Xerox ( XRX) posted a third-quarter profit and set plans to buy back as much as $500 million in stock.

The Stamford, Conn., digital imaging outfit earned $63 million, or 5 cents a share, in the quarter ended Sept. 30, down from the year-ago $163 million, or 17 cents a share. Revenue rose 1% from a year ago to $3.76 billion. Excluding certain costs, Xerox said latest-quarter earnings were 18 cents a share, in line with Thomson First Call's analyst consensus estimate.

The company said it expects to make 25-29 cents a share for the fourth quarter after a nickel-a-share restructuring charge. Again, that's in line with the Wall Street estimate.

Xerox closed the quarter with operating cash flow of $162 million and a cash and short-term investments balance of $1.6 billion. Through the third quarter of this year, the company has generated close to $800 million in operating cash flow. Debt was down $3.3 billion year over year and declined by about $700 million from the second quarter of this year.

"Xerox's third-quarter results reflect the strength of our digital portfolio, especially in color where our industry-leading technology delivered 22-percent revenue growth," said CEO Anne Mulcahy, citing strong sales of the company's DocuColor® multifunction devices and iGen3® Digital Production Press. "These digital systems combined with document management services flow through to boost our annuity revenue, continuing a positive trend that fuels total revenue growth. Our resources are aligned around a solid growth strategy -- and the strategy is working."

Early Friday Xerox was set to open at $12.41.