Xerox Turnaround Continues to Collapse

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Xerox (NYSE: XRX) disclosed two important sets of information recently. The first is that long-time CEO Ursula Burns received another huge compensation package — in this case for 2013. The second was that first-quarter 2014 earnings were poor, and the figures will continue to be poor for the balance of the year.

Burns was paid $10.3 million last year, on top of $13 million in 2012 and $12.9 million in 2011.

Xerox is off to a bad start this year. Burns has been promising improvement for the past four years, as the company is supposed to evolve from a document-based operation to one driven by services. However, total revenue at Xerox dropped 2% in the first quarter from the same period last year to $5.1 billion. The critical services revenue was flat in the quarter. Document technology revenue dropped 4% to 5%. So, it is impossible to characterize the services operation as a growing success.

Net income performance was also poor and fell at a greater rate than revenue, off 5% to $281 million.

Management comments about the near-term and long-term future were grim:

As a result of increased implementation costs in government healthcare, the company is lowering its guidance for both full-year Services segment margin and 2014 earnings. Second-quarter 2014 GAAP earnings per share is expected to be 21 to 23 cents per share. Second-quarter adjusted EPS is expected to be 25 to 27 cents.

The company expects full-year 2014 GAAP earnings per share of 90 to 96 cents and full-year adjusted EPS of $1.07 to $1.13.

The plan for services revenue to drag Xerox out of its hole has been deferred yet one more year.

SEE ALSO: Time for Xerox Board to Fire CEO Burns

Burns continues to try to focus investor attention on her Five-Plank Strategy to push resources toward attractive “verticals,” improve the presence of revenue from services, put better customer care in place, leverage low-cost labor and carefully track results to focus on higher margin operations.

She said, in the press release for first-quarter earnings:

We’re focused on driving Services growth and margin improvement by executing on our Five-Plank Strategy and expect the benefits to build through 2014.

The plan has not worked, and there is no evidence it will in 2014.