The company said that currency fluctuations, distributors lowering inventories and weakening economies impacted its results, and warned that its outlook for the first quarter of 2009 would be lower than analyst predictions.

Xerox chief executive Anne Mulcahy said: "We continue to prioritise cash and productivity to give us flexibility in this uncertain environment. We believe our strong balance sheet and disciplined approach to cost reductions strengthen our ability to effectively manage through these tough economic times."

Xerox shares fell on the news but recovered quickly to trade at around the $7 mark.

The company's production business showed a 13% decline in revenues for the fourth quarter with equipment sales revenue down 17%, led by an 11% drop in black and white sales. However, revenues from the sale of colour production presses such as the iGen4 and the 700 were up 4%.

Post sales revenues were down 8% for the quarter, with supplies, paper and other sales of $850m down 11% year on year.

Xerox Global Services also revealed full year growth of 3%, bringing in $3.5bn in annuity revenues.

The figures also revealed bad debt expenses almost doubling - a $39m increase put the cost at $80m. This was down to "an increase in write-offs, including several high value account bankruptcies in the US, UK and Germany".