'Transition year' for Unisys means Q1 loss of $28M

The company also announced that it will lay off 3,600 workers

Unisys Corp. is still struggling, but not as much as it was a year ago. The company today reported a net loss of nearly $28 million for its first quarter on revenue of $1.39 billion and announced 3,600 layoffs it had earlier telegraphed would be coming.

The cutbacks will be spread among its workforce throughout the world.

In the year-ago quarter, Unisys reported a $45.5 million loss on revenue of $1.37 billion. The company now employs about 36,000 workers and said it is finalizing further cost-cutting in actions in Europe. Those actions were not detailed.

Unisys reported a “significant decline” in server sales and said customer revenue in its technology segment declined 18% in the first quarter. Customers are holding back on purchases pending the release of new server products in the second half of this year, a company spokesman said.

Unisys CEO Joseph McGrath called 2006 a ”transitional year” and said in a statement that the Blue Bell, Pa.-based company expects to see “tangible benefits” in 2007 from its actions this year.

Brad Day, an analyst at Forrester Research Inc., said that “in the next couple of quarters, things have got to shake out” for Unisys. He pointed to the company's new strategy, which isn’t based entirely on Microsoft Corp. or its high-end servers but more on open-source and Linux.

“They finally realized that they can’t sell high-end machines that are high-end and as expensive and compete with [IBM's] P Series and [Sun Microsystems Inc.'s] Sparc, which is really who they are competing with, unless they can have a multiple operating-system play,” said Day.

Unisys mainframe user Greg Schweizer, a systems administrator at Oregonian Publishing Co. in Portland, Ore., said there has been concern about Unisys for a long time. “I think we’re all in a wait-and-see mode,” he said.

But Schweizer, who is also on the board of the directors of the user group Unite Inc., said Unisys is in the mix of vendors being considered for an upgrade of its ClearPath mainframe, which now hosts a heavily customized Cobol-based circulation system.

In January, Unisys said it had won a new three-year IT services contract with the U.S. Transportation Security Administration worth as much as $750 million.

Among the steps that Unisys took recently to improve its financial position was to sell its stake in Nihon Unisys Ltd., generating $378 million in cash. Tokyo-based Nihon Unisys will remain the company's exclusive distributor in Japan.

Copyright © 2006 IDG Communications, Inc.

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