Xerox Sales Up 4%, Revenues Grow By 2%

Xerox has announced equipment sales in the second quarter increased by four per cent year over year and total revenue of $3.9 billion - an increase of two per cent.

Xerox has announced equipment sales in the second quarter increased by four per cent year over year and total revenue of $3.9 billion - an increase of two per cent.

Both equipment sales and total revenue included a currency benefit of two percentage points.

The overall post-sale trend improved as the revenue stream from new digital systems and services offset declines from the company's older light-lens technology, said the company.

Second-quarter earnings per share of 40 cents, including a 33-cent per share gain from a recent IRS tax settlement, which was partially offset by restructuring charges of 13 cents per share.

Gross margin of 39 per cent was lower than expected due to a change in the company's traditional product mix, which impacted net income in the quarter.

The shift in product mix is primarily due to increased sales activity for desktop office products as well as light production and colour systems.

Anne M Mulcahy, Xerox's chairman and chief executive officer, said: "Our investment in innovation strengthened top-line results in the second quarter with our industry-leading colour technology driving equipment sales growth.

These equipment sales will drive future post-sale gains and, at the same time, we're adjusting our business model to respond to the resulting pressure on margins.

We remain confident that these actions and increased sales of new technology - 25 new products launched in the second quarter - coupled with growth from Xerox Global Services provide the marketplace momentum for strong second-half performance." Revenue from colour products grew 17 per cent in the second quarter.

Xerox said that colour is a key driver of its growth strategy as the increasing volume of pages printed on the company's colour systems flows through to post-sale revenue.

In the company's opinion, only three per cent of the total pages produced in businesses today are printed on colour devices.

Xerox expects new colour services and technologies to drive that number to 10 per cent of pages by 2008, fuelling a $22 billion market opportunity.

Xerox added that its production business provides commercial printers and document-intensive industries with high-speed digital technology that enables on-demand, personalised printing.

Total production revenue was flat year over year.

Production equipment sales growth of three per cent only partially offset a decline in production post-sale and financing revenue.

Second-quarter installation activity for production monochrome systems increased one per cent primarily due to the success of the Xerox 4110 light production system, which offset declines in activity for high-end production monochrome systems.

Production colour installs grew 18 per cent largely due to strong placements of the iGen3 digital press and the Docucolor 8000 digital press.

Last May, Xerox announced the Docucolor 7000 digital press.

In Xerox's office business, which provides technology and services for workgroups of any size, equipment sales were up seven per cent and total revenue grew two per cent.

Activity was said to be exceptionally strong in the second quarter with office colour multifunction systems up 69 per cent and office colour printing activity up 155 per cent.

Office monochrome activity was up 26 per cent driven by increased demand for Workcentre desktop multifunction systems.

In late June, Xerox announced 24 office products, software and services that target a $60 billion market.

With the addition of those products, 95 per cent of Xerox's office product line has been completely refreshed over the past 24 months.

The company reported second-quarter selling, administrative and general expenses of 26.7 per cent of revenue, a modest improvement from the second quarter of last year.

For the third quarter of 2005, Mulcahy said she expects earnings in the range of 16-18 cents per share, which includes anticipated additional restructuring charges of one cent per share.

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