Xerox Profit Rises Amid Brisk Sales

Office equipment maker Xerox Corp. (XRX) Tuesday said fourth-quarter profit rose 15 percent, fueled by solid demand for new digital color printers and document services.

Stamford, Conn.-based Xerox, best known for its copiers, said fourth-quarter net income, after paying preferred dividends, rose to $226 million, or 24 cents a share, from $197 million, or 22 cents a share, a year earlier.

Analysts had forecast a profit of 23 cents a share, according to Reuters Estimates.

Revenue rose 1 percent to $4.33 billion, including a benefit of 3 percentage points from the weak U.S. dollar. Equipment sales grew about 3 percent in the fourth quarter and revenue from its lucrative color systems surged 21 percent.

Analysts had been expecting revenue of about $4.31 billion, according to Reuters Estimates.

"It was a strong quarter from a revenue, EPS and cash flow standpoint," said Cross Research analyst Shannon Cross. "Their digital and color areas were up, so their key trends all moved in the right direction this quarter."

Shares of Xerox rose 18 cents, or about 1 percent, to $15.45 on the New York Stock Exchange (search).

Xerox has been working aggressively to sell digital color copiers and high-end printers, which reap more profits through related sales of supplies and service contracts.

Fourth-quarter revenue from Xerox's targeted growth areas — office digital, production digital and value-added services — grew 5 percent and now represents about 76 percent of the company's revenue.

Growth was slowed by declines in demand for supplies and services for older machines, known as "light lens," and softness in Latin America. Xerox Chief Executive Anne Mulcahy (search) said the light lens segment represents only 5 percent of revenue.

"We've been consistent in saying that the impact from light lens ... will no longer be an issue after 2005, although it provides short-term pressure on total revenue," she said on a conference call with analysts.

She added that revenue from supplies and services for new digital systems offset declines from light lens.

Looking ahead, Xerox forecast first-quarter earnings in a range of 17 cents to 20 cents per share. Analysts, on average, are looking for 19 cents per share in the first quarter, according to Reuters Estimates.