By Steven Schnoll February 10, 2005 -- Xerox Corporation (NYSE: XRX) announced fourth quarter earnings of $226 million or $0.24 a share up 14.7% compared to $197 million or $0.22 per share for the same period in 2003. Xerox Chairman and CEO Anne Mulchay related, “… we delivered another quarter –and another year-of earnings growth, driven by a rich portfolio and a lean business model.” Total revenue for 2004 was $15.7 billion unchanged from 2003. Net income for the year was $859 million or $0.86 per share. Most significantly revenue from color products was up 21% for the quarter. Topics of this summary: Company Performance Overview Guidance Raine Radar Q & A Company Performance Xerox reported that fourth quarter revenues were up 1% from $4.29 billion in 2003 to $4.33 billion in 2004. Weak performance in Brazil hurt the overall sales effort in the fourth quarter. The Mulchay turnaround plan, instituted over the past few years, has turned nay-sayers to believers. With 40 new product introductions in 2004, a 25% increase in Global Services and a return to profitability the company is running at an awesome pace. Fourth quarter revenue in the digital and value added services arena grew 5% and now represents almost 76% of the company’s total revenue. Mulchay was proud to announce that the company reached the 350 installed milestone for the iGen3. It also proclaimed that over 8 billion color pages have been produced to date on color production engines. Post sale and financing revenue for the quarter represented a 70% growth as a percentage of revenue The company continues to deliver strong results in Xerox Global Services, the consulting side of document management, with double digit growth. A recent $40 million contract with Barclays Plc demonstrates the power and strength Xerox brings to document management. The company continues to do a good job of managing cash as seen by the announcement of $3.2 billion in cash or cash equivalents on hand. This represents a $741 million increase. Guidance For the first quarter of 2005 the company expects earnings in the range of $0.17 to $0.20 per share with full year earnings in the $0.90 to $1.00 range Raine Radar Anne Mulchay continues to prove that she is one of the most effective CEO’s in business today and she is pulling the stodgy old printing industry kicking and screaming along with her. She is making many printing veterans who in past years wouldn’t even let a Xerox sales rep in the door think twice about this former copier company. While cross-town rival Kodak starts to assemble an impressive array of equipment and services, they are playing catch-up. HP/Indigo on the other hand is mired in the Compaq quagmire and has not breathed any new life into the Indigo division. Right now Xerox is out in front and is not resting on any lead. They are already announcing impressive introductions for 2005 the US debut of Nuvera and the coating product introduction on the iGen3, to highlight two significant ones, will bring a smile to the most discerning printer. While it looked like a cross-country race of fillies it is now an in state two horse race between two well bred New York horses. The real winners will be the graphic professionals who embrace all that is offered. Q & A Earnings in the first half of 2005 will be influenced by all the new product launchings. Should see most of the improvement in the second half of year. Post Sales revenue of a 3-t-1 ratio will drive margins. Color trending upward from 4% to 6 % of total portfolio. Will show double digit growth in installs. Page volume, 7% decline in B/W and 8 billion pages in color produced. Igen3 driving page growth and revenue per page. Two-tier system in Brazil should improve the DMO market. Rest of DMO market showing improvement. Equipment sales fell off due to outstanding performance of iGen3 and delay of Nuvera introduction. Price pressure in color equipment sales is high, but consumables more than compensate. Strength is in high end office color. Accounts receivables days outstanding keeps improving but new equipment sales should impact that number. Average number of pages produced in a month on iGen3 is now over 400,000. Very happy over the launch of DocuColor 8000. Company feels they have the best equipment portfolio in marketplace.