Xerox Corp. (NYSE: XRX) posted a 33 percent spike in first-quarter sales Friday, but reported a loss for the first quarter mostly due to the purchase of Affiliated Computer Services Incorporated (ACS).
The printer-and-copier maker finalized its acquisition of Affiliated Computer Services during the first quarter in a deal worth $6.4 billion. The acquisition extends Xerox’s offering in the business payrolls, accounts payable and technology outsourcing functions, which more than doubled service revenue at Xerox for the quarter.
Xerox’s strong revenue growth for the first quarter is inline with previous earnings reports from tech bellwether companies Intel and IBM who cited better-than-expected revenue growth from corporate spending.
"We started the year strong with the successful acquisition of ACS and solid performance in revenue, operational improvements and cash generation," Xerox chief executive Ursula Burns said. "Our results reflect improving demand for Xerox’s document technology in developing markets and from small and mid-size businesses."
The company provided second-quarter guidance above analysts estimates, including an earnings range of 20 cents and 22 cents per share for the quarter and a range of 75 cents and 85 cents per share earnings for the full fiscal 2010 year.
The acquisition of ACS afford Xerox exposure to a faster-growing market, but it also raises risks to earnings if continued economic weakness persists, which prompted rating agency Standard & Poor’s to downgrade the company to BBB-, one step from junk.
Total revenue totaled $4.72, with its service segment reaching $1.8 billion, or almost 40 percent of all Xerox’s sales, up from 23 percent of revenue reported for 2009.
Chief executive officer Burns’ strategy of drastically cutting costs and shifting revenue to a near-50/50 service and hardware revenue model was mostly completed in the latest quarter, with the first quarter representing the first ! full qua rter of ACS results and cost-cutting measures nearly fully instituted.
"Through our expanded offerings, we have become more differentiated in the marketplace," Burns said. "Our first-quarter results indicate we are on the right track."
Xerox posted a loss, however, of $42 million, or four cents per diluted share, compared with a $42 million profit for the equivalent quarter last year. Excluding special items such as a $195 million restructuring charge and $48 million in acquisition-related charges, the company reported 18 cents per diluted share.
The mean analyst estimate polled by Thomson Reuters expects earnings of 18 cents per share for the second quarter and 81 cents per share for the full fiscal year.
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