Unisys Announces Third-Quarter 2006 Financial Results; Company Reports Improved Results and Solid Progress in Repositioning Program

Business Wire, Oct 25, 2006

BLUE BELL, Pa. -- Unisys Corporation (NYSE:UIS) today reported improved financial results for the third quarter of 2006 as the company continues to make good progress in its repositioning program to focus its resources on large, growing markets and reduce its cost structure.

Orders and margins improved in the quarter from the year-ago period and sequentially from the second quarter of 2006. The company also announced a number of strategic client awards in targeted growth areas such as enterprise security and outsourcing.

Revenue for the third quarter of 2006 increased 2 percent to $1.41 billion from $1.39 billion in the year-ago quarter. Revenue was essentially flat on a constant currency basis.

Unisys reported a third-quarter 2006 net loss of $77.5 million, or 23 cents per share. The results included a:

* pre-tax charge of $36.4 million to cover additional selected headcount reductions, primarily in continental Europe; and

* pre-tax pension expense of $43.4 million.

These results compared with a third-quarter 2005 net loss of $1.63 billion, or $4.78 per share, which included a:

* $1.57 billion charge for an increase in the company's deferred tax asset valuation allowance; and

* pre-tax pension expense of $44.2 million.

Comments from President and CEO Joseph W. McGrath

"We made solid progress in the third quarter in repositioning Unisys for profitability," said Joseph W. McGrath, Unisys president and chief executive officer. "Our services orders showed double-digit growth in the quarter as clients respond favorably to our more focused portfolio of services and solutions. Unisys is increasingly being chosen for leading-edge projects in security, outsourcing, and open source solutions.

"While we work to grow in our targeted market areas, we also continue to reduce our cost base in line with our more focused business model," McGrath continued. "During the quarter we continued to move aggressively to implement headcount reductions as part of our cost reduction program, and we increased our target for annualized cost savings to more than $340 million by the second half of 2007. We also expanded our use of offshore resources and announced the planned opening of two additional global sourcing centers in India. We are beginning to see benefits from our efforts in terms of reduced costs and improved margins as we work toward our goal of significantly improved operating margins in 2007 and 2008."

"While we have much more work yet to do, I am encouraged by the progress we are making in our operations and our results," McGrath said. "We look to build on our progress in the fourth quarter as we lay the foundation for stronger profitability in 2007 and 2008."

Third-Quarter Company Results

The company reported a double-digit increase in services orders in the third quarter. Services order growth was driven by growth in outsourcing orders. Technology orders declined. Overall orders rose by a single-digit percentage compared to year-ago levels.

Major wins in the third quarter included:

* The U.S. Department of Homeland Security awarded a groundbreaking contract to a Boeing-led team, which includes Unisys, to implement the first phase of its Secure Border Initiative (SBI), a comprehensive, three-phase program to secure the U.S. borders. The first phase, called SBInet, will use surveillance and information systems to enable agents and officers to detect, identify, classify, respond to, and resolve illegal entry attempts beginning at a 28-mile stretch of the Tucson, Ariz. border. Unisys is Boeing's co-integrator on the program and is responsible for information systems integration, IT infrastructure, and certain surveillance, targeting systems, and law enforcement systems.

* The U.S. Federal Bureau of Investigation (FBI) awarded Unisys a contract to develop and implement a next-generation DNA indexing system that will allow federal, state, and local laboratories to share and compare DNA profiles in linking convicted offenders to violent crimes. The contract has a two-year base period, with an estimated value of $11 million, and a two-year option and two one-year options. If the FBI exercises all option years, the contract has an estimated total value of approximately $50 million.

* The Australian Department of Immigration and Multicultural Affairs awarded Unisys a significant contract for an identity authentication solution, using facial recognition, fingerprint scanning, and biometrics technology, to strengthen the country's borders.

* The European Commission awarded frame contracts to a consortium led by Unisys. The contracts, which have a potential combined value of approximately $200 million to the consortium, cover a range of IT services including systems integration and application management and support.

* In the United Kingdom, Unisys continues to strengthen its partnership with BT and signed a five-year, approximately $23 million data center outsourcing contract in the quarter.

* Starbucks Coffee Company, the largest coffee retailer in the U.S., awarded Unisys a five-year contract for a range of IT services to support Starbucks' expansion into international markets. The services include data center support, network and server monitoring, and security services.