April 21, 2008 - Xerox Corp. (XRX-NYSE) is best known for its color and black-and-white copiers, but it also makes printers, scanners, and fax machines. The company sells document management software and copier supplies, offers such services as consulting and document outsourcing, and holds a stake in a joint venture with Fuji Photo Film called Fuji Xerox. Xerox designs its products for businesses in the financial services, graphic arts, health care, government, and industrial sectors. Customers include FedEx Kinko's and Southern Company.

New products put the company right. About 75% of equipment sales and leases is from new offerings created since 2005, mostly digital color. Color products generate 40% of sales, up 8 percentage points since 2005. Color output from Xerox's current crop of printers is only 14% of total pages printed. That suggests there's plenty of market growth opportunities here. To help expedite that growth, Xerox recently introduced a printer with solid ink technology which significantly lowers the cost of printing color pages.

Another big help: the acquisition of Global Imaging, a company that sells and services document management equipment such as copiers, printers and multi-function devices to small and medium-sized businesses, to the tune of more than $1 billion a year. The company's 1400 sales people didn't add Xerox equipment to their arsenal until the third quarter of 2007. Analysts believe the addition will put 5 cents more to XRX's bottom line in 2008.

Over the next 5 years, predictions are for sales to grow by 6% a year, on average, while earnings increase by 12%, suggesting more efficiencies going forward. In the fourth quarter of last year, sales of supplies and services increased by 12%, year over year. Furthermore management services and supplies showed improved performance. This division has higher margins than equipment sales. To further aid in the bottom line, the company is buying back stock, will pay less in interest, and have lower depreciation charges in 2008.

Other numbers: Current assets are twice current liabilities. Debt is 47% of capital. Return on Equity is a respectable 13%. Foreign sales were 47% of total revenues and contributed 47% of profits. Market cap is $14 billion on 917.177 million shares. Net profit margin was 6.6% in 2007 with expectations of 6.7% this year and 6.9% next year. A dividend of 17 cents started this year.

Xerox is keeping ahead of competition with new products. It's also going after new markets. With $1.5 billion in free cash flow, there is plenty of money to buy back stock and pay a dividend. This company got derailed in the early part of the decade. Now it's back on track and rolling nicely.

- Company Web site: www.xerox.com

- Ted Allrich