January 25, 2013
Market Watch reports that Xerox suffered an 11 percent drop in earnings at the end of last year as the cost of shifting its focus to services has put pressure on margins.
Profit reported by Xerox was down from $375 million (€279 million) in 4Q11 to $335 million (€249 million) in 4Q12, with revenue down 0.7 percent to $5.92 billion (€4.4 billion), although this exceeded analysts’ estimates of $5.88 billion (€4.38 billion).
While sales from Xerox’s technology business decreased by eight percent to $2.5 billion (€1.86 billion), its services revenue grew by 6.6 percent to £3.05 billion (€2.27 billion), with Financial Times reporting that the company is optimistic that it has made the right decision in moving away from its printing business to focus on services.
Ursula Burns, Chief Executive of the company reportedly said that the “shift to a services-led growth portfolio is paying off”, adding that “throughout 2012, we focused on scaling our services business and adjusting our business model to align with growth opportunities in the $600 billion (€446.6 billion) market we serve […] Our fourth-quarter results reflect steady progress.”.
As part of Xerox’s services focus, the company sells document systems, supplies, technical service and financing of products” as well as processing “student loan payments, Medicaid claims and parking tickets”, with further plans to spend “up to $500 million (€372 million)” on acquisitions predominantly centred on the services sector during 2013.
Xerox’s decision to focus on services came after the company struggled with the weak economic conditions, particularly in Europe, as businesses and governments were forced to make cuts in IT spending.
Dylan Cathers, Analyst at S&P Capital IQ, expressed his concerns for the company, commenting: “My biggest worry is that there is a lot of competition out there and Xerox does not have the firepower to compete with bigger names such as IBM, Accenture and many Indian outsourcers who are becoming more aggressive […] just because there is a deal pipeline, doesn’t mean the company will be able to close those deals. Due to the economic climate, it is taking a lot longer for companies to sign off on contracts.”
Categories : Products and Technology