("Xerox 1Q Profit Falls 4.3% Amid Charges, Weaker Margins," published at 7:31 a.m. EDT, misstated the consensus estimate for second-quarter earnings in the second paragraph. A corrected version follows:)
Xerox Corp.'s (XRX) first-quarter earnings fell 4.3% on restructuring charges and weaker margins, though the printer and copier company reported revenue growth as its services segment offset declines at its technology business.
For the current quarter, the company forecast per-share earnings of 25 cents to 28 cents, in line with recent estimates of analysts polled by Thomson Reuters for 26 cents.
Xerox has been looking to its color devices to bolster its sales amid a tough market for printers and copiers, as a sluggish economy leads companies keeping a close watch on costs and a shift towards digital documents continues. However, Xerox has been benefiting from growth in contracts to outsource business technology and back-office functions.
In the latest period, services revenue grew 10% as business-process outsourcing revenue climbed 13% and document outsourcing revenue rose 7%. Technology revenue, which includes systems, supplies and technical services, was down 5%.
"Services now represents more than half of our total revenue and will continue to be the growth engine of our company as we expand our business-process-outsourcing offerings and strengthen our leadership in managed print services," Chairman and Chief Executive Ursula Burns said. "As a result, we see short-term pressure on margins that we will offset through cost reductions and operational improvements."
Xerox reported a profit of $269 million, down from $281 million a year earlier. On a per-share basis, earnings were flat at 19 cents. The latest period included $17 million in restructuring and asset write-down charges. Excluding amortization of intangible assets, adjusted earnings were flat at 23 cents. Revenue edged up 0.7% to $5.5 billion, with currency fluctuations cutting roughly 1 percentage point from the growth.
Xerox in January forecast per-share earnings of 21 cents to 24 cents.
Gross margin fell to 31% from 33% amid the ramping up of new service contracts, the impact of lower contract renewals and a higher mix of services revenue.
Shares of Xerox, which affirmed its 2012 earnings guidance, closed Friday at $7.87 and were inactive premarket. Through Friday's close, the stock is down about 23% in the past year.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com
