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SEC probe hurts Xerox
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June 30, 2000: 3:00 p.m. ET
Shares of office products maker tumble a day after SEC probe disclosed
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NEW YORK (CNNfn) - Shares of Xerox Corp. hit a new five-year low Friday, a day after the company said the U.S. Securities and Exchange Commission is investigating accounting issues related to the company's Mexico business.
In early trading on the New York Stock Exchange, shares of the Stamford, Conn.-based office products maker were off 1 at 18-9/16, the lowest price seen since 1995. Shares since have ticked up 1 to 19-9/16 as of about 3 p.m. ET.
 After the closing bell Thursday, Xerox (XRX: Research, Estimates) disclosed that the SEC is investigating accounting irregularities at Xerox's Mexico operations, which posted $400 million in revenue in 1999. The company employs about 3,000 workers in five Mexican cities.
Xerox operates manufacturing facilities in Mexico in addition to housing sales and service operations, Xerox Spokesman Bill McKee said.
McKee said Xerox has launched its own investigation into its Mexico operations, which it expects to complete and release when it reports second-quarter earnings on July 26.
"Mexico is about a $400 million a year business for us, but total revenue for the company is $19.2 billion, so the overall percentage of the Mexican business is small," McKee said.
"We found some unexpected problems related to our customer receivables in Mexico, which we announced two weeks ago, and we have launched our own thorough internal investigation," Xerox Spokeswoman Christa Carone said Thursday."
The SEC could bring civil action in federal court if it finds irregularities.
While concerned, some analysts do not see the investigation jeopardizing Xerox' statements last quarter that it is on track to reposition itself from a freestanding copier maker into a company that sells digital printers connected to computer networks.
 Over the last year, Xerox has struggled with problems that have hurt earnings and the company's stock, including a realignment of its sales force along industry lines rather than geographic boundaries.
In May, the company asked Chief Executive Officer Rick Thoman to resign after just 13 months on the job, and a month after the company reported a $243 million loss in the first quarter. The loss had been expected following the announcement in March that Xerox would lay off 5,200 employees and close several plants as part of an effort to cut costs and remain competitive with rivals Hewlett-Packard and Canon.
"Mexico was definitely a problem for them last quarter, but all of the strategies that Rick Thoman started are pretty much in place. It's not like everything is completely out the window," said Wendy Abramowitz, an analyst at Argus Research in New York. "They're working toward implementing their strategies, fixing up some of the errors that were within the company. They stated in their recent conference call that things wouldn't happen until closer to the end of the year."
William O'Connor, an analyst at Fourteen Research in New York said he didn't think the Mexico investigation was an earthshaking event.
"It's strange when companies get caught flatfooted. In many cases it's just mistakes that people made. I would be surprised if it was knavery," O'Connor said. After all, given the size of Xerox, and given this Mexico activity, what would the people at Xerox headquarters have to gain? It's things that you don't manage, like the $20 that's missing out of your wallet."
The news came less than two weeks after Xerox warned that its earnings likely will fall short of expectations due to problems with its Mexico operations. 
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Xerox
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