Unisys Q4 Bites The Bullet And Looks Toward Rosier Fy98

Computergram International, Jan 16, 1998

Unisys Corp is looking to 1998 for the confirmation of new CEO Lawrence Weinbach's low debt, high-end hardware focus which has seen it abandon its PC and low-end server business in a search for improved margins and increased shareholder value (CI No 3,320). But clearing out the old to make way for the new has inevitably left the fourth quarter carrying the load.

In the three months to December 31, revenue rose 4% to $6.64bn but losses crashed to $992m under the weight of $1.1bn in one-time charges designed to tidy up the balance sheet for the new financial year. Early retirement of expensive, high-yield debt combined with the sudden write-off of $900m in capitalized goodwill formed the lion's share of the charges, the removal of which Unisys confidently expects to result in an earnings per share boost of $0.15 per annum. The pre-charge numbers for the quarter came in $0.02 below the consensus of analyst's estimates, but Unisys puts this down to observers' failures to anticipate the conversion into shares of $616m of debt. The company's new strategy is to focus on the twin areas of services and enterprise class servers. The Clearpath enterprise server range showed strong shipments, said the company, helping it to an operating margin of 11%, the best in three years. Operating profitability was also achieved in the group's Information Services division, but operating profit is before interest charges, and if a division can't carry the cost of its own finance, then its bottom line isn't a profit. This, combined with the mammoth charges in the quarter, was predictably sidelined in favor of headline earnings figures for the year which were adjusted to exclude one- time items. In the final analysis, Unisys made a loss of $965m in 1997, together with a meager revenue increase of just 4%. Hardly surprising then that Weinbach says he's looking forward to 1998.