U.S. News

Xerox Posts Higher Profits, Raises This Year's Forecast


Xerox posted a larger-than-expected rise in quarterly earnings Wednesday, fueled by stronger demand for printing supplies and color equipment, and it raised its outlook for full-year profit.

Shares of the company, which this week reached their highest level in seven years, rose 4% in premarket trade.

Xerox , the world's biggest supplier of office printers, copiers and related services, reported second-quarter net income of $266 million, or 28 cents a share, up from $260 million, or 25 cents a share, a year earlier.

Analysts were expecting a profit of 27 cents a share, according to Reuters Estimates.

Xerox, which has bet on introducing color printers along with lucrative long-term supply and service deals, said total revenue rose 6% to $4.21 billion from $3.98 billion.

Analysts were expecting $4.19 billion.

Over the past few years, Xerox -- whose rivals range from Canon Inc. of Japan to Heidelberg of Germany -- has grabbed market share with new digital office printers and large-scale presses.

But its equipment revenue growth has lagged amid strong competition and pricing pressure on color laser printer sales to some distributors. Xerox expects revenue and profits to improve as sales of higher-margin color machines increase.

Xerox Chief Executive Anne Mulcahy described the results as "solid" and raised the company's expectations for full-year earnings to a range of $1.16 to $1.18 per share. Previously, Xerox had forecast $1.12 to $1.16.

Analysts had expected 2007 earnings of $1.17 a share, according to Reuters Estimates.

Xerox forecast third-quarter profit of 24 cents to 26 cents per share. The analysts' average forecast was 26 cents, according to Reuters Estimates.

In the second quarter, Xerox said it had made progress boosting long-term revenue growth with bigger sales of color printers and high-end systems, which are routinely combined with lucrative long-term supplies and service contracts, also referred to as post-sale revenue.

Post-sale and financing revenue, which represents more than 70% of Xerox's total, rose 7%. Equipment sales rose 3%.

Revenue from color, which includes hardware, supplies and services, increased 12%, the company said, and now represents 38% to its total.

Gross margins were 40.3%, a less than one point decline from second quarter 2006.

The second-quarter results include the benefit of Xerox's $1.5 billion acquisition of technology products provider Global Imaging Systems Inc., which was completed in May. Global Imaging sells printers and copiers to small and mid-size businesses, and it add Xerox document-management products to its product line.