XEROX TO LAY-OFF 3,000 EMPLOYEES
XEROX TO LAY-OFF 3,000 EMPLOYEES
2008-10-23 at 10:50:55 am #20610
Xerox to cut 5 pct of staff; 3Q profit beats views
SAN FRANCISCO – Xerox Corp. plans to cut 3,000 jobs, or 5 percent of its work force, because a slowdown in orders from large U.S. companies has dragged down the printer and copier maker’s profit margins.The restructuring the Norwalk, Conn.-based company announced Thursday will affect all departments except sales and is an example of how the economic turmoil is hurting companies outside the financial services industry.Xerox shares slid 37 cents, 4.6 percent, to $7.61 in morning trading.
Xerox had already been steadily cutting costs and jobs before the financial crisis dramatically worsened in the past month, but the sharp downturn intensified pressure on its profit margins and caused the company to accelerate its restructuring plans.Xerox said the cuts will lead to a $400 million charge. U.S.-based employees are being offered buyout packages, said Xerox spokesman Carl Langsenkamp.
Xerox revealed the cuts as it reported that sales of new equipment weakened in the third quarter, dragged down by tightened spending budgets in the U.S. and Britain. The economic slowdown has hurt companies’ abilities to borrow money to buy new equipment, and many are clamping down on spending.Xerox managed to post a 2 percent increase in profit in the July-September quarter, topping Wall Street’s forecast by a penny per share. A big tax windfall helped Xerox offset slumping sales.
But revenue fell short of the consensus estimate, highlighting the damage caused by soft business spending.Xerox earned $258 million, or 29 cents per share, in the three months ended Sept. 30. That was a penny per share higher than the average estimate of analysts polled by Thomson Reuters. In the year-ago period, Xerox’s net income was $254 million, or 27 cents per share.Profits in the latest period were boosted by a $41 million tax settlement, which increased earnings per share by 4 cents.
Xerox’s gross profit margin came in at 39.2 percent of revenue for the third quarter, down about one percentage point from the prior year. Gross margin measures a company’s profit on each dollar of revenue once manufacturing costs are stripped out. It’s an important measurement of how well a company is controlling its costs.Xerox’s sales grew just 2 percent, to $4.37 billion, short of the $4.47 billion that analysts polled by Thomson Reuters were expecting. Sales would have been flat were it not for the benefits from a weak U.S. dollar.
Equipment sales, which make up about a quarter of Xerox’s overall business, were down 3 percent to $1.13 billion.A much bigger and more lucrative part of Xerox’s business — so-called “post-sale” revenue, which refers to the sale of ink and other supplies to companies that have already bought or leased Xerox machines — grew 3 percent to $3.25 billion. That segment makes up nearly three-quarters of Xerox’s sales.
Anne Mulcahy, Xerox’s chief executive, said in a statement that the job cuts are necessary to give Xerox more flexibility in an unpredictable economy.”We believe the operational efficiencies we’ll gain from our restructuring actions in the fourth quarter position us well to deliver double-digit earnings growth in 2009,” she said.The restructuring charges are expected to reduce net income by 31 cents per share. Excluding those charges, Xerox expects profit in the range of 34 cents per share to 36 cents per share. Analysts surveyed by Thomson Reuters had expected the company to earn 43 cents per share for the fourth quarter.