- The Washington Times - Friday, March 20, 2009

NORWALK, CONN. (AP) - Two ratings agencies cut their outlook for the debt of printer and copier maker Xerox Corp. after it slashed its first-quarter profit forecast Friday nearly 80 percent on restructuring costs and slowing technology spending.

Xerox, which also sells printer ink, said Friday it now expects earnings per share in a range of 3 cents to 5 cents, down from its earlier forecast of 16 cents to 20 cents.

Analysts were expecting, on average, 18 cents per share, according to Thomson Reuters.

In response to the lowered guidance, Standard & Poor’s Ratings Services and Fitch ratings cut their rating’s outlook on Xerox debt to “Negative” from “Stable,” though they both left Xerox’s investment-grade rating unchanged.

“We expect that global economic weakness, reduced information technology spending, and highly competitive industry conditions will pressure Xerox’s revenues, operating earnings, and leverage profile in fiscal 2009,” said S&P; analyst Lucy Patricola.

Shares lost $1, or 18.7 percent, to close at $4.34 Friday. In the last 52 weeks the stock has ranged from $4.12 to $16, and is off nearly 33 percent since January.

The Norwalk, Conn. company said its 25 percent stake in Fuji Xerox Co., a partnership that sells Xerox equipment in Japan and other Pacific Rim countries, helped drag down its outlook with restructuring costs and disappointing profits.

Xerox also said revenue in January and February fell 18 percent, largely due to lower sales of equipment and printer-based supplies.

As a result, Xerox said it will cut costs by roughly $300 million this year, suspending its 401(k) matching plan in the U.S., freezing salaries and cutting travel and overtime pay. Last year, Xerox announced it would be cutting 3,000 jobs for an estimated savings of $250 million.

Further, Xerox said it is reducing debt this quarter, though it did not quantify that.

The company’s recent performance has been trending down as the recession forces business customers to cut their budgets for technology spending.

“It’s not a competition issue,” Xerox spokesman Carl Langsenkamp said. “The bottom line here is the market has declined as our customers have sort of put the breaks on.”

For all of last year, Xerox profit plunged to $230 million, or 26 cents per share, on revenue of $17.61 billion, from $1.14 billion, or $1.19 per share, on sales of $17.23 billion in the previous year. Excluding charges, adjusted profit last year totaled $985 million.

The company plans to update its full-year guidance when it reports earnings on April 24.

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