Difficult Quarter for Xerox; Will Review Operations
Xerox today reported third-quarter 2015 adjusted earnings per share of 24 cents and total adjusted revenue of $4.4 billion, down 4 percent, as well as a loss of $34 million, or 4 cents a share. This loss, however, is related to a a $385 million charge that Xerox took for its interrupted government health-care projects in California and Montana, with Xerox warning earlier that its implementation plans for its Health Enterprise Medicaid platform in California and Montana wouldn’t be completed. The $385 million charge represents settlement costs.
Xerox also today announced that its board of directors has authorized a review of the company’s business portfolio and capital-allocation options.
“Xerox’s Board of Directors and management team continually review the company’s strategy and consider a range of opportunities regarding our businesses and operations with the goal of maximizing value for shareholders,” said Xerox Chairman and Chief Executive Officer Ursula Burns. “Although we already have taken steps to accelerate cost reductions and prioritize investments to drive improved productivity and higher margins, our board determined that undertaking a comprehensive review of structural options for the company’s portfolio is the right decision at this time.”
Burns added, “During the third quarter, the company achieved adjusted earnings in line with our guidance. We continue to focus on strengthening our offering portfolio, improving productivity and targeting our highest-margin segments.”
In the third quarter, Xerox’s Annuity revenue represented was 85 percent of total revenue.
Revenue from the company’s Services business was $2.4 billion, down 8 percent, or 4 percent in constant currency. Services margin was negative 7.6 percent. Adjusted to exclude the Health Enterprise charge, Services revenue, which represented 57 percent of total revenue, was $2.5 billion, consistent in constant currency with the same period last year. Adjusted services margin, was 8.1 percent, down 1.0 percentage point year-over-year.
Revenue from the company’s Document Technology business was $1.8 billion, down 12 percent, or 9 percent in constant currency. Document Technology margin was 12.8 percent, down 1.2 percentage points.
Xerox expects fourth-quarter 2015 earnings of 23 to 25 cents per share and adjusted EPS of 28 to 30 cents per share. For full-year 2015, it expects earnings at the low end of 46 to 52 cents per share and adjusted EPS at the low end of $0.95 to $1.01 per share.