UPDATE 2-Xerox profit beats estimates on restructuring

Thu Jul 25, 2013 9:45am EDT

By Nicola Leske
    July 25 (Reuters) - Xerox Corp reported
higher-than-expected second-quarter earnings on Thursday on
growth in its services division and reiterated its full-year
targets as its restructuring efforts showed signs of paying off.
    Known for its printers and copiers, Xerox last year kicked
off a restructuring program focused on its services business,
which now generates about 55 percent of revenue and manages
anything from toll systems to healthcare programs.
    Chief Executive Officer Ursula Burns said the total contract
value of services signings was up 40 percent, while new business
signings increased 10 percent. The renewal rate for business
processes and IT outsourcing was 95 percent, she said.
    Net income from continuing operations attributable to Xerox
was $345 million or 27 cents per share, compared with 26 cents
last year. The analysts' average estimate was 24 cents per
share, according to Thomson Reuters I/B/E/S.
    The company said it expected to take 2 cents a share in
restructuring charges in the third quarter, with earnings before
those items at 24 cents to 26 cents. 
    Revenue from the services business rose 5 percent in the
second quarter, while document technology, which includes
printers and copiers, was down 5 percent. Total revenue
increased 1 percent to $5.4 billion, excluding discontinued
operations.    
     Xerox recently sold its North American paper business to
Canada's Domtar Corp and has agreed to sell its
European paper business to UK and Ireland paper distributor
Antalis. With the second quarter, Xerox is reporting results
from these businesses as discontinued operations, it said.
    Those deals resulted in a net pretax loss of $23 million,
primarily due to severance costs, Xerox said.
    The company took $39 million of severance costs for staff
cuts of about 1,300 employees, primarily in North America. As a
result of the asset sale in Europe, it expects to cut some 300
jobs in that region.
    Cross Research analyst Shannon Cross said it was a strong
quarter and that Xerox's restructuring efforts were beginning to
pay off.
    "It's a combination of benefits from technology side, where
they have really solid new products, and strong services," Cross
said. 
    Xerox reiterated its forecast for full-year earnings per
share of $1.09 to $1.15, excluding special items, and operating
cash flow of $2.1 billion to $2.4 billion. 
    Based in Norwalk, Connecticut, Xerox moved into business
services with its purchase of Affiliated Computer Services Inc
for $5.5 billion in 2009 - the biggest deal in its 106-year
history.
    Smaller rival Lexmark International Inc reported
better-than-expected quarterly results on Wednesday and said
revenue would fall less than anticipated in 2013 due to big
contract wins in services and software. 
    Xerox shares were up 0.7 percent at $9.90 in early trading.