Unisys Posts $648-Million Loss for Quarter
Unisys Corp., hard hit by price wars and sluggish sales in the U.S. computer industry, said Friday that it lost $648.2 million in the third quarter.
The nation’s No. 3 computer maker attributed most of the loss to the costs of slashing nearly 8,000 jobs from its 90,000-member work force, closing unneeded manufacturing plants, writing off excess inventory and taking other steps to get it through the current downturn.
About $150 million of the loss stemmed from Unisys’ aerospace operations, for which defense contract costs have exceeded fixed-price bids and the company faces lawsuits due to last year’s “Ill Wind” investigation into Pentagon procurement fraud.
While large, the latest loss was generally in line with Wall Street’s expectations. In trading Friday on the New York Stock Exchange, Unisys stock fell 75 cents per share to close at $16.25, a 52-week low.
Analysts said the company faces no immediate financial crisis that could force an asset sale or other similar actions. The company placed the value of its assets at $11 per share, down $4 from its level just three months ago.
Although other manufacturers of large computer systems, such as International Business Machines and Digital Equipment Corp., have suffered from a sales slowdown, none has been hurt as badly as Blue Bell, Pa.-based Unisys, formed in 1986 by the merger of Sperry and Burroughs, two middle-of-the-pack computer makers.
Over the past 18 months, the company’s U.S. sales have dipped, its inventories of unsold products have swelled and its defense operations have been the object of a scandal that led the Pentagon to temporarily cut off new Navy contracts.
Furthermore, despite the company’s predictions that it can be profitable next year, some analysts believe that 1990 could be another down year at Unisys.
The problem is an industrywide shift toward powerful desktop computers that typically carry lower profit margins than larger mainframe machines and are more prone to price competition, said Ulrich Weil, a Washington high-technology analyst.
Weil said while Unisys has correctly adjusted its production to serve the desktop market, it has consistently overestimated the buying power of the market.
“They have been too rosy-eyed about the future,” Weil said. “The attitude is that market growth can hide a company’s sins. But the market isn’t growing much, and now there’s no place to hide.”
Weil said new orders for Unisys products have slowed, which could lead to a disappointing 1990.
In its report, the company acknowledged that its computer sales dipped in the last quarter and that companywide sales growth was due to a temporary upswing in military orders following the lifting of the Navy contracting ban in late June.
Still, W. Michael Blumenthal, Unisys chairman and chief executive, said the company is well positioned for improvement.
In a prepared statement, Blumenthal said the latest write-offs and layoffs, “though painful and expensive, will significantly enhance our competitive posture going forward and our profitability and cash flow in 1990.”
Company officials said approximately $230 million of the third-quarter loss stemmed from plant closings and the previously announced slashing of 8,000 jobs, cost-cutting programs that are expected to be completed over the next six to nine months. The latest red ink brings the company’s total loss for the first nine months of 1989 to $673.3 million, compared to a profit of $462.6 million in the same period last year.
Revenue for the third quarter was $2.35 billion, up 4% from the same three-month period last year.
UNISYS EARNINGS In millions of dollars 1989 BY QUARTER 1Q: -$78.7 2Q: $53.6 3Q: -$648.2 ANNUAL 1986: -$43.4 1987: $578.0 1988: $680.6
