Earnings Preview: Xerox to report 2Q earnings

NEW YORK — Xerox Corp. is set to report earnings for the second quarter on Thursday ahead of the opening bell. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Xerox signaled a big shake-up in the economics of printing during the second quarter. It unveiled a new office machine that promises to cut the cost of color printing by 62 percent. The ColorQube uses a waxy substance that looks a lot like a crayon rather than a traditional ink cartridge.

That said, Xerox doesn’t expect the new printer to contribute much to earnings until next year.

In fact, the company is bracing for a long period of doing more with less, expecting penny-pinching among customers to last for at least the next couple of quarters. Printing and copying are discretionary costs that are often the first eliminated by those in charge of shrinking information-technology budgets.

Still, analysts don’t expect things to get much worse for Xerox. The Norwalk, Conn.-based company has said sales have stabilized after customers drew down their inventories when the recession deepened last year.

“That inventory correction is coming to an end,” said Shannon Cross, of Cross Research.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect Xerox to report earnings of 11 cents per share on sales of $3.72 billion. That compares with year-ago profit of 24 cents per share on sales of $4.53 billion.

ANALYST TAKE: Cross doesn’t expect any rebound in second-quarter sales, but thinks the second half of the year should look a little brighter. That’s when Cross expects savings from cost-cutting moves to kick in.

Xerox announced last fall that it was trimming 3,000 jobs, and in March the company suspended its 401(k) matching plan in the U.S., froze salaries and cut down on discretionary costs.

WHAT’S AHEAD: Xerox is entering a new chapter as Ursula Burns, formerly president of the company, takes over as CEO. She replaced Anne Mulcahy on July 1, becoming the first and only African-American woman to lead a Fortune 500 company.

Mulcahy, now chairman, is widely credited with turning Xerox around after taking over in 2001 amid losses and speculation about possible bankruptcy plans.

The job of leading Xerox out of the longest recession since World War II now falls to Burns, who has put in nearly three decades at the company.

STOCK PERFORMANCE: Xerox shares climbed $1.93, or 42 percent, to $6.48 in the second quarter.