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Xerox Profit Jumps 17%, Outpacing Analyst Estimates

Xerox , the world's largest supplier of office printers, copiers and related services, said on Friday that quarterly profit rose a better-than-expected 17%, driven by sales of service contracts and supplies.

First-quarter net income was $233 million, or 24 cents a share, up from $200 million, or 20 cents a share, a year earlier.

Excluding costs related to restructuring, profit was 26 cents a share.

According to a survey from Thomson Financial, analysts on average were estimating earnings of 20 cents a share.

Revenue rose 4% to $3.84 billion, fueled by strength in "post-sale" and financing revenue, which represent more than 70% of total sales.

Chief Executive Anne Mulcahy said the latest results show that the company's growth strategy is working as it focuses on increasing digital technology with new products and broader distribution.

"We delivered solid activity gains, grew color revenue and signed big deals for Xerox's document management services, all of which contribute to steady annuity growth," Mulcahy said.

The company also benefited from a lower-than-expected charge at Fuji Xerox. The Stamford-based company has a 25% stake in Fuji Xerox, a partnership that markets Xerox products in Japan and other countries in the Pacific Rim.

Post-sale and financing revenue increased by 6%. Xerox's annuity streams -- revenue from equipment servicing and the sale of supplies such as copier toner and printer inks -- represent more than 70% of total revenue, the company said.

Mulcahy said that since the beginning of the year, Xerox has introduced 19 products, half of which are color products. The company plans to more than double its number of product launches this year, she said.

Xerox agreed earlier this month to acquire Global Imaging Systems for $1.5 billion, which should give the company access to about 200,000 new customers and increase its distribution in the United States to small- and mid-sized customers by 50%. The purchase is expected to close next month.

Xerox has cut its work force and is moving later this year from its Stamford headquarters to nearby Norwalk. It employs about 300 people at its Stamford offices, down from 600 seven years ago. The company's total work force at the end of last year was 53,700.

Xerox said it expects second-quarter earnings of 26 cents to 28 cents a share. Analysts were expecting 27 cents, according to Reuters Estimates.

Xerox stock closed on Thursday at $18.08, up almost 7% so far this year. Earlier this month, it hit its highest level in almost seven years.