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Xerox CEO Ursula Burns Getty Images
<p>Xerox CEO Ursula Burns.</p>

Xerox Declines Highest in Six Years

&ldquo;We&rsquo;re pulling all the levers within our control to successfully navigate in a challenging market environment,&quot; said CEO Ursula Burns.

Xerox Corp. plunged the most in more than six years Monday after the company reported first-quarter earnings that missed analysts’ estimates and lowered some full-year forecasts, underlining the challenges it faces ahead of a planned company split.

The shares dropped 13% to $9.68 at the close in New York, the steepest plunge since September 2009. The shares are down 9% this year.

Famous as the brand behind the copy machine, Norwalk, Connecticut-based Xerox is struggling with continued declines in revenue from document technology, which includes printer sales and related services. That business was hurt by a stronger dollar and weakness in emerging market economies, Chief Executive Officer Ursula Burns said on a conference call. Those factors led to the company’s decision to accelerate layoffs, she said, which in turn pressured margins and resulted in a higher-than-expected restructuring charge.

Xerox said earnings in the first quarter excluding some costs were 22 cents a share, lower than the average analyst estimate for 23 cents a share. The company also adjusted its full-year net income to 45 cents to 55 cents a share, down from previous forecasts of 66 cents to 76 cents, interim Chief Financial Officer Leslie Varon said on the call.

For the current period, Xerox expects adjusted earnings per share of 24 cents to 26 cents, compared with analysts’ projections of 26 cents.

The added cost of the job cuts affects the company’s document technology and services divisions, as well as the overall corporate group, Burns said. In the first quarter, Xerox eliminated about 4,800 jobs and incurred a charge of $126 million, mostly due to severance costs. The company expects to spend another $100 million this quarter on restructuring.

“We expect to realize the benefits of these charges beginning in the second quarter,” Burns said. “We’re pulling all the levers within our control to successfully navigate in a challenging market environment and best position our businesses for the future.”

In January, Xerox said it’s splitting into two companies in an agreement with investor Carl Icahn, who will select three directors on the service company’s board. The split will create an $11 billion document technology company and a $7 billion business process outsourcing company. Xerox is on track to complete the separation by the end of the year and plans to file its initial registration statement in July.

Full-year free cash flow forecasts were revised to $600 to $850 million, down from $1 to $1.2 billion, as a result of the additional restructuring costs. Xerox reaffirmed its forecasts for full-year revenue and adjusted earnings-per-share.

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