Unexpected costs cut Xerox's earnings

HARTFORD, Conn. — Xerox Corp. on Friday said third-quarter profit slid sharply on litigation and other one-time charges, but the results excluding those items met Wall Street expectations.

The Stamford, Conn., maker of copiers and printers said net income after preferred dividends declined to $49 million, or 5 cents per share, for the three months ended Sept. 30 from $149 million, or 17 cents per share, in the same quarter last year.

The latest results include litigation charges of 12 cents per share related to an arbitrated settlement with MPI Technologies, as well as a restructuring expense of 1 cent per share and other items.

Xerox said adjusted earnings were $188 million, or 18 cents per share — on par with analysts' consensus estimate, according to a Thomson Financial poll.

"We're quite pleased with the results," said Anne M. Mulcahy, Xerox chairman and chief executive officer, during a conference call with analysts.

Revenue edged higher to $3.76 billion, up 1 percent from $3.72 billion a year ago but slightly below analysts' target of $3.79 billion. Xerox said sales of its color technology were particularly strong, growing 22 percent year-over-year.

"Our investments in color are paying off," Mulcahy said.

Revenue from financing and "post-sale" revenue, which comes from services and sales of supplies such as ink, paper and toner, rose 1 percent. The two categories represent roughly 70 percent of the company's total sales. Equipment sales increased 2 percent.

Xerox has returned to profitability in recent years by introducing numerous new products and cutting its work force by thousands of positions. The company has about 56,300 employees.

"The most important part is that the business is moving well," said Ulysses Yannas, a broker with Buckman, Buckman and Reid Inc. in New York. "Their emphasis on color, where the margin is better than black and white, is continuing to improve. What is also very important, their balance sheet has improved unbelievably well."