First profitable year for Xerox since 1999

Xerox’s 4Q 2002 profits were $19 million/$0.01 per share, compared with a net loss of $140 million/($0.19) a share for 4Q 2001. Had it not been for restructuring charges and a one-time tax benefit, Xerox would have posted a 24 cent per share profit. For the full year 2002, Xerox had net earnings of $91 million/$0.02 per share, including restructuring charges of $470 million, a marked contrast to the company’s dismal record of a net loss of $94 million/($0.15) per share for the full year 2001.

Xerox’s results for sales were not as good. Fourth-quarter sales were $4.24 billion, down from

$4.38 billion in 4Q 2001. Full-year sales for 2002 were $15.85 billion, down 7 percent from 2001. But investors said they expected the declines in sales while Xerox is improving its manufacturing

efficiency and switching to making more profitable machines such as lower-priced office copiers and

color printers. Brian Eisenbarth, a fund manager with Davidson Investment Advisors, which owns about 980,000 shares of Xerox stock, said he now feels more confident about Xerox’s future. "They are getting toward the end of their restructuring and all the cost savings they can find have been found. They need to get some market share back now and that will get them some top line revenue growth, which will make earnings rebound. And the stock price will take care of itself."