Xerox Buys Breakaway Group

Xerox Corp. (XRX - Analyst Report) recently announced that one of its fully owned subsidiaries, Affiliated Computer Services (ACS), has acquired The Breakaway Group with the sole intent of expanding its electronic medical records business.  The terms of the deal along with its financial terms remain undisclosed.

Denver-based The Breakaway Group is a cloud-computing company which offers a technology called PromisePoint. Alongside the popular training program it provides, it helps healthcare professionals to learn the usage of electronic methods and adopt the updated versions of Electronic Medical Records (EMR) in a simulated environment.

According to Xerox, the acquisition will enable the company’s medical industry clients to improve and customize their record systems for different hospitals, patients and doctors, without risking the actual data set. It will also enable the users to prepare for the forthcoming changes for ICD-10 compliance. As per the estimate put forward, Breakaway Group’s PromisePoint program can expedite the adoption of electronic records by as much as 70%.

Xerox has pursued a number of acquisitions in the current year, all aimed at capitalizing on the growing markets (both domestic and foreign) in order to strengthen its financial performance in the upcoming quarters. Some important acquisitions include Xerographic Solutions, Education Sales and Marketing, LLC, Midwest Business Solutions Inc., Premier Office Equipment Inc., United Business Solutions, Florida Imaging & Network Systems and Innova Consulting.

In the last reported quarter, Xerox earned an adjusted net income of $374 million or 26 cents per share compared with $314 million or 22 cents per share in the year-ago quarter. Revenues increased marginally by 3% year over year to $5.58 billion, driven by higher sales, outsourcing and rentals. The company expects to witness better performance going forward based on its attempt to grow and expand its businesses, particularly its Business Process Outsourcing.

Taking into account its improved financial performance, Xerox has projected adjusted earnings in the range of $1.08 to $1.11 per share for full-year 2011. However, intensifying competition and availability of substitutes for the company’s products have put the company in difficulty.

Thus, the shares of Xerox Corp. are maintaining a Zacks #3 Rank, which translates to a recommendation of “Hold” for the short term (1 to 3 months) and we reiterate our recommendation of “Neutral” for the long term (more than 6 months).

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