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 user 2007-07-30 at 11:46:00 am Views: 39
  • #18483

    Sales worries drop Xerox shares
    printer and copy machine maker reported a higher-than-expected
    quarterly profit, but revenue fell short of analysts’ estimates
    2007: NEW YORK  — Xerox Corp. posted a higher-than-expected quarterly
    profit Wednesday, but concerns about margins and the pace of equipment
    sales pushed its stock down more than 5 percent.Xerox (down $1.05 to
    $18.28, Charts, Fortune 500) shares had fallen as much as 8.5 percent
    earlier in the day, the largest single-day drop in more than three
    years for Xerox. The decline comes one day after the stock hit its
    highest level in seven years.

    Fortune’s Geoffrey Colvin sits
    down with Xerox CTO Sophie Vandebroek and discusses how she uses Second
    Life as a testing ground for future ideas.Jeff Embersits, an
    independent advisor to investment funds, said Xerox was overpriced and
    noted that its revenue gains in the second quarter had benefited from
    the acquisition of technology products provider Global Imaging Systems
    Inc.Without that boost, equipment sales would have once again been
    anemic, he said.”They are trudging along,” Embersits said, adding that
    he has rated the stock “sell.”

    Xerox, the world’s biggest
    supplier of office printers, copiers and related serviceS, reported
    second-quarter net income of $266 million, or 28 cents a share, up from
    $260 million, or 25 cents a share, a year earlier.Analysts were
    expecting a profit of 27 cents a share, according to Reuters
    Estimates.Xerox, which has bet on introducing color printers along with
    lucrative long-term supply and service deals, said total revenue rose 6
    percent to $4.21 billion from $3.98 billion. Analysts were expecting
    $4.19 billion.Xerox, whose competitors include Canon Inc. (down $1.08
    to $57.80, Charts) of Japan, Heidelberg of Germany and Hewlett-Packard
    Co. (Charts, Fortune 500), has grabbed market share over the past two
    years with new digital office printers and large-scale presses.But its
    equipment revenue growth has lagged amid strong competition and pricing
    pressure on color laser printer sales to some distributors.Analysts
    also took issue with Xerox’s gross margins, which were 40.3 percent in
    the quarter, less than a 1-point decline from the second quarter of

    Acquisition boost
    Xerox bought Global Imaging for $1.5
    billion in May. Global Imaging sells printers and copiers to small and
    mid-size businesses, and it added Xerox’s document-management products
    to its product line.Chief Financial Officer Larry Zimmerman said
    Xerox’s wider client base would help it reach better deals, as well as
    boost post-sale supplies and services.”We now have a huge tool (in
    Global) to help us with that growth,” he told Reuters in an interview.
    “We have been building post-sale, and as it builds up and Global takes
    effect, I think you are going to see sustained total revenue growth.”

    said it made progress in the second quarter, boosting long-term revenue
    growth with sales of color printers and high-end systems, which are
    routinely combined with lucrative long-term supplies and service
    contracts.Post-sale and financing revenue, which represents more than
    70 percent of Xerox’s total, rose 7 percent. Equipment sales rose 3
    percent.The company raised its expectations for full-year earnings to a
    range of $1.16 to $1.18 per share. Previously, Xerox had forecast $1.12
    to $1.16.Analysts had expected 2007 earnings of $1.17 a share,
    according to Reuters Estimates.Xerox forecast third-quarter profit of
    24 cents to 26 cents per share. The analysts’ average forecast was 26
    cents, according to Reuters Estimates.”While strong … growth came
    from the acquisition, we think it is indicative of the strength of
    Xerox’ cash-generating model with management reinvesting cash in
    accretive acquisitions that drive the top and bottom line,” Cross
    Research analyst Shannon Cross said.Xerox shares were down more than
    5.4 percent in afternoon trading on the New York Stock Exchange, after
    falling to a session low of $17.69. The stock is still up about 8
    percent so far this year.