Xerox to Cut More Jobs, Restructure After Quarterly Loss
Xerox Corp. will cut more jobs, sell part of a stake in a Fuji Xerox joint venture and other businesses and stop financing equipment sales after reporting its first quarterly loss in 16 years.
The world’s largest copier maker will sell assets valued at $2 billion to $4 billion and cut $1 billion in costs in 2001. It’s in talks to sell its $200-million China business and is looking for joint venture partners for its Palo Alto Research Center and for investment in its inkjet-printer business.
Xerox has used about two-thirds of a $7-billion credit line to fund operations because it’s been unable to sell commercial paper, or short-term IOUs. Competition from such rivals as Canon Inc. and an ill-conceived reorganization choked sales and profit. Xerox missed profit forecasts four times in the past five quarters and its shares tumbled 65% in the last year.
“They had to do this,” said Domenick Fumai, an analyst with BNP Paribas Inc., which is considering buying Xerox bonds. “It seems now they have a strategy to at least go forward.”
Shares of Stamford, Conn.-based Xerox fell 31 cents to $8.81 on the New York Stock Exchange. The overhaul is designed to reduce Xerox’s $18-billion debt.
The company plans to cut about $600 million in sales and general administrative costs. Depending on which assets are sold, the job cuts could be “quite large,” said Anne Mulcahy, president and chief operating officer. Xerox has 94,000 employees worldwide.
Xerox has been unable to borrow from investors in the money markets since it disclosed the third- quarter loss this month. Xerox originally used the $7-billion line of credit to back up its commercial paper, of which it now has $1.6 billion outstanding.
“It seems they’ve done a lot of little stuff, which maybe adds up to something adequate, but it’s still going to be tough going for a while,” said Gibboney Huske, an analyst at Credit Suisse First Boston Inc.
Xerox had a third-quarter loss from operations of $128 million, or 20 cents a share, compared with net income of $339 million, or 47 cents, a year earlier. Sales fell 4% to $4.5 billion from $4.63 billion.
The company’s credit troubles stem in part from the $11 billion it borrowed to finance equipment sales. Xerox Credit Corp., its finance unit, is one of the company’s most profitable businesses. Xerox is looking at all options for getting out of the financing business over time, though it will still make sure its customers can get financing for their purchases.
The company is holding talks with Fuji Photo Film Co. to sell half of its 50% stake in Fuji Xerox, their joint venture since 1962, Chief Executive Paul Allaire said. Analysts valued Xerox’s share of the business, which makes copiers and laser printers, at $6.4 billion.
Xerox also plans to cut costs by eliminating duplication, shedding $200 million in manufacturing and supply chain costs and getting rid of the worldwide service-staff organization. It also will sell its large-format-photo printing-systems business, which has more than $500 million in sales.
