Xerox to Cut 5,200 Jobs, or 5.3% of Work Force, on Falling Profit

Xerox Corp. said Friday it will cut 5,200 jobs, or 5.3% of its work force, after three quarters of falling profit and a drop in its stock price of almost 60% in 14 months.

The office-equipment giant will take a first-quarter charge of $451 million, or 67 cents a share, to cover job cuts, plant closings and inventory write-offs.

More than half the job cuts will be in the U.S., with about 2,000 in Rochester, N.Y., where Xerox employs 14,600. The rest will be spread across Europe, Canada and developing markets, Xerox spokesman Jeff Simek said. Xerox had 94,600 employees at the end of 1999.

Jobs will be eliminated in most areas of the company except sales and research and development. Xerox will trim middle and upper management in the U.S. by about 10% and try to contract some work, including some parts manufacturing.

Xerox said in January it planned an overhaul by the end of the first quarter. While it didn’t give specifics, it told analysts and investors that the cuts and charge would be less than its 1998 restructuring.

The company cut 10,000 jobs--about 10% of the payroll at the time--starting in 1998 as it sought to bring its margins closer to that of competitors such as Hewlett-Packard Co.

The company said it expects to save $95 million in 2000 and $300 million in 2001 from the latest moves, helping it achieve percentage profit growth in the “mid-to-high teens” in 2001.

Chief Executive Rick Thoman still has to prove the effectiveness of his January 1999 plan to reorganize 15,000 salespeople.

The company has said it began retraining too many at once, which cut into sales. At the same time, Xerox reorganized its billing centers, forcing salespeople to iron out billing problems instead of selling machines and service contracts.

Xerox began reorganizing its sales force along industry lines instead of geographic boundaries. The change was meant to sell copier-printers, software and consulting services to corporations as a package, which it says will generate half the company’s revenue in the next decade.

Friday’s announcement “indicates the management team is aggressively moving to improve the company’s footing,” said Prudential Securities analyst B. Alex Henderson, who has a “hold” rating on Xerox.

Hewlett-Packard had revenue of $509,200 per employee in its fiscal year ended October, whereas Xerox had $203,000 per employee last year.

Profit began to fall in the third quarter, dropping 11% and marking the company’s first quarterly profit decline in three years. In the fourth quarter, profit fell 52% as sales slumped.

Xerox is expected to earn 25 cents a share in the first quarter and $1.95 in 2000, the average estimate of analysts polled by First Call/Thomson Financial. It had per-share profit of 48 cents in the year-ago first quarter and $1.96 in 1999.

Xerox shares fell 56 cents to $26 in New York Stock Exchange trading. They have risen 15% this year.