Unisys Reports 72% Increase in Third-Quarter 1999 Earnings Per Share Driven by Improved Margins; Additional Debt Reduction Actions Taken - Company Financial Information

Edge: Work-Group Computing Report, Oct 18, 1999

Unisys Corporation (NYSE:UIS) Thursday reported diluted earnings per share of 43 cents in the third quarter of 1999, up 72% from the prior year.

The company's third-quarter earnings included a one-time tax benefit of $22.0 million, or 7 cents per share, as well as an extraordinary charge of $12.1 million, or 4 cents per share, for the repurchase of high-coupon debt.

Excluding these items, third-quarter earnings per share rose 60% percent to 40 cents per common share compared to 25 cents per common share in the year-ago period. Revenue in the quarter increased 4% to $1.87 billion from $1.79 billion in the year-ago period. Without the negative impact of currency, revenue grew 7%.

Unisys also announced Thursday that it is realigning its services business to better position the company to seize growth opportunities in electronic business.

The realignment, which results from an extensive, seven-month review of the company's competitive position and go-to-market model, is focused on accelerating profitable revenue growth by taking a more coordinated, integrated approach to serving client needs in an electronic business environment.

Comments from Chairman and CEO Larry Weinbach

"We delivered a sharp increase in earnings in the third quarter," said Unisys Chairman and Chief Executive Officer Lawrence A. Weinbach. "A better-than-expected performance in our technology business, combined with margin improvement in our services business and continued tight expense control, helped us achieve an operating profit margin of 12.3% compared to 11% a year ago.

"We achieved a major milestone in the third quarter with the redemption of our remaining preferred stock. This eliminates $106 million of annual preferred dividends and dramatically strengthens our balance sheet. We also took actions during the quarter to further reduce debt and interest expense. We bought back $141 million of high-coupon debt in the open market, which reduced our long-term debt position to under $1 billion at the end of the third quarter. In two years, the company has now reduced long-term debt by $1.3 billion and slashed annual interest expense by more than $125 million.

"While we are making excellent progress in reducing costs, improving margins, and transforming our balance sheet, we clearly have work to do in accelerating growth at the top line," Weinbach said. "Revenue in the quarter came in below plan primarily due to weakness in our network services and NT services businesses and the impact of negative foreign currency exchange. Our networking business, particularly in the Federal government marketplace, is being impacted by intense competitive pricing pressures and unexpected delays in the startup of certain contracts. Our enterprise NT services business, which we believe offers tremendous growth potential over the long term, is developing more slowly than we anticipated in the short term as clients evaluate and test new NT-based systems.

"As we work through these issues in an anticipated environment of slower information technology spending during the year 2000 transition, we are using this period to realign ourselves organizationally to seize the tremendous growth opportunities in electronic business as we enter the new millennium. Our goal in this, as it has been over the past two years, is to be selective in focusing on market opportunities that match our strengths and can yield profitable revenue growth that enhances shareholder value."

Weinbach said that the changes being made to the services organization are designed to enhance client relationships by presenting an integrated view of Unisys capabilities to clients worldwide.

In 1998, Unisys took the first step toward an integrated go-to-market approach by creating a single point of contact for its 200 largest clients in the United States and Europe. The company plans to extend that approach for the majority of its customers to improve client satisfaction and enhance cross-selling opportunities.

The realignment results from an extensive review and benchmarking of the company's position in the marketplace -- its service and solution offerings, marketing efforts, branding and identity programs, and competitive positioning.

Under the new approach, the company's services business will be focused on growth opportunities in electronic business with emphasis on outsourcing, network services, and enterprise NT capabilities, in addition to vertical business solutions. The company's new CMP technology and enterprise-class ClearPath systems will be integral parts of the company's electronic business solutions.

"Organizations today are using the Web to link all aspects of their operations to improve service to their customers and slash costs," Weinbach said. "This presents tremendous opportunities for companies like Unisys that have the services, the support, and the systems to help clients succeed in this new environment. To seize these opportunities, however, we must be able to harness all of our capabilities -- unencumbered by organizational or geographic boundaries -- to deliver innovative solutions to clients. This requires an integrated approach to the market and to serving customers. We have seen good success over the past year with the integrated go-to-market approach that we created for our 200 largest clients in the U.S. and Europe and we are building on that success with this realignment."