Xerox to Cut 3,000 Jobs Amid `Unpredictable' Economy (Update1)
By Courtney Dentch
Oct. 23 (Bloomberg) -- Xerox Corp., the largest maker of high-volume color printers, plans to eliminate 3,000 jobs in the next six months and speed manufacturing cost cuts to cope with an ``unpredictable economy.''
The job cuts are being made in administration and manufacturing through voluntary buyout packages, spokesman Bill McKee said. Sales employees won't be affected, he said. The reductions represent 5.2 percent of the company's workforce of 57,400 as of Sept. 30.
Chief Executive Officer Anne Mulcahy is accelerating a cost- cutting program after sales of equipment fell 2.7 percent in the third quarter on slowing U.S. demand for production printers. Profit margins shrank on lower prices and higher administrative expenses. Xerox said fourth-quarter profit will trail analysts' estimates even before it spends $400 million to ramp up the restructuring program.
``Xerox is trying to get ahead of the economic downturn by aggressively going after costs in order to maintain margins,'' Shannon Cross, an analyst with Cross Research in Livingston, New Jersey, wrote in an e-mailed statement. She rates Xerox ``buy.''
Other restructuring efforts to improve efficiency in development, engineering and delivery are still being identified, Chief Financial Officer Lawrence Zimmerman said on a conference call today. He expects the moves to save $200 million next year. Xerox cut 300 jobs in the third quarter.
``We're not immune to economic issues and the unpredictability of these coming months will likely make for a challenging environment,'' Mulcahy said on the call. She expects the restructuring will position the company ``to deliver double- digit earnings growth in 2009.''
`Tough' Times
Xerox forecast fourth-quarter profit of 34 cents to 36 cents a share, excluding a 31-cent restructuring charge. The average estimate in a Bloomberg analyst survey was for earnings of 43 cents. The company predicts full-year profit of $1.14 to $1.16 a share, before the restructuring charge and a 55-cent legal settlement, below the $1.24 average analyst estimate.
Third-quarter net income climbed 1.6 percent to $258 million, or 29 cents a share, topping the average estimate of 28 cents in a Bloomberg survey. Sales rose 1.6 percent to $4.37 billion, on higher orders for paper, toner and supplies.
Xerox fell 27 cents to $7.71 at 4 p.m. in New York Stock Exchange composite trading. It has lost 52 percent this year.
The supply business ``is a true asset in tough economic times'' Mulcahy said. ``It delivers recurring revenue from multi- year contracts and generates strong operating cash flow.''
Large Customers
Xerox projects the slowdown among its largest U.S. and European customers to continue, Mulcahy said. Currency translation is expected to hurt fourth-quarter earnings, and the company isn't ``depending on any economic recovery in 2009'' to drive earnings growth, Mulcahy said.
The restructuring moves will give Xerox ``more flexibility in our business and in this unpredictable economy,'' Mulcahy said in the statement.
The company is also phasing out a health-care stipend of as much as $1,000 for some retirees, beginning next year. Xerox plans to halt the stipend for former workers who are eligible for Medicare and put the savings toward a similar allowance for those who aren't eligible for the government plan.
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