By Nicola Leske
Jan 24 Xerox Corp reported quarterly
earnings slightly above expectations on Thursday and reiterated
its full-year targets as it restructures parts of its business
in its effort to become a broader technology company.
Chief Executive Ursula Burns said on an analysts' call that
Xerox was going through "a seismic shift" and "2012 was a year
Xerox is at pains to shed its printer company image, wanting
instead to be known for its services business, which it entered
with the 2009 acquisition of Affiliated Computer Services Inc
for $5.5 billion.
In the fourth quarter of 2012 Xerox began a restructuring
program focused on the services business, which manages anything
from toll systems to healthcare programs.
Lynn Blodgett, who heads the services unit, said Xerox had
made good progress, but there was still cost cutting to be done.
But Burns said she was optimistic the company was well
equipped to meet its targets even though she did not expect
economic conditions to improve much.
"I am upbeat, I am very confident in the guidance we have,"
"This is not going to be a walk in the park. The environment
hasn't changed that dramatically to make it that much better,"
For the first three month of 2013, Xerox expects earnings to
be in a range of 23 cents to 25 cents per share. Analysts looked
for 24 cents in the first quarter, according to Thomson Reuters
The company reiterated its full-year EPS target of $1.09 to
$1.15 and forecast operating cash flow of $2.1 billion to $2.4
Fourth-quarter revenue was flat at $5.9 billion and earnings
per share, excluding items, were 30 cents. Analysts looked for
$5.88 billion in revenue and EPS of 29 cent.
Xerox stock was up 3.6 percent at $7.85 in midday trade.
Some analysts called the outlook conservative.
Shannon Cross at Cross Research said the guidance "is likely
conservative, given tailwinds from currency, significant product
refreshes in technology, restructuring and easier comparisons."
She anticipated the company would return cash to
shareholders through a dividend, share repurchase and
Cross added that the fourth-quarter operating margin was up
30 basis points year-on-year, benefiting from the restructuring
efforts. Operating margin was 10.3 percent, Xerox said.
Xerox's services business now generates more than 50 percent
of revenue and by 2017, Burns said, it will grow to generate
two-thirds of revenue.
Quarterly revenue from the business was up 7 percent thanks
to recurring contracts.
But new contract signings in the services segment declined
25 percent to $2.9 billion in last 12 months. Xerox said the
drop was due to a decrease in very large deals and shorter
contract lengths, which Burns said have gone from five years to
"The shorter contract and less megadeals is a sign of the
times today," she said, adding there were significant pressures
from both government and large enterprises given a very weak
Still, Xerox said the pipeline of future deals remained
strong with 6 percent year-on-year growth.
Revenue from the document technology business, which
includes document systems, supplies, technical services and
financing of products, was down 8 percent due to difficult
economic and market conditions, Xerox said.
Equipment sales were becoming a much smaller percentage of
the business and they were the most impacted by economic and
industry trends, Burns said.
Nevertheless, she was optimistic about new products and
investments that she said would boost market share.
"We expect the equipment sales trend to improve modestly