Xerox Corp. tightened its full-year earnings outlook and said it would take a restructuring charge of up to $100-million (U.S.) after third-quarter revenue was hurt by a strong dollar, weak economic conditions in Europe and tight government budgets.
Xerox, best known for its office copiers and printers, said on Tuesday that it planned to take a restructuring charge of $50-million to $100 -million.
The company did not say what the charge was for, but that as a result, it expected 2012 earnings per share, excluding items, of $1.07 to $1.09. Previously it had forecast a range of $1.07 to $1.12.
Xerox also said it expected EPS to be flat or up slightly in the current quarter - 33 cents to 35 cents, compared with 33 cents a year ago. Analysts anticipate EPS of 34 cents, according to Thomson Reuters I/B/E/S.
Xerox, which would like to be known as more than just a printer and copier company, has moved into business services with its 2009 purchase of Affiliated Computer Services Inc for $5.5-billion - the company’s biggest deal in its 106-year history.
It now derives more than half of its revenue from its services unit, but investments in the business have pressured margins.
Its technology business includes document systems, supplies, technical services and financing of products.
But similar to other information technology companies such as IBM, which successfully transitioned from hardware to a more software and services business model, Xerox is feeling some pain as governments hold off on spending and projects are delayed.
While third-quarter earnings per share were in line with expectations at 25 cents, revenue fell 3 percent to $5.4-billion, below Wall Street estimates of $5.51-billion.
“While we’re pleased with the continued revenue growth trajectory in services, the profitability of a few contracts has been hampered by constraints in government spending, delaying implementation on committed projects that required our upfront investments,” Chief Executive Ursula Burns said in a statement.
“We believe this is a short-term consequence of current macro and political conditions,” she said, adding that the company remained cautious and aimed to reduce costs.
Revenue from the company’s services business rose 6 percent in constant currency while revenue from its technology business declined 7 per cent.