Xerox Corp. (NYSE: XRX) announced Friday morning that the company will stop throwing good money after bad and discontinue investing in one of its health care programs and concentrate more effort on its existing software. The charge will total approximately $145 million (or $0.09 a share after tax) and will result in second-quarter earnings of $0.09 to $0.11 per share.
Analysts were forecasting earnings of $0.22 per share, and the company’s own guidance called for earnings in a range of $0.21 to $0.23 per share. Ursula Burns, the company’s CEO, said:
We continue to refine our strategy and take the necessary actions to position our Services business for better revenue growth and margin improvement. These changes to our Health Enterprise platform strategy will enable us to improve execution. We will continue to offer and deliver a broad array of other government healthcare solutions and services to existing and future clients.
Translation: We’ve spent too much money on a business that offers too little return and now we’re going to stop.
In the first quarter of this year, the company’s Health Enterprise platform took most of the blame for a 1.1% drop in the Services division margin. Revenues in the Services division were down 3% as well.
Shares of Xerox traded up about 0.4% to $10.65 in the late morning Friday, in a 52-week range of $10.24 to $14.36. The consensus price target on the shares is $13.52.
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