UPDATE: Shares of Unisys Corp. fell as much as 12 percent, to around $21, in trading today after the board of the Blue Bell-based computer services and systems company said it has ousted CEO J. Edward Coleman, six years after he took the helm of the 23,000-worker firm, which counts the U.S., Pennsylvania, airlines, financial institutions and tech firms among its clients.
In a statement, lead independent director Paul Weaver said directors have decided it's time to find new leadership. Revenues have fallen in each of the past 10 years, as Unisys left old business lines and struggled to replace sales with new products. Weaver lauded Coleman for stabilizing the company after the recession of 2008-09, slashing debt and interest expenses, and working to prepare it for the rapid changes that have overcome the information technology business. Unisys has begun an executive search but has not announced any candidates.
Coleman summarized the problems facing Unisys and other business computing companies in a July conference call with investors, after announcing disappointing sales and profits: "The information technology industry is going through major transition, driven by the disruptive trends of cloud, mobility, big data, social computing and increasing cybersecurity threats," and the "shift from labor-based services to software-based and enabled services, from on-premise computing to hybrid clouds," he said at the time.
He said firms that once bought software and systems from many vendors are now "standardizing on common platforms like Intel Xeon," and shifting "from human-to-machine interactions to sensor-based machine-to-machine interactions." Unisys needs to find ways to stay relevant with "modern mission-critical IT."
After Coleman, a former boss at Compu-Com and Gateway Computers, took over, Unisys shares recovered rapidly in late 2009, but shares have trailed the market since then, posting total returns of -30% since the start of 2010. Investors still hoped for renewed profits: Before Coleman's departure, Unisys has lately traded at more than 30x earnings, compared to 17x at Microsoft or 11x at IBM. Shares fell more than 20% after the company reported disappointing earnings in July, but had since recovered partway.
On the July conference call, Coleman acknowleged "lower sales of technology products and less revenue from systems integration" left Unisys losing money for the three months ended June 30, but also promised 'a strong second half" of the year.
Among its other jobs, Unisys is in the early stages of a seven-year, $681 million contract to combine seven data centers into a single "secure hybrid cloud involvement" that Coleman promised will "reduce the operating costs while enhancing (Pennsylvania state government) flexibility and service delivery."
Coleman told investors in July he was hopeful about future sales prospects for Unisys products including ClearPath enterprise software and servers, the Forward! fabric-based Intel platform for Windows and Linux applications, Unix to Linux migration, enterprise applications for SAP and other business software and Stealth security software.
He acknowledged at the time that "we have more work to do in our project-based systems integration business where we've been experiencing revenue declines," and said it's been difficult to reach his target of an 8-10% profit margin from Unisys' services businesses.
Given the difficulty in boosting sales, Coleman promised to shift more services to "cloud-based and software-as-a-service delivery," and to increase the proportion of Unisys employees based at "lower-cost delivery organizations," presumably in India and other low-wage countries, to 40%, up from 35%.
In her report on that same quarterly conference call, chief financial officer Janet B. Haugen called the situation "challenging." Among other factors, she cited the need to continue paying tens of millions of dollars a year to pensions for retired workers from when Unisys and its predecessors were larger.
Public-sector jobs account for 40% of Unisys business, industry for 34%, financial institutions for 26%.