Xerox posts loss on litigation charge

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The litigation cost, which included reserves set aside for other pending cases, related to the settlement of a securities lawsuit dating back to 2000. Xerox previously said it would make payouts in the settlement in five installments this year.

NEW YORK (Reuters) - Xerox Corp <XRX.N>, the leading provider of digital printers and document management services, on Friday reported a quarterly loss as a $491 million litigation charge overshadowed solid sales growth.

The litigation cost, which included reserves set aside for other pending cases, related to the settlement of a securities lawsuit dating back to 2000. Xerox previously said it would make payouts in the settlement in five installments this year.

Shares edged higher in pre-market trade for Xerox, which has rebounded from fiscal troubles earlier this decade, spurred by solid profits and improved market share despite tepid sales growth.

The Stamford, Connecticut-based company posted a first-quarter loss of $244 million, or 27 cents a share, compared with a profit of $233 million, or 24 cents a share, a year earlier.

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Excluding a charge of 54 cents a share for the litigation, Xerox earned 27 cents a share, in line with analyst views, according to Reuters Estimates.

Total revenue rose 13 percent to $4.3 billion, fueled by a an 11 percent increase in sales of supplies and services -- also known as "post-sale." The company said post-sale now represents more than 70 percent of total revenue.

Despite the revenue gains, total margins slipped in the quarter to 39.3 percent, down 1.3 points from one year ago. Xerox blamed the margin pressure on price declines and a higher proportion of revenue from lower-margin products, including paper.

"Equipment placements were strong with Xerox gaining share in many categories," said analyst Shannon Cross of Cross Research. "Weaker than expected sales gross margin (was), we assume, driven by a combination of Xerox being more aggressive to take share as well as macro issues."

The company said it expects second-quarter profit of 28 to 30 cents per share before a restructuring charge of 5 cents per share.

Analysts expect a profit of 29 cents a share, according to Reuters Estimates.

Xerox stock edged higher to $14.65 in pre-open trading, after closing on Thursday at $14.50 on the New York Stock Exchange.

(Reporting by Franklin Paul; Editing by Derek Caney and Steve Orlofsky)