Unisys misses forecast

Shares of Unisys Corp. sank nearly 18 percent yesterday after the computer-services company reported a decline in revenue and a quarterly loss. Wall Street expected a profit.

The Blue Bell seller of computer-server software and consulting services said its third-quarter net loss was $31 million, or 9 cents a share, compared with a loss of $77.5 million, or 23 cents a share, in the same quarter a year ago.

Unisys shares closed down $1.33 to $6.13 on the New York Stock Exchange.

The company reported a small operating profit of $43.6 million, versus an operating loss of $42.9 million in the same period last year.

Revenue declined 1 percent to $1.39 billion from $1.41 billion, which was below the $1.4 billion average estimate of analysts polled by Thompson Financial.

Analysts expected four-cents-a-share earnings in the quarter.

Unisys pushed back its operating margin target of 8 percent to 10 percent, excluding retirement-related costs, to the second half of 2008, rather than for the full year as anticipated.

"You have a target out there for 2008, but as the target gets moved, it causes the market increased concern and uncertainty that we can't track your progress," analyst Jerome Lance of Nobert Capital said during a conference call.

Analyst James Friedman of Susquehanna Financial Group wrote in a research note that "revenue trends remained weak, compounded by deterioration in recently stable business lines. Furthermore, management credibility to improve execution in an increasingly competitive environment is slipping."

Unisys, which employs 2,400 in the Philadelphia area - mostly in Blue Bell and Malvern - has been shifting work to countries with cheaper labor costs. Unisys, which has announced a total of 7,100 layoffs since the end of 2005, said it had laid off 6,200 people by the end of September. The remaining 900 layoffs will be completed either by the end of this year or early 2008.

"We can point to clear, strong and continuous progress," president and chief executive officer Joseph McGrath said on the call. "We still have challenges to work through."

Service revenue, which was 87 percent of third-quarter revenue, was flat. Technology revenue declined 9 percent and represented 13 percent of quarterly revenue, McGrath said.

U.S. sales, which accounted for 44 percent of Unisys revenue in the period, declined 5 percent to $608 million, while international revenue rose 2 percent to $785 million, but that was partly due to the weak dollar. On a constant-currency basis, international revenue fell 4 percent.

Unisys expects to consolidate facilities before the end of the year and to increase by the end of 2008 its foreign workforce, with a goal of having about 20 percent of workers providing services from countries including India, China and Eastern Europe.

"For all new jobs, we've been trying to get a fair portion of those offshore," McGrath said. "While I believe we have the bulk of our restructuring behind us, we continue to explore ways to further streamline our cost and expenses."