Xerox' Image Is Getting Crisper

Two years ago, Xerox (XRX ) was on the brink of filing for bankruptcy--or being taken over. Neither came to pass. Today, the world's largest maker of copiers is on a recovery kick, thanks to the efforts of Anne Mulcahy, who took over as CEO last year. "She has done a masterly job of healing a wounded bird," says Robert Morris, chief investment officer at mutual-fund outfit Lord Abbett, which manages $46 billion and owns 47 million shares, or 6.5%, of Xerox. The company is not out of the woods, but things are looking up, observes Morris.

On Nov. 19, Xerox said it would eliminate a further 2,400 jobs in North America and close more plants. Mulcahy cut 13,600 jobs last year to slash expenses by $1.1 billion. Most analysts remain negative, but Xerox shares, down to 4.42 in October, had nearly doubled, to 8.25, by Nov. 20. Sales have yet to perk up, but Xerox posted third-quarter earnings of $105 million, or 5 cents a share, mainly through cost-cutting. And it could be in the black for all of 2002--the first time since 1999 that it will post a yearly profit. According to Zacks Investment Research, Xerox is expected to earn 9 cents in the fourth quarter, 22 cents for all of 2002, and 56 cents in 2003.

By Gene Marcial

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