Xerox Corporation announced third-quarter revenue of $3.8 billion grew 1 percent year over year. Equipment sales increased 2 percent. Post-sale and financing revenue, which represents more than 70 percent of the company's total revenue, grew 1 percent as the revenue stream from digital products offset declines from the company's older light-lens technology.
"We met expectations by delivering another quarter of positive performance with revenue growth and earnings expansion," said Anne M. Mulcahy, Xerox chairman and CEO. "Xerox's third-quarter results reflect the strength of our digital portfolio, especially in color where our industry-leading technology delivered 22-percent revenue growth," she added. "As important, the strength of our financial position gives us flexibility to compete effectively, invest in innovation and deliver a return to shareholders through initiatives like the share repurchase program."
Xerox's production business provides commercial printers and document-intensive industries with high-speed digital technology that enables on-demand, personalized printing. Total production revenue declined 1 percent in the third quarter. Production equipment sale growth of 1 percent only partially offset a decline in production post-sale and financing revenue. Production color installs grew 5 percent reflecting strong placements of the iGen3. Installs of production monochrome systems grew 21 percent largely due to the success of the Xerox 4110 light production system.
In Xerox's office business, which provides technology and services for workgroups of any size, equipment sales declined 1 percent and total revenue grew 2 percent. Equipment sale revenue was impacted by product mix with the company selling a greater proportion of lower-priced units compared to the third quarter of last year. Installs of digital office monochrome systems were up 21 percent reflecting increased placements of Xerox WorkCentre(TM) desktop multifunction systems. In office color, installs of multifunction systems were up 56 percent due to the success of the recently launched DocuColor 240/250 systems, and activity remained strong in installs of office color printers.
Selling, administrative and general expenses decreased $25 million year over year and were 26.9 percent of revenue in the third quarter, a decline of 1 percentage point from third quarter of last year. Gross margins were 41.3 percent, a sequential improvement from second quarter of this year and down about 1 point year over year. Xerox closed the quarter with operating cash flow of $162 million and a cash and short-term investments balance of $1.6 billion. Through the third quarter of this year, the company has generated close to $800 million in operating cash flow. Debt was down $3.3 billion year over year and declined by about $700 million from the second quarter of this year.
For the fourth quarter of 2005, Mulcahy said she expects earnings in the range of 25-29 cents per share, which include anticipated additional restructuring charges of 5 cents per share.
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