Xerox Corporation (XRX) recently bagged a five-year contract worth $103 million from the U.S Department of Defense.
As per the contract, the company will offer improved technology to the U.S Department of Defense in a bid to reduce costs. The Department of Defense has been an important client for Xerox for more than 40 years.
According to the terms of the contract, Xerox will manage the in-house printing of the Defense Logistics Agency (DLA) Document Services. DLA will also have access to Xerox’s latest document management technology, and Xerox products will be available to all the DLA facilities nationwide. On the other hand, the contract is expected to generate substantial revenues for Xerox over the period.
In the past few quarters, Xerox has made aggressive efforts to sustain its business position worldwide. Apart from its efforts to win contracts from various enterprises, Xerox has pursued a number of acquisitions in the current year, aimed at capitalizing on the growing markets (both domestic and foreign) in order to strengthen its financial performance in the upcoming quarters.
Some important acquisitions include Xerographic Solutions, Education Sales and Marketing, LLC, Midwest Business Solutions Inc., Premier Office Equipment Inc., United Business Solutions, Florida Imaging & Network Systems and Bennett’s Business Systems, Inc.
Even during the last week, Xerox announced the acquisition of Italy-based, multi-lingual customer care firm XL World in an attempt to enhance the company’s European language services to support call center and business process operations.
In the last reported quarter, Xerox reported an adjusted net income of $393 million or 27 cents per share compared with $342 million or 24 cents per share in the year-ago quarter. Revenues increased marginally by 2% year over year to $5.61 billion, driven by lower sales. The company expects to witness a better performance going forward based on its efforts to expand its business, particularly Business Process Outsourcing.
Consequently, Xerox has projected adjusted earnings in the range of $1.07 to $1.12 per share for fiscal 2011. However, intensifying competition and availability of substitutes for the company’s products have been challenges.
Thus, we reiterate our long-term “Neutral” recommendation on Xerox Corp.
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