Xerox results suggest turnaround

Anne Mulcahy was brought in to turn Xerox around

Xerox, the troubled office equipment company, has reported a smaller loss than expected, but dampened hopes of an improvement in the second quarter.

Nevertheless, the company showed some promise of a turnaround after reporting a loss of $86m for the first quarter of 2001, or 12 cents a share.

We are ahead of schedule in implementing our cost-reduction plans

Anne M. Mulcahy
Xerox

The loss compares to a profit of $220m, or 30 cents a share a year earlier, but was not as bad as analysts were expecting.

Most had forecast a loss of 28 cents a share for the first quarter.

"We are clearly benefiting from the aggressive attack on our cost base and focus on operational improvements," said Anne M Mulcahy, president and chief operating officer.

"We are ahead of schedule in implementing our cost-reduction plans," she added.

The surprise announcement by the company vaulted the shares to a session high of $8.85, the highest the stock has traded since November.

At midday US time, the stock changed hands at $8.65, up $2.25.

Warning

The improvement was offset by news that the company expects to report a similar loss in the second quarter, which would be larger than analysts were hoping for.

Analysts had been looking for a loss of seven cents a share.

With the inclusion of gains from asset sales and restructuring charges, the company reported a net profit of $158m for the first quarter, or 19 cents a share.

Overall, the company reported first quarter revenues of $4.2bn, 8% lower than the first quarter of 2000.

Profitability

Nevertheless, Xerox hopes to return to profitability in the second half of the year.

Xerox has strengthened its US sales team

"Xerox's performance in the first quarter is evidence of significant cash and operational improvements as well as the effectiveness of our turnaround strategy," said Paul A Allaire, chairman and chief executive.

A stronger North American sales force contributed to the reduction of Xerox's losses.

Modest growth in North America was offset by a slight decline in Europe and a 20% downturn in developing markets.

Bankruptcy rumours

Over the past few months, the company has struggled to face down rumours of bankruptcy.

The ailing copier company also said in January it was cutting 4,000 jobs on top of 2,000 announced late last year as part of a plan to pare $1bn in costs.

Once the dominant player in the photocopying market, Xerox has been bedevilled by billing problems and bad debts.

It is attempting to transform itself from a maker of free-standing photocopiers into a manufacturer of digital printers connected to computer networks.

Over the past year, the company's shares have lost about 80% of their value.