STAMFORD, Conn., - Xerox Corporation (NYSE: XRX) today announced a third quarter loss of 20 cents per share, before an incremental 6 cent charge related to its Mexican subsidiary. The company also outlined an aggressive turnaround program that includes cutting $1 billion in costs, asset dispositions that are expected to raise $2 billion to $4 billion, and strengthening the company's strategic core. "It is clear that just fixing our operational issues, although critical, is not sufficient. We must fundamentally resize our cost base, cut our investment levels and significantly improve our balance sheet with asset sales and alternative means of providing customer financing," said Paul A. Allaire, Xerox chairman and CEO. "None of these efforts will compromise our core strategy, each will contribute to our turnaround and all are designed to enhance value for all stakeholders - customers, credit providers, shareholders and employees." Third Quarter Highlights Third quarter revenue was $4.5 billion, 4 percent lower than the 1999 third quarter. Pre-currency revenue declined 1 percent. Including a $55 million pre-tax provision associated with the company's previously announced issues in Mexico, the third quarter net loss was $167 million. No additional provisions related to Mexico are anticipated. Equipment sales in the quarter were weak primarily in North America, and particularly in the high end of the business due to open sales territories, less experienced sales people and increased competitive pressure, which also affected gross margins. However, the company's color product lineup turned in an outstanding performance with color revenue advancing 74 percent, led by the DocuColor 2060 and DocuColor 2045 Digital Color Presses, strong placements of the DocuColor 12 and Document Centre ColorSeries 50 digital multifunction products, excellent growth in desktop inkjet printers from initial shipments of the company's new DocuPrint M series products, and the inclusion of the Phaser line of color printers. Color revenues represented 16 percent of the third quarter revenue, up from 9 percent in the third quarter last year. Turnaround Program Detailed Xerox also outlined a wide-ranging plan to sell assets, cut costs and strengthen its strategic core. The company said it is exploring alternatives to provide financing for customers in a manner that does not involve the Xerox balance sheet. Over time, the company will exit the equipment financing business, but continue to ensure that service is provided to its customers. Xerox revealed that it was also actively engaged in discussions to sell a range of assets that includes: the company's China operations, a portion of the Xerox ownership in Fuji Xerox, Xerox Engineering Systems, and its interest in spin-off companies such as ContentGuard and Inxight. Xerox said it was talking with a number of parties to make a significant equity investment in its inkjet business and was exploring a joint venture with non-competitive partners for its storied Palo Alto Research Center. The company also said it would outsource or sell certain manufacturing operations. "The combination of all of these actions - the previously announced dividend reduction, the focus on operational cash, the asset dispositions and financing options will significantly strengthen the balance sheet, and reduce our debt level," said Allaire. "This will sharpen our competitive edge, deliver the superior products and services that our customers require, and generate the value that our credit providers and shareholders require." Xerox also detailed steps designed to reduce costs by $1 billion in 2001. "Our actions are centered on improved cash flow and profitability - and at the same time strengthening our strategic core," said Anne M. Mulcahy, president and chief operating officer. "These actions will be implemented in a disciplined and controlled manner, but we are moving forward with a sense of urgency." The plan mandates drastic cuts by: The company will re-allocate research and development efforts to underpin growth opportunities in solutions and color, work more closely with Fuji Xerox to eliminate R&D redundancies and scrutinize all programs based on their affordability and future profitability. Mulcahy said the company would focus most of its direct-sales and document outsourcing resources to the high-end, high-value solutions and services business, using more efficient channels to deliver a greater range of products to customers in the digital office, reducing selling costs. "This plan provides Xerox with a strong financial foundation, to build on the unique strengths inherent in our brand, market position, technology, people and leadership team," Mulcahy said. Xerox reiterated that it has adequate liquidity, including unutilized capacity under its $7 billion revolving credit agreement, and that it is in compliance with all of its covenants.