The turnaround begins ?
Dow Jones Newswires
Xerox 3Q Oper Loss 20c A Share
Dow Jones Newswires
Xerox Corp.
3rd Quar Sept. 30:
2000 1999
Revenue $4,462,000,000 $4,627,000,000
Net income a (167,000,000) 339,000,000
Avg shrs (basic) 667,700,000 664,500,000
Avg shrs (diluted) b .... 739,200,000
Shr earns (basic)
Net income a (.26) .50
Shr earns (diluted)
Net income b .... .47
Figures in parentheses are losses.
a. Before an incremental charge of 6 cents a share related to its Mexican
subsidiary, the loss in the third quarter was $128 million, or 20 cents a share.
b. Anti-dilutive.
Xerox Corp. (XRX), in conjunction with the release of third quarter results,
outlined a wide-ranging plan to sell assets, cut $1 billion in costs, dispose of
assets that are expected to raise $2 billion to $4 billion and "strengthen its
strategic core."
Xerox said it's exploring alternatives to provide financing for customers "in a
manner that does not involve the Xerox balance sheet." Xerox said over time
the company will exit the equipment financing business, "but continue to
ensure that service is provided to its customers."
Xerox said is actively engaged in discussions to sell a range of assets that
includes: the company's China operations, a portion of the Xerox ownership
in Fuji Xerox, Xerox Engineering Systems, and its interest in spinoff
companies such as ContentGuard and Inxight.
The company said it was talking with a number of parties to make a significant
equity investment in its inkjet business and was exploring a joint venture with
non-competitive partners for its Palo Alto Research Center. The company
also said it would outsource or sell certain manufacturing operations.
As part of its cost-cutting moves, Xerox said it will be "substantially increasing
the number of positions removed from the company."
Xerox also detailed steps designed to reduce costs by $1 billion in 2001,
including the elimination of a worldwide service staff organization, as it seeks
to improve cash flow and to boost profitability.
Xerox said drastic cuts will be made by reallocating resources from
headquarters operations to the field, eliminating duplicate
industry-and-product organizations and, in certain developing market
countries, moving to a distributor-based product-sales approach.
The company plans to cut more than $200 million in manufacturing and supply
chain costs and attack service costs with a greater emphasis on remote
diagnostics and third-party service providers. It also seeks to move activities
into the operating companies to eliminate a worldwide service staff
organization with plans of "substantially increasing the number of positions
removed from the company."
Xerox will re-allocate its research and development efforts to strenghen
growth opportunities in solutions and color, work more closely with Fuji
Xerox to eliminate R&D redundancies and "scrutinize all programs based on
their affordability and future profitability."
The company will focus most of its direct-sales and document outsourcing
resources to the high-end, high-value solutions and services business, using
more efficient channels to deliver a greater range of products to customers in
the digital office, reducing selling costs.
Xerox reiterated that it has adequate liquidity, including unutilized capacity
under its $7 billion revolving credit agreement with 58 banks, and that it is in
compliance with all of its covenants. On Oct. 10, the company confirmed its
compliance with financial covenants related to the pact, including that related
to consolidated tangible net worth.
At the time, the company said it had tapped the credit line in recent days after
its borrowing was constrained in the commercial paper market.
Xerox third quarter revenue fell 4% from the year-ago period and the
company recorded the aforementioned $55 million pretax provision related to
its problems in Mexico. No additional provisions related to Mexico are
anticipated.
Equipment sales in the quarter were weak primarily in North America. In
particular, the company cited poor performance in its high end business due to
"open sales territories, less experienced sales people and increased
competitive pressure, which also affected gross margins."
But, the company said revenue of color products rose 74% behind its
DocuColor 2060 and DocuColor 2045 Digital Color Presses and strong
placements of the DocuColor 12 and Document Centre ColorSeries 50
digital multifunction products. The company also cited excellent growth in
desktop inkjet printers from initial shipments of its new DocuPrint M series
products, and the inclusion of the Phaser line of color printers.
Color revenue represented 16% of third quarter revenue, up from 9% a year
ago. |
