New York: Office equipment-maker Xerox Corporation has reported a surprise profit, before unusual items, for the 2001 fourth quarter. The company said it was confident of a profit for the full year 2002 due to a reorganisation and cost cutting, reports said.

The corporation said profits in North America increased in the quarter and its European business also posted a profit. Investors smiled on the report, sending Xerox shares to close up $1.34, or 13.54 per cent, to $11.24 on the New York Stock Exchange.

"Whichever way you look at it, it was a better quarter than expected," says Lehman Brothers analyst Carol Sabbagha, who said Xerox's gross margin at 38.3 per cent in the fourth quarter was up 3.2 percentage points from a year earlier and beat analysts forecasts.

Excluding restructuring charges and the effect of currency translation, Xerox posted a fourth-quarter profit of 15 cents a share. Analysts consensus forecast was a loss of 1 cent a share, with estimates ranging from a loss of 6 cents to a profit of 6 cents, according to Thomson Financial/First Call. Fourth-quarter revenues were $4.3 billion, down 13 per cent from $4.9 billion a year earlier.

The Stamford-based Xerox reported a net loss of $4 million, or 1 cent a share, compared with a net loss of $20 million, or 4 cents a share, a year earlier. Xerox chief executive Anne Mulcahy said, decisions to exit certain businesses and cut costs "resulted in the strong performance delivered in the fourth quarter, including increased gross margins ... reduction of inventory to historically low levels, and improved receivables. The outcome is a return to operational profitability, representative of the new Xerox that is emerging from our successful turnaround."

Facing a mound of debt and steady losses, Xerox known best for its photocopy machines and printers, last year moves to cut annual costs by $1.1 billion, selling or transferring certain manufacturing operations and eliminating 13,600 jobs. For the full year 2001, Xerox reported a net loss of $293 million, or 43 cents a share, on revenues of $16.5 billion. Revenues were $18.7 billion in 2000.

Xerox has struggled in recent years amid slumping sales, increased competition and allegations of accounting irregularities. But under the guidance of new CEO Mulcahy, the company and its stock price have rebounded amid growing sentiment that the turnaround is taking hold.

Mulcahy noted that for the fourth quarter, the weak economy hurt revenues, especially in high-end and colour products. But the decision to walk away from businesses that weaken the company's bottomline and to pursue profitable growth opportunities is beginning to pay off. Since 19 November 2001, when Mulcahy outlined her forecast for a 2002 profit, Xerox shares have risen some 35 per cent and have outperformed the S&P 500 index by about 37 per cent.

The company said its current cash position has increased to $4.5 billion, and the net debt for the fourth quarter was down $4.1 billion from 31 December 2000, a 25-per cent reduction. "Xerox's strengthened financial position is an important factor in our active negotiations with the bank group to refinance a portion of the revolver and to extend its maturity," Mulcahy said in reference to the companys $7-billion revolving line of credit.

Looking ahead, Xerox said it is comfortable with analysts first-quarter earnings forecasts and has confidence in its plan to deliver a profit for the full year 2002. Revenues are expected to decline in the first quarter due to seasonal factors, it said. Analysts have predicted first-quarter results ranging from a loss of 3 cents a share to breakeven. For 2002, they see Xerox turning a profit of about 28 cents a share.