Xerox Corp. stock fell below $5 last week after the company warned investors to expect its fourth-quarter results to be worse than its dismal third quarter and revealed it had exhausted a $7 billion line of credit.
The stock was trading midweek at $4.84, down nearly 20 percent from a week ago.
“And while we are confident for a turnaround in 2001, our fourth-quarter performance is likely to be softer than the third quarter, especially in light of the current economic environment,” said Paul Allaire, chairman and CEO.
The document company lost 20 cents a share in the third quarter, and the current Street estimates are for a loss of 7 cents a share, according to a poll of analysts by First Call/Thomson Financial.
Xerox included the warning with news that the completion of its China-unit sale to Fuji Photo Film Co. Ltd. improves the cash-starved company’s liquidity. Xerox says it has negotiated an extension loan securitized by receivables that could have come due after Moody’s Investor Service Inc.’s Dec. 1 downgrade of Xerox’s bond rating to below investment grade.
With cash in hand from the China-unit sale, the document company has $1.4 billion versus $154 million on Sept. 1. It has used up a $7 billion line of credit it started dipping into earlier in the year after its usual commercial lenders froze it out.
An asset-sale program expected to raise $2 billion to $4 billion is “on track and ahead of schedule,” Allaire said.