Copier equipment giant Xerox Corp has predicted a 10 to 12 per cent drop in earnings per share for the third quarter on flat revenues because of lower than expected sales in Europe and the United States.

Xerox's earnings shortfall compares with the 53 cents per share reported in the year-ago period on sales of $4.6 billion. Analysts had expected earnings of 58 cents per share.

The company's forecast would translate into lower third-quarter earnings of around 47 cents to 48 cents per diluted share.

The copier and printer maker said the shortfall resulted from a combination of weaker revenues, unfavourable product mix and increased competitive pressures.

The productivity of the Xerox sales force, especially in the United States, was affected by a continuing move to sell the company's copiers, printers and services along industry lines rather than geographic ones and by efforts to realign sales teams accordingly, the company said.

"Today's announcement is clearly disappointing," Xerox's president and chief executive, Mr Rick Thoman, said.

"However, we are convinced that our strategy of focusing on industry solutions, a broader array of distribution channels and an expanding product and services portfolio is correct," he said.

Xerox has committed some £360 million (€457.10 million) to create 3,500 jobs by 2003 at its technology park in Dundalk, Co Louth, and at its European customer service centre in Blanchardstown, Co Dublin. While a Xerox spokeswoman in Dublin said she could not comment on the profit warning, she said there was no relationship between yesterday's statement and its Irish investment. "The investment in Ireland is long-term, strategic and on plan," she said.

Last month, influential Prudential Securities analyst Mr Alex Henderson had warned that sales force changes could thwart growth through the middle of next year. "The situation there has obviously deteriorated," Mr Henderson said yesterday morning, noting that the company had just three weeks ago predicted 3 to 4 per cent revenue growth for the quarter. "Obviously they didn't get there," he said.

In response, Mr Henderson cut his earnings estimates for the years 1999 and 2000. He also lowered his rating advice to clients to "accumulate" from "buy" on the stock, noting that this had been a foregone conclusion after he slashed revenue estimates and price targets several weeks ago.