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Xerox to restructure?
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March 28, 2000: 2:36 p.m. ET
Analysts expect Xerox to cut jobs, take $600 million-to-$900 million charge
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NEW YORK (CNNfn) - Office equipment giant Xerox Corp. will announce later this week that it will cut 3,000-to-5,000 jobs to reduce costs, and take a pretax, first-quarter charge of $600 million to $900 million, Wall Street analysts said on Tuesday.
"I am expecting shortly an announcement that Xerox will be announcing a restructuring charge, probably about $600 million, and I expect to hear about jobs being cut in manufacturing, possibly up to 3,000 jobs (in the United States and Europe)," said Ben Reitzes, analyst at PaineWebber Inc.
Xerox (XRX: Research, Estimates), which is based in Stamford, Conn., is the world's No. 1 copier maker, with 1999 revenue of $19.2 billion and 94,500 employees around the world at the end of last year.
"The company has indicated (the charge) will be less than the $1.1 billion that was taken in early 1998, which involved 10,000 (job cuts)," said Jack Kelly, managing director at Goldman Sachs.
"The question is, what does 'less' mean? I think (analysts) have coalesced around the $600 million-to-$900 million area."
Kelly said that while up to 5,000 jobs might be cut, about half of the restructuring charge is likely to involve asset writedowns, including some plant closings.
A Rochester, N.Y.-based spokesman for Xerox said the company has previously said it might announce a restructuring, and refused to comment on the precise details provided by analysts.
"We had said that we would be doing a restructuring this year, likely in the first quarter, and that is as specific as we have been about it," the spokesman said.
On Monday, the company reiterated in federal documents that it planned to reveal the details of its restructuring -- first announced on Jan. 25 -- by April 1.
"We anticipate that a substantial restructuring charge ... will be recorded most likely in the first quarter of 2000," Xerox said in a filing with the Securities and Exchange Commission. "The ultimate restructuring charge is expected to include employee termination expenses and closure costs ..." Xerox said.
Xerox also revealed that as a result of its $925 million acquisition of the Color Printing and Imaging Division of Tektronix, it would take a first quarter acquired in-process research and development charge of $25 million.
Xerox shares were stable on Tuesday afternoon, staying unchanged at 26-15/16 on the New York Stock Exchange.
 Despite its mighty brand name, Xerox has been plagued by strategic missteps and intensifying competition, with its share price plummeting from $64 last May.
The company began reorganizing its sales force a year ago, organizing it along product and industry lines instead of geographic boundaries. The shift was meant to sell copiers, software and consulting services as a package.
"Xerox has pretty much stepped on its own toes in a way, by implementing a number of restructurings all at one time last year," said James Corridore, analyst at Standard & Poor's Equity Group.
"At the same time, they were seeing increased competition from some of their competitors like Canon (Inc.), Ricoh (Co. Ltd.) and Sharp (Corp.) with better products," he said.
Corridore expects the Xerox charge to fall near the high end of expectations.
"They want to make sure they can get it right this time, because people are losing patience with the restructuring programs that have been going on there, and this will probably be the last leeway that analysts and investors get them in terms of allowing them to just go ahead and restructure all the time," he said.
Corridore reiterated his "hold" rating on the stock.
The Xerox restructuring may also involve some repositioning of Internet assets, such as its ContentGuard.com, digital content rights-management product family, Reitzes said. He noted that the value of Xerox Internet & Software Solutions is not reflected in the company's current share price.
"I think the stock is modestly undervalued," said Reitzes, who on Feb. 14 upgraded Xerox to "attractive" from "neutral."
"Xerox is a blue chip in the office-equipment sector; there's still value money out there that needs to chase some depressed technology companies," Reitzes said. "Xerox is in a position where, if they can put together a good plan and start to rekindle its relations with Wall Street right now, you could see the stock go up from here."
Added Kelly, "I think the (brand) franchise is very much intact. However, I think they have to start performing."
Xerox is expected to release its first quarter financial results on April 25, the spokesman said. 
-- from staff and wire reports
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