[Anonymous]

Sales worries drop Xerox shares
The
printer and copy machine maker reported a higher-than-expected
quarterly profit, but revenue fell short of analysts’ estimates.
July 
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
2006.

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.”

Xerox
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.

[Author]

July 30, 2007 at 11:46 AM