Xeroxs third-quarter performance met its previously released revenue and loss expectations.

Revenue fell 13% to 2.7bn ($3.9bn), with a loss of 148m. Better than expected figures for July and August were offset by a sharp decline in sales following the 11 September attacks.

"Despite expected revenue declines, results in July and August exceeded expectations evidence of our much improved operations," said president and chief executive Anne Mulcahy.

Revenue fell by 8% to 1bn in the firms production segment, which is responsible for graphic arts products for both colour and black-and-white. It is the seventh consecutive quarter in which revenues from the segment have fallen.

Sales dropped faster in Europe (7%) than in North America (3%). Xerox blamed the economic situation and the introduction of competitive products for the decline in hardware sales. It blamed previous quarters reduced equipment sales for lower consumables and service revenues.

Despite the fall in revenue, the production segments contribution to overall revenue increased from 33% to 35%.

R&D costs for Q3 were 10m higher due to the development of its next-generation digital colour press, the DocuColor iGen3.

Xerox still expects to return to profitability in Q4 as it previously stated. "We remain cautiously optimistic that the benefits from our turnaround programme will position the company for a return to operational profitability," said Mulcahy.

"But the uncertainty in the marketplace presents significant challenges."

Story by Barney Cox