Xerox will have an "exceptional" 2002 and is "focused like a laser" on restoring its financial strength, according to president and chief executive Anne Mulcahy.

She told the group's investor conference she was "100% confident" it would return to financial health and grow.

Mulcahy outlined three priorities for Xerox: ensure liquidity through the transfer of equipment financing to external partners and re-negotiate its revolving credit agreement; redefine its business model for developing markets from a market share to a cash and profit focus; and invest in growth by broadening sales coverage and building the Xerox brand.

To help achieve the first objective, GE Capital is to become the primary source of equipment financing for Xerox's Canadian customers, which will secure 245m ($350m) for Xerox.

It has also reached a similar agreement with GE Capital for the UK. GE Capital will pay 320m secured by Xerox's UK lease receivables. And Xerox expected to receive initial funding for a US agreement with GE, announced in September, which would provide 580m.

Xerox also hopes to raise 350m through the offer of redeemable convertible trust preferred securities.

Mulcahy said Xerox expected annual revenue growth of 5-6% and gross margins of 40% by 2005.

However, it is being sued for breach of contract by Zapways. The Californian firm is seeking damages from Xerox for breach of a "strategic co-destiny agreement", which would have seen Zapways create, host and operate a web-based portal for distributing printing projects through Xerox's Premier Partners.

But a Xerox spokesman said Zapways' action was in response to a suit that Xerox launched two months ago. Xerox has taken the project in-house.

Story by Gordon Carson