Xerox results beats estimates, stock rises

Xerox Corp (NYSE:XRXNews) posted quarterly results that beat expectations, as cost cutting helped to improve margins, and delivered an optimistic outlook, sending its shares up 2.6 percent.

The office document management company, whose rivals include Hewlett-Packard (NYSE:HPNews) and Canon (Tokyo:7751.T – News), said revenue will be under pressure while the economy creeps toward a recovery. Still, the company, best known for its office printers, cited “improving trends” for overall revenue.

Xerox also said its takeover of Affiliated Computer Services Inc (NYSE:ACSNews) was on track, two days after European Union regulator approved the deal. The cash-and-stock deal, originally valued at about $5.5 billion, is Xerox’s biggest and is the first by its new chief executive, Ursula Burns.

Xerox’s fourth-quarter net income rose to $180 million, or 20 cents a share, from $1 million, or nil per share a year earlier.

Excluding special items, profit was 25 cents a share, which beat Wall Street analysts’ expectations of 22 cents a share, according to Thomson Reuters I/B/E/S.

Revenue fell 3 percent to $4.22 billion, but outpaced analysts forecasts of $3.93 billion. Revenue from sales of supplies and services — known as “post-sale” revenue — was flat.{loadposition in-article}

Xerox’s efforts to boost revenue have been slowed by a recession that has forced its customers to slow or cut orders of new equipment. But 70 percent of its cash flow comes from the sale of supplies, financing and services to repeat customers.

Its gross margin was 39.9 percent in the fourth quarter, an increase of two points from the prior year, as it trimmed expenses. It expects to continue cutting costs, and will take a related $250 million charge in the current quarter.

Xerox expects 2010 adjusted earnings per share of 75 cents to 85 cents. Analysts had expected a profit of 70 cents a share, according to Thomson Reuters I/B/E/S.

Shares of Xerox were up 23 cents to $9.12 in premarket trading on Thursday. As of Wednesday’s closed on the New York Stock Exchange, the stock was up about 13 percent since its last quarterly report, and up about 20 percent in the past year.

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