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Xerox Profit and Sales Beat Forecasts

Xerox posted better-than-expected quarterly earnings Friday, boosted by solid sales of new color printers and other equipment.

Xerox's headquarters in Stamford, Connecticut.
Douglas Healey
Xerox's headquarters in Stamford, Connecticut.

The results were also helped by a 3 percent rise in sales of long-term supplies and services contracts, also known as "post-sale", that accompany hardware sales. Post-sale revenue represents about 75 percent of total revenue, analysts said.

"The results reflected strength in their color portfolio and their continued focus on cost cutting," said analyst Shannon Cross of Cross Research.

"The razor/razor blade model is on track," she said, referring Xerox's practice of selling hardware at little or no profit to encourage sales of replacement ink and toner.

Xerox , the world's biggest supplier of office printers, copiers and related services, said its third-quarter net income was trimmed in half to $254 million, or 27 cents a share, from $536 million, or 54 cents a share a year earlier when the company benefited from a tax gain.

The profit represented a 17 percent increase over adjusted earnings per share one year ago, and exceeded analysts' expectations by 1 cent, according to Reuters Estimates.

Lucrative Lond-Term Service Deals

Xerox, which has bet on introducing color printers along with lucrative long-term supply and service deals, said quarterly revenue rose 12 percent to $4.30 billion, beating the average analyst forecast of $4.24 billion.

Shares of the company, which competes with Canon of Japan and Heidelberg of Germany, edged up to $17.35 in light pre-market trading from the Thursday close of $17.21.

Xerox said equipment sales rose 14 percent in the third quarter. But excluding the benefit of the weak dollar and the acquisition of technology products provider Global Imaging Systems, equipment sales fell 2 percent from a year ago.

Its hardware sales, including new color models that print in color using solid ink, are routinely combined with lucrative, long-term supplies and service contracts.

Chief Executive Anne Mulcahy said in a statement that color products, which are up to five times more profitable than black-and-white systems, make up more than half of total equipment sales.

The Stamford, Connecticut-based company said revenue from color products grew 13 percent in the third quarter and now represents 39 percent of total revenue, up 3 points from the third quarter of 2006.

Xerox sees a fourth-quarter earnings per share profit range of 39 cents to 41 cents, which is on par with analysts estimates of 40 cents a share, according to Reuters Estimates.

For the full year, Xerox sees a profit of $1.18 a share to $1.20 a share.

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