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Xerox fourth-quarter profit rises 18 percent
NEW
YORK – Xerox Corp. on Wednesday said quarterly profit rose 18 percent
on strong demand for its high-margin digital color copier supplies and
services, and 2006 earnings should hit the high end of its previous
forecast.
Xerox, which over the past two years has unveiled many new
digital printers and office systems, said customers shifted to
lower-priced systems during the quarter, but it still sees solid demand
driving recurring sales of supplies and services.
“This increased
activity fuels future post-sale revenue,” Chief Executive Anne Mulcahy
said in a statement. “We’re confident that the short-term impact on
equipment sale revenue will deliver long-term gains in top-line growth.”
The
company, best known for its copiers even as it expands its offering of
document management services, said net income rose to $267 million, or
27 cents a share, after payment of preferred dividends, from $226
million, or 24 cents a share, a year earlier.
Excluding
restructuring costs, Xerox earned 32 cents a share, meeting analysts’
average expectations, according to Reuters Estimates.
Xerox shares eased 6 cents to $14.40 in early New York Stock Exchange trade.
Cross
Research analyst Shannon Cross said the results were mixed overall, but
she was encouraged by Xerox’s ability to build its long-term revenue
stream and generate cash to reinvest in its businesses, pay down debt
and buy back its stock.
“The cash quarter was extremely strong,” Cross said. “(Xerox) is a cash flow story. and they did a billion in cash last year.”
Revenue fell 2 percent to $4.25 billion, short of analysts’ estimates of $4.42 billion.
Without
the negative affect of currency conversion, sales would have risen by 1
percent. Xerox said. Revenue from color products increased 17 percent.
ANOTHER $500 MILLION STOCK BUYBACK
Although
it has grabbed market share from competitors, Xerox is still struggling
to increase its revenue in a sluggish market, where pricing pressures
have cut into margins. The Stamford, Connecticut, company has said it
expects digital sales to yield higher profit margins.
Over time,
Xerox’s sales of color printers yield five times the revenue of
black-and-white systems, fueled by service contracts and supplies like
paper and replacement ink and toner.
Fourth-quarter gross margins improved fractionally to 41.4 percent.
For the second quarter in a row, Xerox said it would buy back up to $500 million in its common stock.
The
company said it sees its first-quarter profit in the range of 20 cents
to 23 cents per share, compared with analysts’ estimates of 22 cents.
Xerox
reiterated its full-year 2006 earnings forecast of $1 to $1.07 per
share, although it now expects results to be in the high end of that
range. Wall Street is expecting profit of $1.04.
Xerox stock, down 9
percent in the past 12 months, trades at 16 times estimated 2006
earnings, compared with a multiple of 21.28 for the Merrill Lynch
Technology 100 index.
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