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Xerox reports first net profit in more than a year

25 Jul, 2002

Xerox reports first net profit in more than a year

Xerox Corp. reported second-quarter earnings of $93 million Thursday, the first net profit for the struggling copier and printer company in more than a year.

The profit of 12 cents per share for the April-June period compared with a loss of $101 million, or 14 cents per share, for the same period last year.

The results easily beat the expectations of analysts surveyed by Thomson Financial/First Call, who were expecting a loss of 2 cents per share.

Xerox officials hailed the profit as the strongest quarterly operational performance since a major turnaround program was initiated in October 2000.

"This management team has put difficult matters behind us while creating a new Xerox that is stronger, leaner and faster," said Anne M. Mulcahy, chairwoman and chief executive. "The result: a return to profitability that speaks to the resiliency of our people and the confidence of our customers who recognize the value and competitive advantages of Xerox's strengthened offerings."

The SEC, which fined Xerox $10 million, said in April that accounting improprieties increased the copier company's pretax profits by $1.5 billion from 1997 through 2000.

Xerox had accelerated the booking of revenue by billions of dollars over the past five years, including $1.9 billion that should properly be recorded in the future.

The restatement had the effect of lowering past results and improving future results because revenue from equipment sales had been booked too fast.

Of the restated $1.9 billion, about $210 million in revenue was recorded in the second-quarter reported Thursday, said Christa Carone, a Xerox spokeswoman. She could not say what the effect of that revenue was on net income, but said Xerox would have been profitable even without the shift in revenue into the quarter.

"It's not a restatement story. It's a Xerox performance story," Carone said.

The $210 million in restated revenue recognized in the quarter was offset by the fact that the quarter's results are based on a new accounting method that recognizes revenue over time rather than at once, Xerox said.

Xerox said it cut costs by more than $1.1 billion last year and another $175 million so far this year. Employment declined 2,200 in the second quarter to 72,400.

Xerox recently launched several major products, including its next-generation Document Centre and Docucolor multifunction systems and an expanded line of Phaser color office printers.

Second-quarter revenue was $3.95 billion, down 8 percent from $4.28 billion in the year ago period. Xerox attributed the revenue decline to the company's exit last year from the retail small office/home equipment business and reductions in its developing markets operations.

For the first six months of the year, Xerox reported net income of $47 million, or 7 cents per share, on revenue of $3.24 billion. That compared with net income of $126 million, or 17 cents per share, on revenue of $3.72 billion, for the first half of last year.

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