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Xerox Announces 2005 Fourth Quarter Earnings

26 Jan, 2006

Xerox Announces 2005 Fourth Quarter Earnings

Xerox Corporation announced fourth-quarter 2005 earnings per share of 27 cents, reflecting an 18-percent increase in net income from fourth-quarter 2004.

"Our earnings performance in the fourth quarter met expectations with increased gross margins, lower costs and operational improvements," said Anne M. Mulcahy, Xerox chairman and chief executive officer. "We delivered another quarter - and another year - of earnings growth. Our strong financial position, with full-year operating cash flow of $1.4 billion, gives us the flexibility to invest back in the business and enhance shareholder value through an expanded share repurchase plan.

"During the quarter, equipment sales were impacted by a more significant shift in product mix with stronger sales of lower-priced systems. At the same time, demand and install activity accelerated for key products like entry-level color production systems and office desktop multifunction devices," added Mulcahy. "This increased activity fuels future post-sale revenue - the engine of growth for Xerox's annuity-based business. We're confident that the short-term impact on equipment sale revenue will deliver long-term gains in top-line growth.

"As important, our leadership in digital color printing continues to deliver strong results," said Mulcahy. "Revenue from color grew 17 percent in the fourth quarter and color now represents 32 percent of our total revenue, up 5 points from last year."

In the fourth quarter, the company's equipment sales and total revenue of $4.3 billion were impacted by 3 points of currency, contributing to a 2-percent decline. On a constant currency basis, total revenue and equipment sales grew 1 percent. Post-sale and financing revenue, which represents about 70 percent of Xerox's total revenue, declined 2 percent and was flat in constant currency.

In Xerox's office business, which provides technology and services for workgroups of any size, revenue declined 3 percent and was flat in constant currency. Installs of digital office monochrome systems were up 20 percent largely due to increased placements of Xerox WorkCentre™ desktop multifunction systems.

In office color, installs of multifunction systems were up 53 percent driven by the success of the recently launched office version of the DocuColor 240/250 systems. Install activity in color printers was up 27 percent.

Xerox expects first-quarter 2006 earnings in the range of 20-23 cents per share. The company also reiterated its full-year 2006 guidance of $1.00-$1.07 per share. Mulcahy indicated that she now expects the company will deliver full-year earnings in the high end of this range.

Full-Year 2005 Results:

• Net income of $978 million or 94 cents per share, an increase of 9 percent from full-year 2004.

• Equipment sale revenue of $4.5 billion, an increase of 1 percent from full-year 2004.

• Total revenue of $15.7 billion, which remains unchanged from 2004.

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