* To take charge of $50 mln to $100 mln
* Cuts top end of 2012 profit forecast by 3 cts to $1.09/shr
* Shares down 8 pct in morning trading
By Nicola Leske
Oct 23 Xerox Corp trimmed its full-year
earnings forecast on Tuesday and said it would take a
restructuring charge of up to $100 million to account for a
tougher economy as large companies tightened budgets and
government had less funding for projects.
"By the time September rolled around, it was very, very
clear that we were headed south from a U.S. economy," Chief
Executive Ursula Burns told analysts on a call.
Xerox, which reported lower-than-expected, third-quarter
revenue on Tuesday, said it saw economic pressures as a chance
to take a look at where to cut costs in its services business.
"It's a bad thing to say but it gives you the opportunity to
step back and say, 'Whoa!' If this is a trend that we're going
to see for quarter four and 2013, which is what we are assuming,
let's go back and let's literally start to scrub everything,"
Xerox, historically known for printers and copiers, said it
would take a restructuring charge of $50 million to $100 million
in its services business, which handles anything from toll
systems to Medicare.
It expects fourth-quarter, adjusted earnings per share to be
33 cents to 35 cents per share, compared with 33 cents for the
same period a year earlier. Analysts' average forecast is 34
cents, according to Thomson Reuters I/B/E/S.
But Burns said that the quarterly outlook, which included an
expectation of a worsening economy, did not include the expected
charge and that the company would likely reduce its
fourth-quarter targets. She said more detail would be given on
Xerox's investor day on Nov 13.
For the full year, excluding one-time items, the company
forecast earnings of $1.07 to $1.09. It previously forecast
$1.07 to $1.12.
Xerox, which wants to be known as more than just a maker of
printers and copiers, made a big bet on business services with
its 2009 purchase of Affiliated Computer Services Inc for $5.5
billion, the 106-year-old company's biggest deal.
It now derives more than half of its revenue from business
services, but investment in those operations has pressured
Its technology business includes document systems, supplies,
technical services and finance support.
Like other information technology companies that have
transitioned from hardware to software and services, such as IBM
, Xerox is feeling the pain as governments hold off on
spending and projects are delayed.
"We think government demand impacted (business process)
revenue, especially at the state level, with uncertainty driving
delayed technology sales in both Europe and North America,"
Cross Research analyst Shannon Cross said.
The analyst said the restructuring charge was aimed at the
business services operations. She also said pressure in Europe
on the technology business was "perhaps more than expected."
While third-quarter earnings per share were in line with
expectations at 25 cents, revenue fell 3 percent to $5.4
billion, below Wall Street estimates of $5.51 billion.
Burns explained the revenue was partly due to a signed
contract that lost funding.
"This is the first time that it's ever happened in the
business that we can see that we had signed and committed with a
state that was defunded after we had started to actually invest
in that contract to stand it up," she said, adding that it was
not a Medicare contract.
"We're still working with the state to actually come to some
kind of a reasonable conclusion, but we took a write-off this
quarter with that...," she said, adding that it was a
significant and unique hit.
Revenue from the services business rose 6 percent in
constant currency, while revenue from its technology business
declined 7 percent.
Xerox shares were down 8 percent in morning trading to