Xerox in Red for Quarter; Net Off 38% for Year

Xerox Corp., citing insurance losses and the previously announced phase-out of its disk-drive business, said Wednesday that it lost $12 million in the fourth quarter and had a 38% drop in profit for all of 1984.

The copier giant also sees a “difficult (financial) comparison in the first quarter” of this year, David T. Kearns, president and chief executive, said at a meeting with securities analysts in New York.

Kearns declined to make a specific projection for the current quarter. But he said the results would be affected by adverse year-to-year comparisons of Xerox’s insurance unit and the dollar’s impact on overseas earnings.

Kearns said 1985 overall “will be a good year for Xerox,” but his near-term forecast apparently did not sit well with Wall Street.

Xerox’s stock slumped $1.25 a share to $42.375 on the New York Stock Exchange.

The fourth-quarter loss compared to a profit of $73 million a year earlier. Revenue from continuing operations rose 14% to $2.5 billion from $2.2 billion a year earlier, said Xerox, which is based in Stamford, Conn.

For 1984, Xerox said net income fell to $291 million from $466 million in 1983. Annual revenue from continuing operations rose 6% to $8.8 billion from $8.3 billion.

The 1984 results, which generally were in line with analysts’ expectations, included an $85-million loss from the phase-out of Xerox’s Shugart disk-drive operation.

Xerox, blaming overcapacity in the disk-drive industry, announced earlier this month that it would close the Sunnyvale, Calif.-based unit and record the loss. Disk drives are used to store computer data.

As for Xerox’s remaining businesses, “1984 was clearly a mixed year,” Kearns told the analysts.

Revenue and earnings from the company’s reprographics and information systems division climbed 6.3% and 8%, respectively, he said. But Xerox’s Crum & Forster insur ance subsidiary suffered a $23-million loss in the fourth quarter and a $10-million loss in all of 1984.

In 1983, Crum & Forster earned $145 million, including a $26-million profit in the fourth quarter.

Crum & Forster was hurt last year “by the industrywide deterioration in the property and casualty insurance business,” an industry beset by severe price cutting, Kearns said.

Crum & Forster is trying to respond by raising prices. But Kearns said price increases can take effect only on new or renewed policies and, hence, the full impact of the higher prices on Crum & Forster’s results would take time.

Price declines also have limited the earnings power of Xerox’s copier business in recent years. Despite rising unit sales of copiers, the price declines eroded Xerox’s market share and profit margins.

Xerox’s problems are particularly acute in the “low-end” copier market, where Japanese companies came to dominate, and to a lesser extent in the large-scale copier market, where Eastman Kodak Co. is Xerox’s main rival.

But Kearns said he was encouraged by the revenue and profit gains recorded by the company’s reprographics and information systems units in 1984, gains that were especially strong in the fourth quarter.

Xerox has slowed its copier market-share erosion, particularly in the high-end sector, where the company’s Series 10 copiers have been well received, Kearns said.

In the mid- to low-end market, however, “there seems to be no letup in pricing competition from the Japanese,” said George Elling of the investment firm Oppenheimer & Co.

Sanford J. Garrett of Garrett Research said that “on an absolute basis we’re seeing good (copier) unit growth at Xerox, in fact the first acceleration in unit growth the company has seen in three or four years--11% versus 7%.”

“The big problem,” Garrett added, “is that pricing is no longer in Xerox’s control.”