Unisys expands cost-cutting with 950 layoffs

Unisys Corp. said yesterday that it would cut 950 jobs, expanding layoffs that began last year and eliminated 5,600 positions.

The Blue Bell seller of computer servers and consulting services also reported a small first-quarter profit yesterday as it continued to cut costs and move jobs to less-costly countries such as India.

The job reductions will be primarily in the United States and United Kingdom, while workers will be added in India, China and Eastern Europe, Unisys president and chief executive officer Joseph McGrath told analysts in a conference call.

First-quarter net income was $3.6 million, or 1 cent a share, compared with a loss of $27.9 million, or 8 cents a share, in the year-earlier quarter, the company said. Sales fell 3 percent, to $1.35 billion from $1.39 billion in the quarter a year ago, due to declines in revenue from systems integration, consulting, and core maintenance.

Analysts polled by Thomson Financial had expected a loss on average of 2 cents a share on sales of $1.39 billion.

"We are planning two additional cost actions," McGrath told analysts. Eliminating the 950 jobs will result in a $32.7 million pretax charge.

Also, Unisys will consolidate locations and make additional workforce reductions, primarily in Europe, in the second quarter. "This is the first phase of global facility consolidations resulting from our head-count reductions," he said.

"The investments will be needed to build off-shore resources," McGrath said. "For example, in the third quarter, we will open up facilities in yet another Indian city, Hyderabad."

Unisys said it has essentially completed the 5,600 layoffs, more than 10 percent of its workforce, as of the end of the first quarter. The company, which announced the layoffs at the end of 2005, has sought to improve profit margins to compete with larger rivals such as International Business Machines Corp.

Unisys employs about 3,000 workers in India, China and Eastern Europe. The company plans eventually to have 20 percent of its workforce in lower-cost countries where wages are lower, McGrath said.

Unisys reiterated that its goal by 2008 was to achieve an operating profit before interest and taxes of 8 percent to 10 percent, excluding retirement-related charges.

"We are about halfway into a three-year plan, our repositioning program," McGrath said. "And while we have a great deal more work to do, we remain confident that we can achieve the 2008 financial goals."

Service-contract orders in the quarter declined more than 10 percent, which McGrath attributed to timing. Several large contracts, particularly in the public sector, did not close due to approval delays.

"One such delayed contract closed last week," with the Los Angeles Department of Public Social Services, he said.

Unisys said it was focusing on its strategic high-growth markets: open-source software, security, outsourcing, real-time software and hardware, and services for Microsoft Corp. products.

Unisys had 36,000 employees in December 2005 and 30,500 employees at the end of March. More than 1,500 are in Malvern and Blue Bell.

"Given the magnitude of the transformation we are driving, our profit improvement will not go in a straight line," McGrath said. "But we are moving in the right direction."

Unisys' shares closed down 9 cents at $8.83 yesterday on the New York Stock Exchange.