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Xerox eyes asset sales
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October 3, 2000: 11:27 a.m. ET
Allaire tries to assuage Wall Street concerns after another warning
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NEW YORK (CNNfn) - Xerox Corp. Chairman Paul Allaire said Tuesday the company is considering "significant" asset sales, a day after the world's largest copier maker said it will post a loss instead of the profit Wall Street had expected for the third quarter.
 But that news did little to placate investors who continued to shed Xerox (XRX: Research, Estimates) stock, pushing it down $3.31 to a new 52-week low of $12.00 Tuesday. Consecutive earnings warnings and a declining officer copier business have pummeled Xerox stock, which was trading at about $45 a year ago.
"We're looking across the board at asset dispositions. We are talking about very significant asset dispositions to (try) to improve the strength of the balance sheet," Allaire told Wall Street analysts, adding that the company's investment in inkjet printers is among those under scrutiny.
Allaire, who is trying to shift the company away from its troubled copier business to computer printers and associated businesses, provided scant details about which assets will be sold. But he did say the company probably will leave its color products business alone.
"We are looking at everything and are looking at options we have associated with that investment," Allaire said. "We will continue to focus on things like color. We think that's a real advantage and a market opportunity for us... but you should not expect to see a change on color."
He made the comments in a conference call with analysts a day after Xerox said it expects a third-quarter loss of 15 cents to 20 cents a share, compared with a 12-cent-a-share profit forecast by Wall Street analysts. It was the fourth earnings warning the Stamford, Conn.-based company has issued in the last five quarters.
Allaire said he will provide more details when the company reports its third-quarter earnings later this month.
Carol Sabbagha, a Lehman Bros. Analyst, said Xerox has not even hinted at which units might be for sale, but said its smaller, fledgling inkjet printer business or one of its finance units would make the most sense as opposed to color products.
One asset she said is highly unlikely to go is the company's high-end Docutech printer business, which caters to the production market.
"That's one of the major drivers to their sales and profits for the 1990s," Sabbagha said, adding that the middle-market office copier business also probably would not go because of possible objections from competitors Canon and Ricoh.
Sabbagha and other analysts are skeptical about Wall Street rumors of a possibly buyout of the company by computer maker Hewlett Packard (HWP: Research, Estimates).
Analysts said HP probably would not be interested in Xerox because of its steady decline and because HP's hands are full with its potential $18 billion acquisition of PriceWaterhouse Cooper's global management and technology consulting business.
"Xerox would present such an unfathomable integration challenge," Toni Sacconaghi, an analyst with Sanford C. Bernstein said. "Really, when you think about it, Xerox would like to be more like HP. The page volume is moving more to printers, and you wonder why HP would effectively want to take on a business that's principally in decline when they effectively have a business that's increasing."
Sabbagha also added that Xerox's tremendous debt would probably preclude it from an outright sale of the company. Rather, she believes it will sell off pieces.
Xerox President Anne Mulcahy said the company has no plans to reduce the sales force, but indicated that better training is taking place, since
customer service in the company's high-end businesses is one of the reasons for the earnings shortfall.
She also said the company is taking a three-pronged approach as it refocuses on the printer business, That approach includes reviewing dividends, improving cash flow and the balance sheet, and resizing the company. 
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Xerox
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