Xerox's forecast, CFO change weighs on shares

A generic picture of a Xerox logo on a photocopier.

NEW YORK (Reuters) - Xerox Corp (XRX.N) issued a profit forecast that was at the low end of Wall Street estimates and announced the retirement of its finance chief, sending its shares down more than 7 percent.

Xerox, a company best known for its printers and copiers, but that is now trying to expand its corporate services business, said its 68-year-old chief financial officer, Lawrence Zimmerman, would step down next month. Luca Maestri, 47, who is Nokia Siemens Network's current CFO, will replace him.

The announcement raised more questions about Xerox on a day when it reported higher-than-expected earnings and revenue, but failed to reassure investors about its outlook for 2011.

The company forecast first-quarter earnings ranging from 20 cents to 22 cents a share and full-year earnings ranging from $1.05 to $1.10 a share. This compared to the Thomson-Reuters I/B/E/S mean estimate of 22 cents for the first quarter and $1.10 for the full year.

The company's shares fell 81 cents to $10.59 on the New York Stock Exchange, its lowest price since October.

Analysts said Wall Street might be less comfortable with the company without Zimmerman, who served as CFO for eight years and will now retire to his home in Colorado.

"(Zimmerman) has done a terrific job and investors are a little concerned about whether the company will continue to return cash to shareholders as they've done in the past," said Matthew Lockridge, a buyside analyst at Westwood Holdings Group, which owns Xerox shares.

Chief Executive Ursula Burns said in the conference call with analysts that the company will stick to its plan of buying back shares in the middle of the year.

Zimmerman told Reuters in an interview the company's growth strategy will not change with his departure, but speculated the shares were down on Wednesday because of his retirement.

"On Wall Street, there's always a pause when there's change, but this company is so well positioned that I consider this a blip on the radar screen," Zimmerman said.

One analyst said Zimmerman's successor could help Xerox improve its position in international markets and that it was encouraging that such a qualified candidate from another company would come to Xerox.

"Maestri has experience in Europe and Asia Pacific which could be a positive to Xerox as they expand," said Gabelli & Company analyst Hendi Susanto.

Xerox, like many printer companies, is trying to diversify its business by offering more services to its corporate clients. But its hardware business still accounts for the largest portion of its overall sales. Revenue in that segment fell slightly, undermining investor hopes a rebound in tech spending would filter through to Xerox's equipment sales.

"Investors might have expected higher year-over-year growth on equipment sales in the technology business, especially if they had drawn some parallels with IBM's positive results," Gabelli & Company's Susanto said.

Last week, IBM's strong results raised optimism that global companies were becoming confident enough to spend more on technology. [ID:nN18146899]

Xerox, which competes with Japan's Ricoh Co Ltd (7752.T) and Hewlett-Packard Co <HPQ.N, posted a 42 percent rise in revenue to $5.98 billion from $4.22 billion a year earlier.

Its fourth-quarter net income fell to $171 million, or 12 cents a share.

Excluding costs for restructuring charges and acquisitions, the company's adjusted EPS was 29 cents a share, which beat analysts' average estimates by a penny, according to Thomson-Reuters I/B/E/S.

(Reporting by Liana B. Baker; editing by Derek Caney, Dave Zimmerman and Andre Grenon)