Unisys swings to first-quarter loss on weaker US business
PHILADELPHIA—A weaker U.S. business climate and federal contract delays hammered technology services provider Unisys Corp. in the first quarter, and the company said Wednesday that it swung to a first-quarter loss after a hefty tax expense.
The Blue Bell-based company, which also sells enterprise servers, said U.S. spending on information technology was squeezed by economic concerns. Contract delays at certain federal agencies and a 6 percent drop in international revenue, after adjusting for currency translation, also hampered sales.
Shares of Unisys fell Wednesday by more than 12 percent, or 59 cents, to close at $4.16.
Unisys incurred a first-quarter net loss of $23.4 million, or 7 cents per share, compared with a profit of $3.6 million, or a penny per share, a year earlier. Revenue fell 3 percent to $1.3 billion but it would have been worse without a 5 percent boost from a weaker dollar.
Analysts were expecting a loss of 2 cents per share profit on revenue of $1.33 billion, according to Thomson Financial.
Wendy Abramowitz, an analyst at Argus Research, said the wide earnings miss weighed on the stock. There was also concern that the company's business won't recover later in the year, given the precarious economic climate, she said.
Goldman Sachs analyst Julio Quinteros Jr. said in a research note that he remains "guarded" about the stock. He noted that revenue at Unisys has declined for the last six quarters. Quinteros, who has a "sell" rating on the stock, lowered his 2008, 2009 and 2010 earnings estimates.
But Unisys posted an operating profit -- excluding interest payments, taxes and other items -- of $28 million for the quarter compared with a loss of $29.6 million last year. The first quarter included a provision for income taxes of $23.8 million compared with a tax benefit a year ago.
Last year's first quarter also included gains from the sale of a business and a restructuring charge.
In the latest quarter, services revenue fell by 1 percent to $1.14 billion. Technology, which includes enterprise server sales, fell 16 percent to $164.2 million.
The company said it saw double-digit gains in services orders and it expects the business to rebound through the year. It also sees a federal business recovery in the second quarter.
"We're poised to begin growing again in services," Chief Executive Officer Joseph McGrath said in a conference call with analysts.
Unisys also completed 375 job cuts in the quarter as part of a work force reduction, first announced in early 2006, that aimed to trim 7,200 jobs. About 300 jobs cuts remain. Unisys employs nearly 30,000 worldwide.
