Xerox cutting five per cent of staff, 3,000 jobs; Q3 profit beats estimates


Jordan Robertson, THE ASSOCIATED PRESS

SAN FRANCISCO - Xerox Corp. (NYSE:XRX) plans to cut 3,000 jobs or five per cent of its workforce because a slowdown in orders from large U.S. companies has dragged down the printer and copier maker's profit margins.

Xerox said Thursday the job cutting over the next six months will affect all departments except sales and is an example of how the economic turmoil is hurting companies outside the financial services industry.

The Norwalk, Conn.-based company has 3,800 employees in Canada but a spokesman said there are no specific numbers on how Canadian staff will be affected.

Xerox shares slid 5.6 per cent on the New York Stock Exchange, losing 45 cents to US$7.53 in afternoon trading, down from the $17 level a year ago.

Xerox had already been steadily cutting costs and jobs before the financial crisis dramatically worsened in the past month. The company has eliminated 8,800 jobs since 2005, including 1,500 so far this year.

But the recent sharp economic downturn intensified pressure on Xerox's profit margins and caused the company to accelerate its restructuring plans.

The latest cuts will lead to a US$400-million charge. U.S.-based employees are being offered buyout packages, said Xerox spokesman Carl Langsenkamp.

"We're assuming more of the same ... deterioration in the economic markets," Anne Mulcahy, Xerox's chief executive, said on a conference call with analysts. "That's why we're being so aggressive in terms of the cost reductions, so we can be assured of delivering the earnings growth that we expect in 2009."

Xerox has forecast that profits will grow by a double-digit percentage in 2009, helped by an estimated US$200 million in savings from restructuring.

Xerox revealed the cuts as it reported that sales of new equipment weakened in the third quarter, dragged down by tightened budgets in the U.S. and Britain. The economic slowdown has hurt companies' abilities to borrow money to buy new equipment, and many are clamping down on spending.

Xerox managed to post a two per cent increase in profit in the July-September quarter, earning $258 million, or 29 cents per share. That was a penny per share higher than the average estimate of analysts polled by Thomson Reuters. In the year-ago period, Xerox's net income was $254 million, or 27 cents per share.

Profits in the latest period were boosted by a $41 million tax settlement, which increased earnings per share by 4 cents.

Xerox's gross profit margin came in at 39.2 per cent of revenue for the third quarter, down about one percentage point from the prior year. Gross margin measures a company's profit on each dollar of revenue once manufacturing costs are stripped out. It's an important measurement of how well a company is controlling its costs.

Xerox's sales grew just two per cent, to US$4.37 billion, short of the $4.47 billion that analysts polled by Thomson Reuters were expecting. Sales would have been flat were it not for the benefits from a weak U.S. dollar.

Equipment sales, which make up about a quarter of Xerox's overall business, were down three per cent to $1.13 billion.

A much bigger and more lucrative part of Xerox's business - so-called "post-sale" revenue, which refers to the sale of ink and other supplies to companies that have already bought or leased Xerox machines - grew three per cent to $3.25 billion. That segment makes up nearly three-quarters of Xerox's sales.



[ 2008-10-23 ]



Print
Career Zone Home »