[NYT] Xerox slashes a unit of costs...

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From: Adam Rifkin (adam@KnowNow.com)
Date: Tue Oct 24 2000 - 13:11:49 PDT

1. Xerox still pays a dividend??
2. Xerox still has a billion dollar annual R&D budget??


3. Pop quiz: Which company could most benefit from acquiring the Xerox brand?
   A) IBM, B) Hewlett Packard, or C) Canon?

> Xerox Sets Restructuring as It Posts Bigger-Than-Expected Loss
> http://www.nytimes.com/thestreet/business/1139003.html

> October 24, 2000


> Struggling copier company Xerox announced an aggressive restructuring
> plan Tuesday that includes slashing $1 billion in costs -- mainly
> through job cuts -- and raising up to four times that amount
> through asset sales.

> In the same announcement, the company reported a third-quarter
> loss of 20 cents, a penny more than the already lowered analyst
> consensus from First Call/Thomson Financial of a loss of 19 cents.

> On Oct. 2 the company put out an announcement that it would
> lose between 15 cents and 20 cents a share, compared with the
> previous expectation of a 12-cent-per-share profit. The company
> attributed the shortfall to weaker-than-expected revenue in North
> America and Europe.

> In subsequent announcements the company lowered its dividend by 75
> cents to 5 cents a share and, most recently, was forced to issue a
> terse statement denying it's close to filing for bankruptcy
> protection in Europe.

> Xerox revealed Tuesday that it is in discussions to sell a range
> of assets that includes the company's China operations, a portion
> of its stake in Fuji Xerox,Xerox Engineering Systems, and its
> interests in companies ContentGuard and Inxight. It hopes to raise
> between $2 billion and $4 billion from the asset sales.

> The news, which was widely anticipated, failed to boost Xerox
> shares, as many analysts had expected. The restructuring plan fell
> short of expectations because it was too vague and did not include
> selling off its financing division, which accounts for between $7
> billion and $8 billion of Xerox's $11 billion in debt, one analyst
> said.

> "I don't think it was what the market was looking for," said James
> Corridore, who researches the company for Standard & Poors Equity
> Group. "It had nothing concrete. It's all still in the 'what if'
> stage." Corridore has an avoid rating on Xerox, and his firm does
> not perform underwriting.

> Xerox shares were lately trading down 19 cents, or 2%, at $8.94.
> Shares have traded as low as $6.75 and as high as $30.50 over the
> last 52 weeks.

> Xerox did not give a specific timetable for when it plans to
> finalize the asset sales, only that it would notify the investment
> community in the coming months.

> Xerox also said it was talking with several investors about making
> a significant equity investment in its inkjet business and was
> exploring a joint venture for its Palo Alto Research Center.

> "Xerox's famous Palo Alto Research Center could have several
> technologies of value to venture capital firms, but it is very
> difficult to discern what exactly is there -- and what exactly is
> marketable," said PaineWebber analyst Benjamin Reitzes, in a report
> published Monday anticipating Xerox's restructuring plan. In the
> report, Reitzes -- who has a neutral rating on the company --
> suggested the company whittle down its $1 billion a year research
> and development budget as part of the cost-cutting effort.

> The company also plans to save about $1 billion in 2001, mainly by
> cutting an undisclosed amount of jobs and by outsourcing some of
> its manufacturing.

> As part of the restructuring plan, the company will shuffle its
> sales force, putting more effort on selling its machines through
> distributors and emphasizing its high-end machines for publishers.

> "The combination of all of these actions -- the previously
> announced dividend reduction, the focus on operational cash, the
> asset dispositions and financing options -- will significantly
> strengthen the balance sheet, and reduce our debt level," said Paul
> Allaire, Xerox's chairman and chief executive, in a statement.
> "This will sharpen our competitive edge, deliver the superior
> products and services that our customers require, and generate the
> value that our credit providers and shareholders require."

> Tuesday's announcement is not new territory for the company, noted
> the PaineWebber research report. In 1998, the company restructured
> with a $1.6 billion charge that resulted in about 10,700 job cuts.
> And in March 2000, the company took a $625 million pretax charge,
> and it is expected that 5,200 jobs will be eliminated by mid-2001,
> a process that Xerox said Tuesday will be sped up.

> Third-quarter revenue for Xerox was $4.46 billion, down 4% from
> revenue of $4.63 billion in the year-ago period. Including a $55
> million charge related to its Mexico business, the company posted a
> third-quarter net loss of $167 million. This compares with net
> income of $339 million in last year's third quarter.

> The Stamford, Conn.-based company attributed the weak financial
> results to lower-than-expected equipment sales in North America,
> and particularly for its high-end products.


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