Xerox Q3 revenue down 16%, raises outlook

Plans to focus on services business

Xerox has reported total revenue of $3.7 billion for third quarter of 2009, down 16% from $4.4 billion in third quarter of 2008, including a 2 point negative impact from currency. Post-sale and financing revenue was down 11% and equipment sale revenue declined 29%. The company said that the revenue was impacted by continued weakness in global economy.

Gross margin was 39.8% in the third quarter, an increase of over half a point from the same quarter of the prior year. The company reported net income of $129m, a decline of 52% compared to $267m in the prior year quarter.

Third-quarter operating cash flow was $610m. Through the third quarter, the company has generated $1.2 billion in operating cash flow, and, as a result, has increased its expectation for the full year to $1.7 billion.

Xerox expects fourth-quarter 2009 earnings per share in the range of 20 to 22 cents, excluding costs related to the acquisition of ACS. The company has increased its full-year earnings expectations to 55 to 57 cents per share, which excludes fourth-quarter ACS acquisition related costs. Prior guidance for full-year 2009 was 50 to 55 cents per share.

Ursula Burns, chief executive officer of Xerox, said: “Scaling our services business has long been a strategic focus. The growth opportunity is significant, customers are demanding more service-related value, and the multi-year contracts provide profitable recurring revenue.

“These factors give us confidence in the strategic and financial rationale for acquiring Affiliated Computer Services. With this acquisition and the benefits of our existing annuity-based business, we’ll deliver significant revenue growth, cash and earnings expansion.”

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