EARNINGS : Unisys Posts $357-Million Loss in Period
Raising fears that its very survival may be at stake, Unisys Corp. on Thursday reported a $357-million third-quarter loss and said it expects more red ink in the closing months of the year, even as it aggressively trims its work force and sheds operations.
The nation’s third-largest computer maker--which has lost nearly $1 billion in the last 21 months following an overly ambitious expansion effort and poor electronics sales--also announced that it would reduce its work force of 75,000 by 5,000 in the coming months. That’s the third such cut in the last two years.
In addition, Unisys said, W. Michael Blumenthal has stepped down as chairman nine months after giving up the chief executive post. Blumenthal, a former Treasury secretary, guided Unisys’ creation four years ago from the merger of Burroughs and Sperry and then designed its bold but ill-fated expansion drive.
Unisys said Blumenthal, 64, stepped down to devote full time to his international investment banking career at Lazard Freres, one of the companies Unisys said it recently retained to step up its efforts to sell operating units. The sales are designed to generate cash needed to pay down its staggering $3.9-billion debt.
The combination of news sent the company’s stock, which had traded as high as $30.50 a share about 20 months ago, down again on the New York Stock Exchange. It closed at $3.375 per share, down 12.5 cents for the day. The news also prompted Standard & Poor’s to lower by one notch its rating of $4 billion in Unisys debt.
Wall Street analysts, skeptical about the company’s prospects for months, said the latest reports underscore Unisys’ precarious position, particularly as the economy continues to slide and the company remains burdened by a debt load more than double the industry average.
The major remaining question, analysts said, is whether James A. Unruh--who took over as chief executive from Blumenthal early this year and now replaces him as chairman--can move quickly enough with the asset sales to prevent further damage.
“The issue is whether they can get enough breathing space,” said Stephen Cohen, a technology analyst with Soundview Financial in Stamford, Conn. “This business can shrink itself and find a vital core, but it has to move quickly.”
With other troubled electronics companies, such as Wang Laboratories and Control Data, aggressively trying to shed unwanted operations, Unisys may not be able to find buyers for its assets, analysts said. Although Unisys has not said what units are for sale, analysts said operations on the sales block might include Unisys’ defense unit, which two years ago was among the aerospace companies caught in the federal government’s defense fraud probe, Ill Wind. Also said to be up for sale are Unisys’ one-third stake in Japanese computer marketer Nihon Unisys Ltd. and its Timeplex Inc. data transmission unit.
Despite the slump, Unisys said Timeplex, its defense unit and sales in Asia and the Pacific were doing well. It also said cash flow had increased significantly over last year.
“We remain confident of our course toward restoring the company to profitability and reducing its debt load,” chief Unruh said.
The company’s latest loss compared to a loss of $648 million in the year-ago third quarter. Sales in the quarter were $2.4 billion, up 2% from the $2.35 billion posted a year ago.
