(Bloomberg) -- Xerox Holdings Corp., which last month dropped a hostile takeover bid for larger rival HP Inc., withdrew its annual revenue forecast, signaling uncertainty over how high a toll the economic slowdown from the Covid-19 pandemic will take on the copy-machine maker.
Revenue reached $1.9 billion over the first quarter, a 14% drop from a year earlier, the Norwalk, Connecticut-based company said Tuesday in a statement. Pretax losses came in at $5 million. Xerox said in January it expected to generate adjusted profit of as much as $3.70 a share on revenue of $8.63 billion in fiscal 2020.
Xerox is reporting results for the first time since calling off its effort to acquire HP because of the economic uncertainty caused by the virus. Now Chief Executive Officer John Visentin must shepherd the pioneer in photocopying technology through the downturn in the face of falling demand for printed documents and eight years of declining sales. Businesses, preserving cash to weather a possible recession, are also postponing information technology projects, representing a threat to Xerox.
“While this isn’t the year we planned for, it’s the one we have,” Visentin said on a conference call with analysts. “I’m doing everything to make sure that Xerox and its team members get out of this in a position of strength.”
Xerox’s shares rose 2% in trading in New York. The stock has plunged 50% this year.
The hardware company warned that, because of the lock down measures countries are implementing, the hit on its business could persist. Xerox expects the greatest impact to its revenues from business closures to be during the second quarter, with revenue returning closer to expected levels nearer the end of the year.
Xerox generated $325 million in equipment sales of hardware in the first quarter, a decrease of 27% from a year earlier. The company recognized $1.5 billion in post-sale revenue during the period, which includes ink supplies, maintenance and other managed services.
Xerox executives said the company is cutting non-essential expenses to preserve cash. The company expects to achieve gross savings of $450 million and return 50% of free cash flow to investors this year.
The hardware company is seeing the most demand for machines from U.S. state and federal governments and healthcare clients, Visentin said. Xerox is participating in European government programs that help pay the salaries of its employees, and has encouraged U.S. clients to apply for government subsidy programs. For customers that are struggling, Xerox is trying to find flexible, individual solutions, including letting some businesses defer their monthly payments for a later date.
(Updates with CEO quote in fifth paragraph and additional details throughout.)
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