Xerox Inflated Revenue Reports by $1.9 Billion
Xerox, once the top company of the copier industry, said that its 2001 annual report will restate some $6 billion in sales from 1997 to 2001. The reduced sales will be offset by $5.1 billion in revenues that will now be reported for the same period as resulting from service, equipment leasing, document outsourcing and other sources.
“There’s no revenue going away,” said Xerox spokeswoman Christa Carone, “It’s just going from one place [in Xerox's books] to another. There were no fictitious transactions and the amount of cash that we are talking about doesn’t change in terms of the leases — it is revenue shifting from one period to another.”
The restatement was expected as part of a settlement of charges filed by the Securities and Exchange Commission in April. The SEC had charged Xerox with accounting improprieties and defrauding investors by disguising the company’s true revenue performance.
Xerox neither accepted nor denied fault in the charges but instead agreed to recalculate past results through a new audit. The company also paid a $10 million penalty fee to settle the case.
An SEC spokesman declined to comment Friday on the Xerox restatement.
PricewatershouseCoopers LLP, which took over as Xerox’s auditor last October after the company fired KPMG LLP, prepared the revised numbers. KPMG said Friday that it stands by its past audit of Xerox and that the restatement defied “economic reality.”
The announcement further rattled investors already shaken by the disclosure of a $3.85 billion accounting scandal revealed earlier this week by telecom giant WorldCom and the earlier collapse of Enron.
Despite the reports, Wall Street seemed to welcome the news. A subsequent drop in Xerox’s stock price on Friday prompted Merrill Lunch to change it’s rating of Xerox stock from “sell” to “neutral.”