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Apr 20, 2001 12:00 AM

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STAMFORD, Conn. –– Shares of Xerox Corp. surged nearly 40 percent Thursday after its first-quarter results came in far stronger than Wall Street expected.
For the three months ended March 31, Xerox earned $158 million, or 19 cents per share, in large part due to a $300 million gain on the sale of half its interest in Fuji Xerox.
Excluding one-time gains and losses, Xerox lost $86 million or 12 cents per share, significantly less than the 28 cents per share expected by analysts surveyed by Thomson Financial/First Call.
Shares of the Stamford-based Xerox rose $2.45, or 38 percent, to $8.85 in afternoon trading on the New York Stock Exchange.
In the year-ago period, Xerox made $243 million, or 38 cents per share.
"Xerox's performance in the first quarter is evidence of significant cash and operational improvements as well as the effectiveness of our turnaround strategy," said Paul A. Allaire, Xerox chairman and chief executive officer.
Improvements since last year include a stronger North American sales force, Xerox officials said. Still, first-quarter revenue of $4.16 billion was 8 percent lower than the $4.50 billion recorded in the first quarter of 2000.
North American revenue growth, described by Xerox as modest, was offset by a slight decline in Europe and a 20 percent decline in developing markets.
Black-and-white production revenues improved and revenue from color copiers rose by 16 percent.
Xerox also reported progress in reducing costs, including a 5 percent cut in general and administrative expenses and a $100 million reduction in inventory. The company also said it has cut 4,300 jobs in the first quarter.
Allaire said Xerox also expects an operations loss in the second quarter.
"Our expectation is to return Xerox to profitability in the second half and for the full year," said Allaire.