STAMFORD, Conn. - Xerox Corp., whose chief executive was ousted last month after a failed reorganization, warned yesterday that second-quarter profit will be below forecasts because of slower sales of publishing equipment.
The shares of the world's biggest copier-maker fell as much as 20 percent. It's the third profit warning in four quarters for Xerox, which has lost more than half its value in the past year.
Xerox reorganized its sales force along product lines rather than geography last year, depressing sales and profit. Sale of the company's DocuPrint and DocuTech machines, which can cost more than $400,000, are being hurt by increased competition. Xerox said problems at its Mexican operations could cut profit further. That is making investors skeptical about a promised turnaround.
"Credibility is going to be their biggest problem," said Credit Suisse First Boston analyst Gibboney Huske, who has maintained a "buy" rating on the stock because she expects the restructuring to be successful.
Profit in the second quarter will be in line with the first quarter's 28 cents a share, Xerox said. It was expected to earn 42 cents, the average estimate of analysts polled by First Call/Thomson Financial. The company earned 62 cents in the year-earlier period.
Xerox said earnings could be reduced by a further 5 cents to 6 cents a share because of problems with customer receivables in Mexico, Chief Financial Officer Barry Romeril said in a conference call.
Shares of Xerox fell $4.6875 to $20.6250 on the New York Stock Exchange after dropping as low as $20.25. They have slumped 57 percent in the past year.
Richard Thoman resigned last month after serving as CEO for little more than a year. His reorganization of 15,000 sales people was blamed for lowering profit, employee morale and customer satisfaction.
The DocuTech machines, Xerox's most profitable products, are used by corporations to publish documents such as annual reports. The business also generates higher margin sales of services and products such as paper. Competition in publishing has increased from Germany's Heidelberger Druckmaschinen AG and Japan's Canon Inc.
"That does not bode well for 2001, 2002," said David Giroux of T. Rowe Price in Baltimore, which has cut its stake in Xerox since December. "This should be a more stable business."
Xerox's DocuTech and DocuPrint lines accounted for about $4.4 billion of last year's $19.2 billion in sales.