Xerox shares slide as it tightens full year outlook
Xerox Corp. (NYSE:XRX) said Tuesday that a “challenging” economy led to a decrease in third-quarter earnings and revenue, and that it will take a $50 to $100 million restructuring charge next quarter.
Shares fell over eight per cent on news of the charge and the resulting effect on full-year per share earnings, trading at $6.42 as at about 10 a.m. EDT.
During the fourth quarter, Xerox said it will take a restructuring charge in the range of $50 to $100 million. As a result, it now expects $1.07 to $1.09 per share in earnings, on an adjusted basis, for the year. Previously, it had forecast an adjusted range of $1.07 to $1.12 per share.
For the quarter that ended September 30, the document technology company posted earnings attributable to the company of $282 million, or 21 cents per diluted share, down 12 per cent from a year-earlier $320 million, or 22 cents per diluted share.
Excluding items, profit was 25 cents, down from 26 cents a year ago.
Sales came in at $5.42 billion, down three per cent from the $5.58 billion in revenue recorded a year earlier.
Analysts polled by Thomson Reuters expected a per-share profit of 25 cents, on $5.49 billion in revenue.
“Our third-quarter performance aligns with shifts in our business as services become a larger proportion of our revenue, and reflects the dynamics of a challenging economy that is creating cost pressures for large enterprises and governments,” said chairman and CEO Ursula Burns.
Indeed, like other information technology companies such as Hewlett Packard (NYSE:HPQ) and IBM (NYSE:IBM), Xerox is attempting to combat a decline in equipment sales and supplies by making the transition to software and services.
In the company’s services business, which accounts for more than half of its revenue, constant currency revenue from business process outsourcing grew nine per cent, IT outsourcing sales grew six per cent and document outsourcing, which includes the company’s managed print services offerings, sales were up four per cent.
“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,” said Burns.
Xerox said it remains cautious, and is focused on reducing costs to absorb the impact and improve margins while investing in key areas of growth.