Xerox shares fall after quarterly results
NEW YORK (Reuters) - Xerox Corp. (XRX.N) posted a higher-than-expected quarterly profit on Wednesday, but concerns about margins and the pace of equipment sales pushed its stock down more than 5 percent.
The shares had fallen as much as 8.5 percent earlier in the day, the largest single-day drop in more than three years for Xerox. The decline comes one day after the stock hit its highest level in seven years.
Jeff Embersits, an independent advisor to investment funds, said Xerox was overpriced and noted that its revenue gains in the second quarter had benefited from the acquisition of technology products provider Global Imaging Systems Inc.
Without that boost, equipment sales would have once again been anemic, he said.
"The are trudging along," Embersits said, adding that he has rated the stock "sell".
Xerox, the world's biggest supplier of office printers, copiers and related services, reported second-quarter net income of $266 million, or 28 cents a share, up from $260 million, or 25 cents a share, a year earlier.
Analysts were expecting a profit of 27 cents a share, according to Reuters Estimates.
Xerox, which has bet on introducing color printers along with lucrative long-term supply and service deals, said total revenue rose 6 percent to $4.21 billion from $3.98 billion. Analysts were expecting $4.19 billion.
Xerox, whose competitors include Canon Inc (7751.T) of Japan and Heidelberg (HDDG.DE) of Germany, has grabbed market share over the past two years with new digital office printers and large-scale presses.
But its equipment revenue growth has lagged amid strong competition and pricing pressure on color laser printer sales to some distributors.
Analysts also took issue with Xerox's gross margins, which were 40.3 percent in the quarter, less than a one point decline from the second quarter of 2006.
ACQUISITION BOOST
Xerox bought Global Imaging for $1.5 billion in May. Global Imaging sells printers and copiers to small and mid-size businesses, and it added Xerox's document-management products to its product line.
Chief Financial Officer Larry Zimmerman said Xerox's wider client base would help it reach better deals, as well as boost post-sale supplies and services.
"We now have a huge tool (in Global) to help us with that growth," he told Reuters in an interview. "We have been building post-sale, and as it builds up and Global takes effect, I think you are going to see sustained total revenue growth." Continued...
