Xerox Corp. XRX.N on Friday it expects a wider-than-expected third-quarter loss, but remains "cautiously" optimistic about fourth-quarter profitability, after the Sept. 11 attacks hurt sales and set off a litany of unusual expenses for copier and printer giant. 
Stamford, Connecticut-based Xerox, best known for its office photocopiers, said it expects third-quarter revenues of $3.8 billion to $4 billion and a loss of 22 cents a share to 25 cents a share before restructuring charges of 5 cents a share. 
Wall Street analysts, on average, were expecting the company to post a third-quarter loss of 12 cents a share and revenues of $3.94 billion, according to Thomson Financial/First Call. The company is slated to report results on Oct. 23. 
Shares of Xerox edged lower in early trade on Friday, dipping 24 cents, or about 3 percent, to $7.90, on volume of about 900,000. 
Xerox cited several factors for the shortfall, including a reduction of about 9 cents due to currency losses from unhedged exposures, a tax rate change, and a property insurance deductible related to losses from the Sept. 11 attacks on the World Trade Center and the Pentagon. 
"In many regards, Xerox's performance in July and August exceeded expectations and we were well positioned to meet our third-quarter targets," said Anne Mulcahy, Xerox chief executive, in a statement. "However, the events of Sept. 11 resulted in a significant impact on sales for the balance of the month -- typically the strongest two weeks of the quarter." 
She added that Xerox remains cautiously optimistic about fourth-quarter operating profitability given further progress in the company's cost-cutting efforts. 
"We continue to aggressively implement our cost-reduction initiatives and focus on operational improvements," she added. "With further progress expected in these areas, we remain cautiously optimistic for a return to operational profitability in the fourth quarter," added Mulcahy. 
The company, which has diligently this year worked on a turnaround plan aimed at selling assets and cutting billions in costs, has for months fostered confidence among investors built upon its hope of showing a profit in the year's final quarter. 
But in recent weeks, Wall Street analysts, while commending the company for implementing its turnaround plan, said Xerox might find it hard to hit its targets in the face of the complex and weak economic environment and tough competition. 
"Seeing very strong execution on turn-around initiatives so far, we continue to rate shares of Xerox (at "outperform,") said Salomon Smith Barney analyst Jonathan Rosenzweig in a recent note to clients. 
"That said, we are inclined to remain a bit more cautious ahead of the third quarter release given a high degree of uncertainty over the impact which macro conditions might have on management's target for revenues and Q4 profitability," he said. 
The company, which is under investigation for alleged accounting irregularities in Mexico, also said in a statement that it was in compliance with debt covenants and had $2.4 billion in cash as of Sept. 30. 
Earlier this month, Xerox replaced its accountant in a move that analysts said was part of the company's efforts to make a fresh start after past problems. The company has been trying to fix its troubled core operations while contending with questions about its books.