XEROX 4TH QUARTER PROFIT RISES 18%

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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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January 26, 2006 at 10:12 AM