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Burns puts Xerox focus on services, costs

Rochester Business Journal
April 26, 2013

Xerox Corp. will focus on cost-cutting measures and growing its services business through acquisitions, its leader said this week.
Over the next 12 to 18 months, Xerox will pursue acquisition candidates that can add capabilities, particularly data analytics, and enhance its health care business, Chairman and CEO Ursula Burns said Tuesday during a conference call to discuss first-quarter financial results.
The company also will focus on international acquisitions in various areas to complement Xerox's services business by increasing sales and adding people experienced in the field, she added.
"It's growing, but we want it to grow faster," Burns said of the international business.
The company reported first-quarter net income of $296 million, or 23 cents a diluted share, compared with $269 million, or 19 cents a diluted share, a year ago. Excluding 4 cents a share related to the amortization of intangibles, earnings per share were 27 cents.
Sales were nearly $5.4 billion, down 3 percent from $5.5 billion.
Revenue from the company's services business was up 4 percent to $2.9 billion and represented 55 percent of total revenue. Revenue from the document technology business was $2.1 billion, down 9 percent from last year; the document technology business represented 40 percent of total revenue.
The company used $87 million in operating cash during the first quarter, in line with cash flow seasonality and reflecting an increase in inventory related to new product launches.
The quarterly results were in line with company estimates, but sales fell short of what analysts had been predicting.
For the first quarter, Xerox had expected earnings of 19 to 21 cents a share and adjusted earnings per share of 23 to 25 cents.
Analysts polled by Thomson Reuters had expected earnings per share of 24 cents on sales of roughly $5.5 billion.
Burns called the results mixed, saying she was pleased with the services side of the business but disappointed with the slow start in the document technology business.
Peter Wahlstrom, an analyst with Morningstar Inc., wrote in a research note this week that steady macroeconomic pressure affected Xerox's revenue, but he noted the services business continues to perform well.
"We expect this segment to be the primary driver of top-(line) and long-term bottom-line performance," Wahlstrom wrote.
Shares of Xerox (NYSE: XRX) were trading around $8.45 at midweek, on the high end of a 52-week range of $6.10 to $9.38.
For the second quarter, Xerox expects earnings of 19 to 21 cents a share and adjusted earnings of 23 to 25 cents a share.
The company plans a higher level of restructuring activities in the second quarter and has included 2 cents a share of restructuring in its guidance. Xerox said it expects to incur additional restructuring charges of some $35 million in the second quarter as it continues to enact cost-cutting measures.
Xerox ranked first on the most recent Rochester Business Journal list of manufacturers with 6,100 local workers. Worldwide employment at the end of March was 143,200, down 4,400 from the end of 2012. The drop was due to restructuring-related actions and attrition, the company said.

4/26/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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