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Xerox to lay off 4,000 after reporting loss

By Bloomberg News, CNET News.com, Bloomberg on January 30, 2001

Summary

Xerox said Monday it will cut 4,000 jobs in the first quarter and fire more workers later in the year after the copier company reported its second consecutive loss in the fourth quarter.

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STAMFORD, Conn.--Xerox said Monday it will cut 4,000 jobs in the first quarter and fire more workers later in the year after the copier company reported its second consecutive loss in the fourth quarter.

The loss from operations was US$198 million, or 31 cents a share, compared with net income of US$294 million, or 41 cents, a year earlier. Sales fell 13 percent to US$4.83 billion.

Two years ago, Xerox was a top-tier U.S. investment. The stock was at US$105 and about to split. Fourth-quarter profit had risen 17 percent, and analysts praised Xerox's gains in market share. Now, after a January 1999 sales-force reorganization that instead hurt sales, and the ouster of a chief executive, Xerox is firing staff and selling its assets to stay alive.

"Pretty ugly," said Gibboney Huske, an analyst with Credit Suisse First Boston Inc. who has a "hold" rating on the shares.

Competition from Canon and Hewlett-Packard has eroded Xerox's sales, and some of its copiers are growing obsolete, analysts said. Those factors, combined with the flawed sales-force reorganization, sapped the company's cash and now force Chief Executive Paul Allaire and President Anne Mulcahy to cut $1 billion in costs and sell US$4 billion in assets to restore profitability.

The latest round of job cuts, about 4.5 percent of its global workforce, include those announced under a previous restructuring begun by ousted former CEO Rick Thoman and never completed, according to an analyst.

Xerox, based in Stamford, Connecticut, eliminated 2,000 jobs in the fourth quarter, achieving more than a third of the US$1 billion in targeted savings, Mulcahy said in a statement. At the end of the year, the company had 92,500 employees.

Xerox is in talks to sell half of its 50 percent stake in Fuji Xerox. It drained a US$7 billion credit line last year after being unable to raise cash with commercial paper, or short-term IOUs.

The company had US$1.8 billion in cash as of Jan. 10 after selling some assets. It will have to repay US$2.7 billion in debt in 2001 out of a total debt load of US$16.4 billion as of Dec. 31, Chief Financial Officer Barry Romeril said during a conference call.

The cash shortage prevented Xerox from financing sales until older leases expired. Earlier this month, the company said it got a US$435 million loan from General Electric's GE Capital unit, secured by equipment leases in the U.K. It's talking with GE Capital to finance leases for Xerox customers in Europe.

Xerox sold its business in China last month to Fuji Photo Film for US$550 million. Fuji is Xerox's partner in the Fuji Xerox joint venture. Xerox also may contract some manufacturing, sell its Engineering Systems division and find partners for its inkjet printer business.

The company was expected to lose 30 cents a share in the fourth quarter, the average estimate of analysts surveyed by First Call.

In the latest quarter, Xerox had a gain of US$119 million, or 18 cents a share, from the sale of the China operation, and a charge of US$40 million, or 6 cents, for restructuring. The items made the final loss US$119 million, or 19 cents a share.

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