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Unisys, Like IBM and Digital, Lowers Earnings Forecast

From Reuters

Unisys Corp. said it expects to report a loss for the first quarter, joining two of its largest computer industry rivals in downgrading earnings estimates.

Unisys, the nation’s third-largest computer company, estimates that it will report a first-quarter net loss of $60 million to $80 million. It reported net income of $149.3 million in first quarter 1988.

International Business Machines Corp. and Digital Equipment Corp. have said within the past two weeks that they expect their first-quarter results to fall below analysts’ estimates, casting doubt on the strength of the computer industry and prompting heavy slides in their share prices.

The company blamed several factors for the expected loss, including the costs of a government probe of defense procurement and low shipments of its 1100 mainframe computers as customers await its new 2200 replacement series.

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The company also said a reorganization announced in January, including the restructuring of its U.S. computer business, would weigh on the first-quarter results.

But Unisys said it believes that the loss is an aberration and that it expects operating results to return to more normal profit levels in the second quarter. Last year, it reported second-quarter net income of $162.3 million.

Earlier this month, the Defense Department suspended three Unisys divisions from doing business with the government as part of its investigation of fraud in defense procurement. All three of the units were parts of Sperry Corp., which merged with Burroughs Corp. in 1986 to form Unisys.

Unisys said these unusual disruptive factors and continued industrywide weakness in the U.S. computer business will result in lower than planned first-quarter shipments.

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It also said the first-quarter results, which it expects to report April 21, will show the worse-than-expected effect of operational factors, including lower production runs and inventory reduction programs.

But the company expects to improve operating results substantially as the year progresses.


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