The leading provider of digital printers and document management services, whose growth is driven by sales of services and supplies for printing machines, said fourth-quarter net income was $1 million, or nil per share, down from $382 million, or 41 cents a share, a year earlier.

Excluding special items, including litigation charges, profit was 32 cents a share, a penny below the average Wall Street forecast, according to Reuters Estimates.

Late last year Xerox announced a restructuring plan that included about 3,000 job cuts, aimed at saving $200 million in 2009. In the fourth quarter, restructuring charges were 27 cents a share.

Revenue fell 10 percent to $4.37 billion. Revenue from sales of supplies and services -- known as "post-sale" revenue -- fell 8 percent to $3.1 billion. Equipment sale revenue declined 15 percent to $1.3 billion, reflecting "weakened economic conditions around the world," Xerox said.

The Norwalk, Connecticut-based company, whose rivals include Oce NV , Canon <7751.T> and Ricoh <7752.T>, has rebounded from fiscal troubles earlier this decade, spurred by solid profits and improved market share. However, efforts to boost revenue have been derailed as the recession has forced its customers to cut orders.

Because of the weak economy, some large clients have been hesitant about purchasing higher-end technology. Increased sales of lower-priced products has hurt gross margins.

In the fourth quarter, adjusted gross margin was 38.8 percent, down 1.7 points from a year earlier, Xerox said.

"This decline was almost entirely due to increased product costs driven by the rapid strengthening of the yen," the company said.

Xerox said it expects first-quarter earnings of 16 cents to 20 cents per share. Analysts, on average, had expected 24 cents.

Xerox shares were down 3.8 percent at $7.30 in light premarket trading. The shares closed on Thursday at $7.59 on the New York Stock Exchange, down about 5 percent since the company's last earnings report in October.

(Reporting by Franklin Paul; Editing by Derek Caney and John Wallace)