Printing and copying may not be the sexiest elements of the seemingly ever-expanding technology sector. But they account for a substantial part of the industry, generating more than $100 billion in annual sales.
New products are constantly hitting the market, and both consumers and businesses focus strongly on keeping their copying and printing costs as low as possible. That makes it very difficult for any of the major players in the industry — Xerox (XRX), Canon (CAJ), Ricoh (RICOY) and Hewlett-Packard (HPQ) — to stand out against each other.
But Xerox has managed to thrive, so it’s well worth paying attention to the company’s stock.
It posted profit of $281 million in the first quarter, exceeding analysts’ estimates and reversing a loss of $42 million in the same period of 2010. Revenue increased 16 percent to $5.47 billion.
The business services division led the way, with a sales gain of 27 percent to $3.63 billion. Xerox’s 2010 purchase of Affiliated Computer Services for $6.2 billion gave it plenty of ballast in that sector. Xerox says the deal may create savings of $375 million for it over the next three years. The company axed 5,000 workers last year.
Xerox expects some dislocation for its Fuji Xerox joint venture in Japan, as its suppliers suffered damages from the earthquake and subsequent tsunami. But the setback wasn’t enough to change the company’s earnings forecast for the year.
In another positive sign for the stock, Xerox plans to start buying back its shares during the second half of 2011. The idea is to lay out about 70 percent of Xerox’ cash, which should come to about $1 billion, the company says.
Standard & Poor’s analyst Thomas Smith has a five-star buy rating — the firm’s highest — on Xerox shares.
“We believe XRX is recovering from a cyclical slowdown in demand for printers, and is benefiting from having more service offerings as a result of the ACS acquisition,” he writes.
“We foresee more stability in overall results, as well as opportunities for new sales to an expanded customer base.”
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