Xerox shows modest rebound but still facing cuts
Xerox Corp. started out 2009 as a $17.6 billion company with 57,000 employees around the planet.
Hammered by the recession, it has become a $15.2 billion company with plans to shrink its global work force by more than 4 percent to match the smaller revenues.
The document and imaging company, which is the Rochester area’s fifth-largest employer, plans to spend $250 million this year as it eliminates 2,500 positions worldwide, with most of the spending on severance packages.
Xerox finished 2009 still hurting financially but showing modest signs of rebounding from the recession, said CEO Ursula Burns.
“‘Modest’ is the key word here,” Burns said during a conference call Thursday with Wall Street analysts. “We are smaller than when we entered 2009.”
The job cuts are intended to “size the business for a $15 billion revenue stream and growing, instead of a $17.5 billon revenue stream,” she said. “It’s that simple.”
Xerox eliminated 3,500 jobs in 2009, partially offset by employees added through acquisitions by its Global Imaging Systems subsidiary. The company ended 2009 with 7,025 employees in the Rochester area, trailing only the University of Rochester, Wegmans Food Markets, Eastman Kodak and Rochester General Health System.
Xerox made a number of cuts to expenses in 2009 such as salary freezes and suspension of 401(k) retirement plan matches — and some of those cost-cutting moves will end this year, Chief Financial Officer Larry Zimmerman said, though he did not give specifics.
This year’s job reductions will hit areas ranging from back-office functions and research and development to manufacturing. As to how deeply the cuts will affect Rochester, spokesman Carl Langsenkamp said, “It’s too early to say where the changes will occur because we will look for voluntary reductions (first).”
The company said that for the fourth quarter ending Dec. 31, its revenue was $4.2 billion, down 3 percent from the same three months of 2008. After expenses, the company netted $180 million, or 20 cents per share, after essentially breaking even a year earlier.
Minus one-time charges related to Xerox’s proposed takeover of Affiliated Computer Services Inc., Xerox had earnings per share of 25 cents. Analysts surveyed by Thomson One Analytics had expected, on average, quarterly revenue of $3.9 billion and profit of $181 million or 22 cents per share.
Wall Street was pleased with the results, with Xerox shares closing Thursday at $9.27, up 38 cents or more than 4 percent.
For all of 2009, the company reported revenue of $15.2 billion, down 14 percent from 2008, and profit of $485 million, up 95 percent.
For this year, Xerox is predicting earnings per share of 75 to 85 cents, assuming shareholders on Feb. 5 approve the $6.4 billion acquisition of Dallas-based Affiliated Computer Services.
While Xerox has continued to show it’s good at containing costs, “Growth in revenue must begin to take place as I believe that their cost structure is generally below industry standards — in other words, they have a lower cost structure than their peer group,” said William Shaheen, CEO of Rochester wealth management firm Whitney & Co.
And Xerox’s major competitors have experienced their own woes during the recession.
Hewlett-Packard Co.’s revenue fell 3 percent and its profit 8 percent in its 2009 fiscal year, which ended Oct. 31. In May, the California-based company announced it was laying off 6,400 people.
Lexmark International, another competitor, cut more than 1,100 jobs in 2009 as revenue plunged 19 percent and profit 61 percent in the first nine months of the year. Canon Inc. had similarly weak results.
There were some bright spots in Xerox’s financial report, including:
Xerox plans to focus on paying down debt this year and to repurchase some of its shares in 2011, Zimmerman said. Analysts said the company’s healthy cash flow should enable the debt reduction this year.
