NEW YORK – Office equipment maker Xerox Corp. (XRX) on Monday said quarterly net income doubled on a tax benefit, but earnings missed Wall Street expectations as growing sales of lower-priced models trimmed profit margins.
Xerox, whose shares fell nearly 7 percent, also warned that third-quarter profit may also fall short of analysts expectations.
The company has been struggling to boost equipment sales amid tough competition from rival such as Canon Inc. and Hewlett-Packard Co. (HPQ).
Xerox shares were down 95 cents, or 6.7 percent, at $13.10 on the New York Stock Exchange (search).
Xerox said second-quarter net income available to common shareholders increased to $408 million from $187 million a year earlier. Excluding payments of preferred stock dividends, earnings rose to $423 million, or 40 cents a share, from $208 million, or 21 cents per share.
Results included a 33-cent-per-share gain from a recent tax settlement with the Internal Revenue Service, partly offset by restructuring charges of 13 cents per share.
Excluding the tax gain and other one-time items, quarterly profit was 20 cents a share. Wall Street analysts on average had expected 23 cents, according to Reuters Estimates.
Revenue rose 2 percent to $3.92 billion from $3.85 billion. The 2005 quarter included a benefit of 2 percentage points from currency exchange, which increased the value of overseas sales when they are converted into dollars.
Xerox said its gross margin of 39 percent was lower than expected because of increased sales activity for desktop office products and lower-priced color printers.
Total equipment sales rose 4 percent, and revenue from color products increased 17 percent. The Stamford, Connecticut-based company has been driving sales of new machines in hopes of reaping lucrative follow-on demand for supplies and services.
For the third quarter, Xerox said it sees profit of 16 cents to 18 cents per share, which includes anticipated additional restructuring charges of 1 cent per share.
Analysts had forecast earnings of 22 cents a share, according to Reuters Estimates.