Xerox plummets after cutting forecast as demand slows

Xerox Corp., the largest maker of high-speed color printers, fell as much as 20 percent in New York trading after cutting its profit forecast, and ratings firms indicated they may downgrade the company.

Profit this quarter will be 3 cents to 5 cents a share, down from an earlier forecast of 16 cents to 20 cents, Xerox said today in a statement. Standard & Poor's and Fitch Ratings both revised their outlook for the company to negative, reflecting challenging economic conditions.

Xerox faces waning demand for its machines amid the recession, as customers cut orders and distributors reduce inventory, Chief Executive Officer Anne Mulcahy said in January. Sales slumped 18 percent in January and February on slowing demand for printers and supplies, Xerox said today.

"Enterprise spending on technology will continue to decline this year," Mulcahy said in the statement.

Analysts on average had estimated earnings of 18 cents a share, according to a Bloomberg survey. Xerox, based in Norwalk, Connecticut, said a reorganization at its Fuji Xerox venture will cut 6 cents a share from earnings this quarter.

Xerox slid 93 cents, or 17 percent, to $4.41 at 1:55 p.m. in New York Stock Exchange composite trading. Earlier, the stock dropped as low as $4.25, the biggest decline since June 2002. The stock had fallen 33 percent this year before today.

The company's cash flow may decline more than expected this year, Fitch said in its report. Xerox's outlook could be revised to stable if the company can reduce costs, Lucy Patricola, an S&P analyst in New York, wrote in a note.

Xerox said it will cut $300 million of expenses, adding to $250 million in savings from previous restructuring actions. The new cuts include freezing hiring and salaries, spokesman Carl Langsenkamp said in an e-mail. Mulcahy announced about 3,000 job cuts last quarter.

In January, the company lowered its 2009 profit forecast to about $1 a share, from as high as $1.25 in November. Xerox is scheduled to report detailed first-quarter earnings April 24. It said it will also update its full-year outlook at that time.