*NEWS*XEROX EARNINGS UP A MODEST 2%

Xerox earnings up a modest 2 percent
Xerox Posts Slight Rise in Net
July 
2007 Xerox Corp., which recently completed its acquisition of Global
Imaging Systems Inc., posted a 2.3% rise in second-quarter profit and
raised its full-year earnings estimates.For the latest quarter, the
copier and printer maker reported a 2.3% rise in net income to $266
million, or 28 cents a share, from $260 million, or 26 cents a share, a
year earlier.Revenue in the latest quarter rose 5.8% to $4.21 billion.
Revenue, which was helped by the Global Imaging Systems acquisition,
included a currency benefit of two percentage points. Equipment-sales
revenue rose 5% to $1.98 billion, although price declines and the mix
of products sold continued to put pressure on results, Xerox said.
Revenue from services, outsourcing and rentals rose 7.6% to $2.03
billion.The Stamford, Conn., company completed its acquisition of
Global Imaging in May. Its $1.5 billion purchase of the Tampa, Fla.,
office-machines distributor was part of a further push into the U.S.
small- and medium-sized business market to kick-start anemic sales
growth. Sales from Global Imaging helped Xerox’s office revenue rise 5%
in the latest quarter, the company said, and the acquisition gives
Xerox access to about 200,000 new customers and adds 1,400 sales
people.”With the Global Imaging team now on board, we’ve increased our
reach to U.S. small and midsize businesses by 50%,” Chairman and Chief
Executive Anne M. Mulcahy said. “At the same time, our investment in
delivering the industry’s broadest portfolio of color technology is
paying off with the annuity from our color business increasing 16%. And
Xerox’s global relationships with large customers are contributing to
annuity growth from our consulting and managed services business.”Since
the beginning of the year, Ms. Mulcahy said, Xerox has introduced 28
new products, 10 of which are color devices, doubling the 14 total
product launches in 2006. More than two-thirds of Xerox’s equipment
sales revenue comes from products launched in the past two years, the
company said.Gross margins were 40.3%, a decline of less than one point
from the second quarter of 2006. Selling, administrative and general
expenses were 25.7% of revenue, about the same as the prior year. Xerox
generated operating cash flow of $388 million in the second quarter and
closed the quarter with $870 million in cash and short-term
investments.Looking ahead, Xerox expects third-quarter 2007 earnings in
the range of 24 to 26 cents a share. The company increased its range of
earnings expectations for 2007 to $1.16 to $1.18 a share. Previously it
had forecast full-year earnings of $1.12 to $1.16 a share.