The Xerox Corp., which conceded earlier that as part of a settlement with the Securities and Exchange Commission it would reclassify more than $2 billion of revenue from previous years, said yesterday that it was in fact restating a much larger amount, $6.4 billion.

The result of the restatement will be to lower the company's revenues and profits in 1997, 1998 and 1999, and increase them in 2000 and 2001.

News of the restatement shook investors, who sent Xerox's shares plunging $1.90 in early trading.

But the stock recovered somewhat after shareholders realized that the restatement did not include phantom sales or earnings that might lead to fresh accusations of accounting irregularities or additional SEC action.

Xerox shares ended down $1.03, or 12.9 percent, at $6.97. According to Xerox, the accounting discrepancy stems primarily from a decision by Xerox to account for equipment leases in Latin America as rentals rather than equipment sales, the most conservative way of accounting for such transactions.

With the latest disclosure, the chairwoman and chief executive, Anne M. Mulcahy, said Xerox had resolved its accounting issues with regulators and was determined to "ensure the highest integrity of the company's financial reporting" in the future.

Yesterday's announcement was more ink inscribed in a dark chapter that Xerox began writing in June 2000, when it alerted the SEC that it had uncovered fraudulent accounting in its Mexican operations.

The alert touched off an investigation of Xerox's accounting. The agency concluded that Xerox booked too large a percentage of its revenue and profits from equipment leases in the first few years of the leases and that it had understated finance revenues and overinflated equipment revenues.

Xerox fought the SEC for more than a year, insisting that its accounting methods were aggressive, but acceptably so.

But in April, Xerox capitulated, agreeing to restate its earnings, change its accounting methods and pay a $10 million fine.

Largest corporate fine

The fine was already the largest that the agency had levied on a corporation, and legal experts say it is unlikely that it would have been any larger if the SEC had realized the magnitude of the resulting restatement.

"In this environment, investors shoot first and ask questions later, but the reality is, nothing significantly new was announced today," said Gibboney Huske of Credit Suisse First Boston, who has a "hold" rating on Xerox shares.

Of the $6.4 billion, all of which had been recorded as equipment sales revenue, about $5.1 billion will immediately reappear as service, rental and financing revenues in 1997 through 2001.

The restatement will lift revenue by about $1.9 billion in coming years.

'It' all real money'

"It's all real money, they just have to put it in different buckets," said James W. Lundy - a former Xerox executive and frequent critic of the company - who is a vice president of Gartner Inc., a technology research firm.

Former Xerox executives as well as KPMG LLP, Xerox's former auditors, hustled yesterday to distance themselves from it.

"I have no idea what the right number would be, but this is certainly larger than I would have guessed," said G. Richard Thoman, who was ousted as Xerox's chief executive in May 2000.

Thoman is one of several former Xerox executives still under SEC investigation.

KPMG, which also remains under investigation, issued a statement reiterating that it had "gotten it right the first time."