STAMFORD, CONN. Xerox is poised to duplicate its earlier success

The company has cut jobs and sold assets to rebound from past problems.
STAMFORD, Conn. (AP) -- It's been called a near-death experience for a company once so dominant it was virtually a verb in its industry.
Bruised by management problems, competition, a falling stock price and an accounting scandal, Xerox Corp. has survived. The copier and printer company still has many challenges but just marked three years since embarking on a turnaround strategy aimed at duplicating its previous success.
Analysts have develop lofty expectations for Xerox, which has introduced numerous new products and cut costs substantially as it returned to profitability last year.
"Generally speaking, if you look at Xerox in two years you're going to have a strong, stable company with impressive market share," said Shannon Cross, who follows Xerox at Cross Research in New Jersey.
Analysts surveyed by Thomson First Call are expecting Xerox to generate profits of 73 cents per share next year. That would be a jump of 38 percent from the consensus of 53 cents expected in 2003.
"At some point they will have a pop in earnings," said Ulysses Yannas, an analyst with Buckman, Buckman & amp; Reid.
Expectations too high?
But Yannas wondered whether expectations for next year are too high. High expectations led to a fall in the company's stock price the same day it announced an 18 percent increase in third quarter earnings.
Xerox still faces stiff competition and ongoing legal issues. Its revenues have fallen for more than three years.
"I think they're back on solid financial ground. But they really need to show they can grow the business," said James Lundy, research vice president with Gartner Inc. "They're floating in a boat in the water, but they haven't fired up that engine yet."
Company officials have been hailing a growth in equipment sales and gains in market share in some segments and declared the turnaround phase of the company over. Xerox, which is planning an investor conference later this month, hasn't offered a forecast yet for next year.
"I think it will be a year of significant improvement for the company," Xerox chief executive Anne Mulcahy said in an interview last week with The Associated Press. "We do believe this is a new Xerox."
History
Xerox was once considered a symbol of corporate success, its products so popular in the 1960s and '70s that it fought to ensure its brand name did not become a generic verb for photocopying.
But starting in the late 1990s, Xerox experienced nearly every problem imaginable, including growing competition, a botched sales force reorganization, a sharp plunge in profits, a plummeting stock price, mounting debt, lawsuits and investigations of its finances that led to a $10 million fine.
Mulcahy has cut thousands of jobs, sold billions in assets, cut costs and introduced new products.
While she often draws praise for her efforts, Xerox has not resolved all of its woes. The outcome of a criminal probe of the company's accounting practices, disclosed last year, is uncertain and there are lawsuits pending, including one by a former executive who claims the company retaliated when he raised allegations of fraud.
Xerox is notably smaller than in its heyday. Revenue this year is expected to be about $15.6 billion, down from a high of $19 billion in 1999, while its work force of 67,800 is down from 91,500 three years ago.
New products
The company is increasingly deriving its revenue from products that produce documents in color in an age where banks, credit card companies and other customers want to highlight portions of their statements.
Xerox also has shifted from old-style copiers that operate with lenses and lights to multipurpose digital models that print, scan and fax documents when connected to personal computers.
Company officials predict overall revenue will start to grow in the second half of next year, while new sales are expected to generate long-term service revenue.
"The clearest indication is winning in the marketplace," Mulcahy said. "We're improving in just about every segment of the market. The company is now on offense."