Reuters: Global Markets: Xerox trims earnings forecast, shares fall

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Xerox trims earnings forecast, shares fall Oct 23rd 2012, 14:44 By Nicola Leske Tue Oct 23, 2012 10:44am EDT (Reuters) - Xerox Corp (XRX.N) trimmed its full-year earnings forecast on Tuesday and said it would take a restructuring charge of up to $100 million after third-quarter sales were hurt by the strong dollar, weak economic conditions in Europe and tight government budgets. Xerox, historically known for its office copiers and printers, said it plans to take a restructuring charge of $50 million to $100 million. It did not say what the charge was for, but one analyst said it was in the business services operations. Excluding one-time items, the company forecast 2012 earnings of $1.07 to $1.09. It previously forecast $1.07 to $1.12. Xerox said it expects adjusted earnings to be flat or up slightly in the current quarter; it expects 33 cents to 35 cents per share, compared with 33 cents a year ago. Analysts' average forecast is 34 cents, according to Thomson Reuters I/B/E/S. Xerox, which wants to be known as more than just a maker of printers and copiers, made a big bet on business services with its 2009 purchase of Affiliated Computer Services Inc for $5.5 billion, the biggest deal ever for the 106-year-old company. It now derives more than half of its revenue from business services, but investment in those operations has pressured margins. Its technology business includes document systems, supplies, technical services and finance support. Like other information technology companies that have transitioned from hardware to software and services, such as IBM (IBM.N), Xerox is feeling the pain as governments hold off on spending and projects are delayed. "We think government demand impacted (business process) revenue, especially at the state level, with uncertainty driving delayed technology sales in both Europe and North America," Cross Research analyst Shannon Cross said. The analyst said the restructuring charge was aimed at the business services operations. She also said pressure in Europe on the technology business was "perhaps more than expected." While third-quarter earnings per share were in line with expectations at 25 cents, revenue fell 3 percent to $5.4 billion, below Wall Street estimates of $5.51 billion. "While we're pleased with the continued revenue growth trajectory in services, the profitability of a few contracts has been hampered by constraints in government spending, delaying implementation on committed projects that required our upfront investments," Chief Executive Ursula Burns said in a statement. "We believe this is a short-term consequence of current macro and political conditions," she said, adding that the company remained cautious and aimed to reduce costs. Revenue from the services business rose 6 percent in constant currency, while revenue from its technology business declined 7 percent. Xerox shares were down 8.5 percent in morning trading to $6.43. (Reporting by Sruthi Ramakrishnan in Bangalore, Nicola Leske in New York; Editing by Sriraj Kalluvila and Maureen Bavdek) Link this Share this Digg this Email Reprints

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