July 20 (Bloomberg) -- Xerox Corp., the provider of printers and business services, declined after cutting its full-year profit forecast as the economic slump in Europe crimped demand for technology.
Excluding some items, profit will be $1.07 to $1.12 a share this year, Norwalk, Connecticut-based Xerox said today in a statement. That compared with a previous forecast of as much as $1.18. Analysts had estimated $1.11.
The economic slowdown, especially in Europe, led to a 4 percent second-quarter decline in Xerox’s sales of printers, supplies and other technology, when adjusting for currency changes. The company’s services business, helped by its 2010 acquisition of Affiliated Computer Services Inc., fared better, rising 7 percent in constant currency.
“They’re exposed to Europe, and Europe is weak,” said Shannon Cross, an analyst with Cross Research in Livingston, New Jersey, who has a buy rating on the stock. “If they didn’t have the services business, their numbers would look substantially worse.”
Xerox shares decreased 6.8 percent to $6.70 at the close in New York, reaching the lowest since July 2009. The stock has declined 16 percent this year.
The weakness in European demand accelerated in the second quarter, Chief Executive Officer Ursula Burns said on a call with investors and analysts. Two-thirds of Xerox’s drop in equipment sales was due to Europe, she said.
“We are definitely seeing a weak Europe,” she said. “That’s the reason why we’ve adjusted our guidance downwards.”
Second-quarter net income attributable to Xerox dropped 3 percent to $309 million, or 22 cents a share, from $319 million, or 22 cents, a year earlier. Excluding some costs, earnings were 26 cents a share, matching analysts’ estimates.
Revenue climbed 1 percent in constant currency to $5.5 billion. Analysts had estimated $5.6 billion.
Printer maker Lexmark International Inc. also cited weakness in Europe -- along with unfavorable exchange rates -- when cutting its second-quarter sales and profit forecast last week.
Under Burns, who took over in 2010, Xerox is remaking itself into a services company that helps businesses outsource their operations. Though still famous for its copiers, Xerox is expanding in markets such as the management of electronic payments for governments and the processing of claims for insurers.
The company also reiterated plans today to buy back as much as $1.1 billion in stock this year.
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