| NEW YORK
NEW YORK Xerox Corp (XRX.N) maintained its annual outlook but could not soothe investors' concerns over the earthquake in Japan affecting its business, which sent shares down more than 3 percent on Thursday.
Xerox has manufacturing plants in Japan, buys components for its printers and copiers in the country and also has a 25 percent ownership stake in the Japan-based joint venture, Fuji Xerox.
Chief Executive Ursula Burns told analysts on a conference call that Xerox expects to see "product constraints" in the middle of the second quarter due to Japan and does not expect a full product recovery until later this year.
While Burns said Xerox was in a "better situation than most companies" affected by the quake, analysts said investors were turned off by the uncertainty in Japan.
"There are still some concerns over Japan," Gabelli & Co analyst Hendi Susanto, said referring to the share price drop.
Xerox's new Chief Financial Officer Luca Maestri, who took over the post in February, told Reuters that the share price likely fell over short-term concerns over Japan.
The company stressed it was finding alternative sources for materials and managing higher costs in the supply chain. Analysts said the process must be going smoothly, since the company did not change its annual earnings forecast.
"It sounds like Xerox is doing a good job of finding second sources for its components and utilizing their inventory better to ensure their customers don't see any impact from Japan," said Cross Research analyst Shannon Cross.
The company forecast second-quarter EPS to be 23 cents to 26 cents per share, which falls in the lower end of analyst estimates, according to Thomson Reuters I/B/E/S.
The company provided "a broader range than usual" for its second-quarter earnings forecast to take into account the business impact from the earthquake in Japan
Xerox, best known for its copiers and printers, had more of its first-quarter revenue come from its services business than hardware sales. The company's services revenue rose 5 percent from a year earlier, which analysts said signaled the company was successfully integrating the business services company, ACS, that it bought in 2009.
But the new finance chief Maestri said that investors are still not fully convinced about the company's transformation.
"Investors are on the fence," Maestri said, referring to the company's new strategy. "Investors understand the story but they want to see the story translated into numbers.
Xerox said its first-quarter net income rose to $350 million, or 19 cents per share, up from a net loss of $10 million, or 4 cents per share a year earlier.
Adjusted for charges related to acquisitions, its net income was 23 cents a share, which beat analysts' estimates of 22 cents a share, according to Thomson Reuters I/B/E/S.
Revenue rose to $5.46 billion from $4.72 billion a year earlier, which narrowly missed analysts' expectations.
Xerox shares were down 3.7 percent at $10.45 in afternoon trading on the New York Stock Exchange.
(Reporting by Liana B. Baker; Editing by Derek Caney and Gunna Dickson)