Xerox cuts earnings target on weak European demand

(Reuters) - XEROX (XRX.NY)Corp , best known for its office copiers and printers, cut its full-year profit TARGET (TGT.NY)on Friday after reporting lower second-quarter results, bracing for continued tough economic conditions in Europe.

The company said it expects revenue to remain weak in its technology business, which includes document systems, supplies, technical services and financing of products. The company is transforming itself into a business services provider.

Xerox forecast 2012 earnings per share of $1.07 to $1.12, excluding special items. Previously it had aimed at $1.12 to $1.18, and analysts had estimated $1.11.

Xerox stuck to its 2012 operating cash flow goal of $2 billion to $2.3 billion.

The company's shares were down 3.5 percent in premarket trading.

In the second quarter, the weak macroeconomic environment resulted in a 4 percent decline in technology revenue, excluding the effects of foreign exchange, the company said.

Companies such as Xerox and rival International Business Machines Corp , which generate a large part of their revenue outside the United States, have taken a hit because a weak euro and other foreign exchange headwinds translate into fewer dollars.

Xerox forecast third-quarter earnings, excluding one-time items, of 24 cents to 26 cents per share, compared with an average Wall Street forecast of 27 cents.

The warning on the third quarter reflected what the market had seen from other companies, said Shannon Cross of Cross Research.

"They held to their cash flow for the full year, which was good," she said, adding that she expects similar results from other office equipment companies such as Canon <7751.T> and Ricoh <7752.T>.

Last week, Lexmark warned of falling sales in Europe.

Xerox, based in Norwalk, Connecticut, is at pains to prove it has more to offer than just copiers and printers. It moved into business services with its purchase of Affiliated Computer Services Inc (ACS) for $5.5 billion in 2009, the company's biggest deal in its 106-year history.

It now derives more than half of its revenue from its services business, but investments in the business have pressured margins. Xerox has promised cost-cutting and operational improvement.

Revenue in the services unit was up 7 percent in the second quarter excluding the effect of foreign exchange.

Overall, second-quarter revenue fell 1 percent to $5.5 billion, below analysts' average estimate of $5.59 billion.

Net income fell 3 percent to $316 million. Earnings per share were 26 cents, excluding one-time items, in line with analysts' expectations and down a penny from a year earlier.

(Additional reporting by Sinead Carew; Editing by Jeffrey Benkoe, Lisa Von Ahn and John Wallace)

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