Xerox posts a surprise Q2 profit

NEW YORK JULY 26. Copier maker Xerox Corp. on Thursday posted a surprising second-quarter net profit, aided by robust margins and aggressive cost-cutting efforts, in its first quarterly report since Federal regulators pressured the company to change its accounting practices.

The results helped boost Xerox shares move up by as much as 20 per cent. The surprise profit was driven by strong margins, and comes as the company emerges from a shroud of scrutiny by the Securities and Exchange Commission, which earlier this year charged Xerox with using accounting tricks to distort financial results from 1997 through 2000. Xerox agreed to pay a $10 million penalty and restate its results, but did not admit or deny any wrongdoing. (The quarter) was about gross margin improvements, which is reflective of new products being introduced and being focused on getting a better bang for each buck of revenue,'' Xerox Chief Executive Anne Mulcahy told Reuters.

Xerox has struggled in recent years amid slumping sales, increased competition, and a host of troubles, including the allegations of accounting irregularities and worker discrimination suits.

Under Ms. Mulcahy's leadership, Xerox has shed billions in costs and assets, and worked to set the company back on track. Perhaps in response to the increased concerns about executive responsibility, Ms. Mulcahy repeated on a conference call that the SEC investigation is officially closed.

"Xerox, the company, has settled with the SEC,'' she said. "We put this issue behind us and are moving on.''

The results were the second significant hurdle in as many months for Xerox, which only a year ago suffered from speculation that it might be nearing bankruptcy due to its hefty debt load. In June, Xerox refinanced $7 billion in debt with with 57 banks related to its revolving credit agreement.


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