Xerox Corp issued its second profit warning in as many quarters Friday, announcing that fourth-quarter earnings could come in roughly 40% below Wall Street estimates due to a host of factors, including weak demand and the lingering effects of its recent sales force reorganization. Analysts surveyed by First Call were expecting earnings of $0.66 for the period. Although the imaging and document management company said that December remains a mystery, October and November results confirm that the negatives from last quarter have intensified.
Overall sales for the fourth-quarter could decline by a mid-single-digit percentage from the year-ago quarter’s $5.8bn, the company said on a conference call. In last year’s fourth quarter, Xerox reported net income of $615m, or $0.84 per share when adjusted for a stock split. Xerox said high-end printing and publishing equipment sales continue to be significantly constrained because of a focus on Y2K mitigation efforts and customer network lockdowns, which appear to be getting worse in December.
In addition, the company’s sales force realignment to an industry-oriented, rather than geographic, approach has continued to provide a negative impact, including higher-than-expected expenses and lower interim sales force productivity. The realignment, announced last January, was partly blamed for sluggish second-quarter and third-quarter sales, as well. Poor results in Brazil – mostly due to the effects of the currency devaluation and economic weakness – as well as the strengthening of the dollar against European currencies hurt the bottom line even further, Xerox said.
The company expects all of the aforementioned factors, save for the European currency exchange situation, to improve during 2000. Despite that belief, Xerox said it is in the midst of a comprehensive review of its costs and key business processes to identify any additional ways it can save money. Xerox plans to announce full fourth-quarter results on January 25.
