Xerox ( XRX) swung to a profit as an asset sale and a reduced research and development expense helped leverage a 2% rise in sales from a year ago.

Xerox earned $248 million, or 25 cents a share, in the latest quarter compared with a loss of $65 million, or 10 cents a share, last year. On a continuing operations basis that excludes proceeds from the sale of ContentGuard, Xerox earned $165 million, or 17 cents a share. Revenue was $3.83 billion in the latest quarter compared with $3.76 billion a year ago.

Analysts surveyed by Thomson First Call had been forecasting earnings of 15 cents a share on revenue of $3.76 billion in the 2004 quarter. The shares were recently up 59 cents, or 4%, to $15 on the Instinet premarket session.

While revenue grew 2%, the top line was juiced by a 5-percentage-point benefit related to currency translation. Xerox also saw an 11% year-over-year jump in cost of sales to $1.11 billion and only had its expense side salvaged by the absence of a $300 million litigation expense in the year-ago quarter and an R&D budget that fell 18% to $193 million.

"Revenue growth continued to be impacted by post-sale revenue declines from the company's older light lens technology," the company said in a release. "The overall post-sale trend continued to improve as the revenue stream from new digital systems and services increasingly offsets declines from light lens."

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