Xerox to pay $670 million in securities case

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The leading provider of digital printers and document management services said it received preliminary court approval to settle the lawsuit brought on behalf of investors who bought its stock and bonds between February 17, 1998, and June 27, 2002.

NEW YORK (Reuters) - Xerox Corp <XRX.N> said on Thursday it would pay $670 million to settle a securities lawsuit from 2000, without admitting any wrongdoing.

The leading provider of digital printers and document management services said it received preliminary court approval to settle the lawsuit brought on behalf of investors who bought its stock and bonds between February 17, 1998, and June 27, 2002.

The lawsuit stems from questions about the accounting at Xerox. In 2002, Xerox agreed to pay a $10 million penalty to settle U.S. Securities and Exchange Commission (SEC) charges that the office equipment maker had manipulated its financial results to inflate profits. It later restated five years worth of results.

Xerox plans to take an after-tax charge of $491 million in the first quarter of 2008 to cover the settlement and set aside reserves for other pending securities-related cases.

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KPMG, Xerox's former outside auditor and a co-defendant, will pay $80 million into the settlement fund. The case was filed under Carlson v. Xerox Corp.

"We believe the settlement amounts are in line with expectations and easily absorbed by Xerox' cash flow," Cross Research analyst Shannon Cross wrote in a report. "We think this alleviates an overhang for the company, particularly on the rating for the bonds."

Following the announcement, Standard & Poor's placed Xerox on CreditWatch with positive implications.

Xerox said it would make its payouts in the settlement in five installments this year.

Shares of Xerox rose 1 cent to close at $14.97 on the New York Stock Exchange on Thursday.

(Reporting by Paul Thomasch; Editing by Andre Grenon, Gary Hill, Toni Reinhold)