NEW YORK, Oct 22 (Reuters) - Xerox Corp's quarterly profit was halved, underscoring the slowdown in office equipment spending, although cost cuts helped the company beat Wall Street expectations.
Shares of Xerox climbed about 2 percent on Thursday after it said that while customers are still hesitant to buy new equipment, they are signing up for Xerox's services that help clients identify ways to trim their own costs.
The results were the first for Xerox since it offered last month to buy Affiliated Computer Services in a surprise deal aimed at moving Xerox into the business of managing back office systems and providing technology services.
"I think 2009 was going to be a challenging year no matter what for Xerox, and its reasonable to expect to that 2010 will be better after the deal," said Susquehanna International Group analyst Stephen Velgot.
The cash-and-stock deal -- Xerox's biggest ever -- is valued at around $5.5 billion. It is among the latest in the technology services sector, where reliable revenue streams have attracted hardware vendors looking to diversify, as customers think twice about big-ticket items like high-end printers.
Xerox, which boosted its 2009 outlook, said third quarter net income was $123 million, or 14 cents a share, compared with $258 million, or 29 cents a share, one year earlier.
Analysts had expected a profit of 12 cents a share, according to according to Thomson Reuters I/B/E/S.
Total revenue at the world's No. 1 supplier of digital printer and document management services declined 16 percent to $3.68 billion, beating Wall Street estimates of $3.63 billion.
But Xerox also recorded a 15 percent reduction in costs, which led to an improvement in the company's gross margin.
Shares of the company, whose rivals include Hewlett-Packard Co, and Canon Inc, were up 18 cents at $7.90 on the New York Stock Exchange.
(Reporting by Franklin Paul; Editing by Derek Caney) (To read more about our Media news, visit out MediaFile blog online at http://blogs.reuters.com/mediafile) Keywords: XEROX/

(Email: Franklin.Paul@thomsonreuters.com; +1 646 223 6195; Reuters Messaging: Franklin.Paul.reuters.com@reuters.net)

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