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Xerox sees bleak 2009

Low expectations lowered

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Xerox announced Friday morning that it was lowering its expectations for first-quarter 2009 earnings by 69 to 85 per cent. Its share price immediately took a 20 per cent hit, but struggled back by five per cent in time for lunch in New York.

Xerox's January and February revenue dropped 18 per cent due to slumping sales of equipment and printer-based supplies - although 5 per cent of the decline is due to what the company calls a "5 point currency impact."

The stronger US dollar has had a detrimental impact on many US companies' worldwide sales. However, Wednesday's announcement by the US Federal Reserve that it was going to pump over $1 trillion into the economy in an effort to slow the Meltdown has put the brakes on that trend.

The reason for Xerox's lowered expectations is obvious: Business buying is depressed worldwide - or, as the company puts it, there's been an "industry-wide slowdown in technology spending."

Xerox doesn't see things getting much better in the near term. In a statement, the company's chairman and CEO, Anne Mulcahy, said that "We expect that enterprise spending on technology will continue to decline this year."

As Reuters points out, less-than-encouraging words are being heard from "household names," citing news this week that FedEx's per-share earnings had dropped 75 per cent year-on-year and that Nike's per-share earnings had slumped by 46 per cent during the same period.

Although the US market may have enjoyed a mild rally in the past two weeks, the coming wave of earnings reports may remind us all of Alan Greenspan's warning against "irrational exuberance." ®

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