Xerox said second quarter earnings figures, due to be announced on 26 July, were likely be in line with first quarter figure of 30 cents a share, well below current forecasts of 42 cents a share.
Shares in the company plunged nearly 18% on the news to $20 7/8 on the New York Stock Exchange.
Despite the profit warning, there were no plans to cut the dividend to shareholders, said newly-appointed chairman and chief executive Paul Allaire.
Mr Allaire replaced Rick Thoman, who was fired in May after failing to improve performance in his 13 months at the top.
In March, Xerox announced it would lay off 5,200 workers and close several plants.
Customer relations
Xerox said relationships with its customers had been disrupted by the recent reorganisation of its sales force and this had hit sales of its most profitable products.
The changes in its sales force and customer support organisation had come at a time when competitors had brought out new products, it added.
The earnings shortfall will result in reduced gross margins, which are expected to be further affected by a shift to sales of lower-margin products and services within each product segment, the company said in a statement.
Profits are also expected to be hit by significant unexpected provisions in the company's business in Mexico where an investigation of apparent accounting irregularities is under way.
Mr Allaire said he was confident of improvements during the second half of the year, but they would develop later and to a lesser degree than previously anticipated.
"Momentum will accelerate as we enter 2001. It will take time to resolve our issues, but they are largely within our control and will be fixed. We will continue to focus aggressively on our productivity initiatives and improving cash flow."