Unisys restructures after posting $54.3M Q3 net loss

It plans to cut about 3,600 jobs globally in a cost-cutting move

Unisys Corp. will cut 3,600 jobs and divest some parts of its business over the next year after reporting a preliminary third-quarter net loss of $54.3 million, or 16 cents per share.

In an announcement yesterday, the Blue Bell, Pa.-based IT hardware and software vendor said the quarterly net loss includes a pretax charge of $10.7 million, or 2 cents per share, related to an earlier cash tender offer for notes due in 2006.

One year ago, the company posted third-quarter net income of $25.2 million, or 7 cents per diluted share. That income included a net benefit of $8.2 million, or 2 cents per diluted share, from tax benefits related to earlier cost reductions.

The company said its third-quarter results are being listed as preliminary because the workforce cuts, divestitures and other cost-cutting actions require Unisys to review the recoverability of a $1.6 billion deferred tax asset. The review, which could impact its financial results, is expected to be completed by the time the company files its third-quarter 10-Q report.

"We are disappointed by these results, and we are taking decisive actions to accelerate our repositioning efforts," Unisys President and CEO Joseph W. McGrath said in a statement. "These actions, which are beginning now and will roll out through 2006, will enable us to focus our resources on high-growth, high-return market segments, reduce costs and drive profitable revenue growth. As these actions take hold, we believe they will enable us to build our financial momentum and result in significantly improved profitability."

Last October, Unisys announced 1,400 job cuts as part of a plan to consolidate some facilities and cut costs (see "Unisys cuts 1,400 jobs").

Revenue for the third quarter, which ended Sept. 30, was $1.39 billion, down 4% from the $1.45 billion the company posted a year ago.

As part of its restructuring, McGrath said Unisys will refocus on key markets, including outsourcing, open-source and Linux, Microsoft Corp. products and security products, while remaining committed to its ClearPath and ES7000 systems. The company said it will sell some non-key parts of its business, which it did not identify, and use the proceeds in other areas.

By cutting about 10% of its 36,000 employee global workforce, the company said it expects to save about $250 million by the end of 2007. The reductions from attrition and layoffs will be across the board and include IT jobs, according to a company spokesman.

"We believe these actions will position Unisys as a major player in large, fast-growing market areas, with a competitive cost structure and a highly skilled, highly focused workforce," McGrath said.

The lower financial numbers were caused by a decline in overall orders during the quarter, including a double-digit decrease in services driven by substantial order declines in the outsourcing business. Systems integration and consulting orders saw double-digit growth over a year ago, while stronger ES7000 orders were offset by a decline in orders for ClearPath mainframes.

Also affecting the results was weakness in the high-end server business, with some clients delaying purchases, Unisys said.

Copyright © 2005 IDG Communications, Inc.

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