Xerox’s Revenue from Document Technology Business Stumbles

Xerox released its earnings report for the third-quarter of 2014. The OEM sees total revenue of $5.1 billion, down 2% at both actual and constant currency.

Revenue from the Service Business is 2.9 billion, representing 57% of the total revenue. The figure is up 1% and remains flat year-over-year (YOY) in constant currency. Earnings from the document technology business is 2 billion, taking up 40% of the total revenue. This amount is down 6% YOY.

According to Xerox’s financial review for the third quarter, equipment sales revenue decreased 8% YOY, with no impact from currency, driven by lower sales in entry products and overall price decline.

In addition, as was seen from the firm’s 3Q2014 earnings presentation, growth was only seen in the sector of mid-range color MFDs, registering 1% increase.

Ursula Burns, Xerox chairman and chief executive office, said, “Profits from our document technology business came in above expectations while services results were lower than planned. Our document technology business continues to provide strong profitability.”

“Looking at our product groups, we are seeing very positive results in the high end with growth in both equipment and annuity revenue. High-end annuity revenue grew the past two quarters which is encouraging as it reflects increases in MIFD and pages in this important segment,” said Kathy Mikells, Xerox’s CFO.

Kathy also noted, “Mid-range was in line with overall document technology declines while entry performance was weaker. The third quarter was a very strong quarter for new products with 17 launched and an additional three launched in October. We extended our successful ConnectKey platform into a number of entry multifunctional devices as well as into color and mono midrange products. By further expanding the platform, we provide even more options for our customers looking to leverage our strong mobile, security and app development. This should position us well in the fourth quarter and as we enter 2015.”

Regarding the outlook for the fourth quarter, Ursula Burns said, “We expect further sequential margin improvement. However, we are moderating our expectations in light of our third-quarter results and investments required as we push forward our services strategy. We expect margin to be between 9% and 10% for the quarter.”