of 4 cents a share from a subsidiary's pension settlement gain and restructuring charges of 2 cents a share.
Revenue declined slightly to $3.71 billion from $3.73 billion, but met Wall Street estimates. It was boosted by 3 percentage points from the effect of the weak dollar.
Analysts were expecting profit of 14 cents a share on revenue of $3.71 billion, according to Reuters Estimates.
EQUIPMENT SALES RISE
Xerox is working to outfit offices with new digital color copiers and high-end printer systems, whose supplies and services are more profitable and recurrent. In the third quarter, sales of new equipment grew 5 percent in the quarter.
Revenue in growth areas such as digital office printers and related services grew 7 percent from last year, and now represent some 74 percent of Xerox's revenue.
Xerox said its sees fourth-quarter earnings in the range of 20 cents to 22 cents per share, contributing to full-year earnings in the range of 83 cents to 85 cents per share.
Analysts had on average forecast a profit of 24 cents a share in the fourth quarter, and 82 cents for 2004
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