Xerox cuts outlook as business expansion costs run high

Summary:The paper copier pioneer reported a five-percent drop in first-quarter profits and trimmed its adjusted earnings forecast for the year, citing slow growth in its services unit and dwindling revenue from its printing business.

Xerox Corp. reported sluggish first quarter 2014 earnings results Tuesday. 

The printing and business process outsourcing company reported a revenue drop of 1.6 percent to $5.12 billion — down somewhat from the same three months the year prior.

The dip caused the Connecticut-based company to adjust its earnings outlook for the full year, now forecasting $1.07 to $1.13 a share, down from its prior view of $1.10 to $1.16 a share.

Xerox predicted adjusted earnings of 25 cents to 27 cents a share, while Wall Street was looking for second quarter non-GAAP earnings of 28 cents a share on revenue of $5.35 billion.

The company's document technology business, made up of its printing and photocopying division, was down 4 percent from a year ago:

Screen Shot 2014-04-22 at 10.03.52 AM

Xerox has been trying to diversify away from its printing and copying roots with an expanded services business that includes toll systems, bill processing, IT outsourcing and health care programs, only to see growth of the new division remain flat as operating costs ran high:

Screen Shot 2014-04-22 at 9.48.44 AM

Xerox CEO Ursula Burns pointed to extra spending on its government health care business as a reason for flat revenue:   

Our first-quarter performance reflects the value of our diversified business. But these gains were offset by higher-than-anticipated investments in our government healthcare business as we implement new Medicaid and health insurance exchange platforms. Were focused on driving Services growth and margin improvement by executing on our Five-Plank Strategy and expect the benefits to build through 2014.

The company generated $286 million in cash flow from operations during the first quarter and repurchased $275 million in company stock.

Burns said the strong cash position enabled a fast start to the share repurchase program, and announced plans to increase full-year share repurchase expectations from at least $500 million to at least $700 million, as the company continues to make investments in expanding services outside of the US and to build out its services capabilities.

Topics: Printers, Cloud, Outsourcing

About

Natalie Gagliordi is a staff writer for CBS Interactive based in Louisville, Kentucky, covering business technology for ZDNet. She previously worked as the editor of Kiosk Marketplace, an online B2B trade publication that focused on interactive self-service technology, while also contributing to additional websites that covered retail tec... Full Bio

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