October 24, 2010
Xerox 3rd-quarter profit doubles; job cuts planned
NEW YORK (AP) — Xerox Corp. more than doubled its third–quarter profit as sales of office equipment continued to bounce back and its recent acquisition of outsourcer Affiliated Computer Services (News - Alert) fueled growth in services revenue.
As it looks to wring more cost savings out of the $6 billion ACS deal, Xerox said Thursday it plans to eliminate 2,500 jobs, or about 2 percent of its 133,000–person work force. That's in addition to 2,500 jobs Xerox said it would cut back in January.
The company has been clawing its way back from a dismal 2009, when sluggish business at its customers caused a drop–off in spending on office equipment and supplies.
Xerox CEO Ursula Burns struck a muted note on the pace of recovery, noting that big companies still aren't doing much hiring. Xerox is a fair indicator of white–collar employment, because the more people that its customers employ, the more ink and paper they use.
"I think that it would be hard for me to say that things aren't looking a little bit better," Burns said, but added, "I'm still cautious on the economy."
Xerox reported net income of $250 million, or 17 cents a share, for the quarter, compared with $123 million, or 14 cents a share, a year ago. Excluding one–time items, it would have earned 22 cents per share.
Revenue rose 48 percent to $5.43 billion, mainly because of the ACS (News - Alert) acquisition. Had results from ACS been included in last year's third quarter, revenue this year would show a 2 percent increase.
The quarter came out mixed as far as Wall Street expectations. Earnings on a per–share basis came in a penny above the average forecast form analysts, according to Thomson Reuters (News - Alert), but revenue fell slightly short of the $5.45 billion analysts expected.
Xerox shares rose 8 cents to $11.17 in afternoon trading.
The company has transformed itself with its deal for ACS, tripling the size of its services business. ACS handles a wide range of outsourcing jobs, from managing electronic toll payments to processing health care records. The deal has shown some early signs of success. Revenue from those types of outsourcing contracts grew 8 percent in the third quarter and new service contract bookings jumped 26 percent.
At the same time, the company's traditional office equipment business is rebounding from a severe drop–off during the recession. Equipment sales climbed 13 percent over the same quarter a year ago.
The Norwalk, Conn., company says that based on its momentum, it's raising its outlook for both this year and 2011.
Excluding one–time items, the company expects earnings of 92 cents to 93 cents per share for the year, up from a previous forecast of 88 cents to 92 cents. Analysts were looking for 93 cents.
Because of the job cuts, Xerox said it will take an extra $120 million in restructuring charges this year on top of $280 million already announced.
And for 2011, Xerox projected full–year adjusted earnings of $1.05 to $1.10 per share, up from 95 cents to $1.05. Analysts expect $1.07.