Unisys Plans Job Cuts After Weak Quarter

But says Win 2000 Datacenter unaffected

Unisys Corp. last week said it plans to cut its workforce by more than 1,000 and de-emphasize some low-margin businesses and products in the wake of a big drop-off in its earnings for the third quarter.

But Unisys assured customers that the cuts wouldn't affect its machines that run Windows 2000 Datacenter, Microsoft Corp.'s newly released operating system that seeks to challenge Unix in corporate computer rooms. Unisys is the sole hardware vendor supporting Datacenter so far.

During a conference call, Unisys Chairman and CEO Lawrence Weinbach stressed the importance of the company's high-end ES7000 server line, which can pool as many as 32 Intel processors.

"We believe there's a big market for that product, and it's one we intend to pursue," Weinbach said.

Informed of the Unisys news, a Microsoft spokesperson said the company was committed to its partnership. "Unisys has already shown tremendous leadership and dedication to the program as the manufacturer of the ES7000, now being licensed by Compaq, HP and ICL," the spokesperson said.

Risky Strategy?

However, in a recent report on Unisys' sluggish earnings, Giga Information Group Inc. analyst David Friedlander blamed the firm's financial decline on Microsoft's slow delivery of Windows 2000.

"Most of its eggs are in one basket: Unisys has put almost all of its engineering efforts behind Windows NT and Windows 2000," Friedlander wrote. "While its accomplishments in the Windows area have been successful, this is a potentially dangerous strategy if Windows 2000 Server does not gain market acceptance quickly."

The Blue Bell, Pa.-based computer maker and professional services firm reported a third-quarter profit of $42.9 million, down 69% from earnings of $138.4 million in the same period last year. Revenue declined 9% to $1.7 billion, compared with revenue of $1.9 billion for the period last year.

Unisys said the results were in line with its financial outlook for the quarter. But the struggling company still detailed a series of planned changes following what Weinbach described in his announcement as "an exhaustive review of our services and technology businesses."

Weinbach said Unisys trimmed 300 jobs during the past three months through a hiring freeze, which will remain in effect for the rest of this year. The company is also offering early retirement to about 1,500 U.S. employees. Unisys had 35,800 employees worldwide last year.

According to the company, it plans to focus its resources through moves such as cutting its portfolio of industry-specific technology offerings from 30 to 15 and reducing its investment in unspecified "low-margin commodity products." In addition, the firm said its outsourcing unit will more aggressively pursue joint ventures and other new ways of doing business, in an effort to increase revenue growth.

More restructuring steps are likely within the next six to eight weeksWeinbach said.

Copyright © 2000 IDG Communications, Inc.

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