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Unisys to Cut 7,900 Jobs to Stem Losses

From Bloomberg Business News

Unisys Corp. reported a larger-than-expected fourth-quarter loss Friday and said it will fire 7,900 workers, prompting a $581.9-million charge.

The nation’s fifth-largest computer maker had a loss from continuing operations of $85.1 million, or 67 cents a share. After the charge and a loss of $9.8 million from discontinued operations, its final loss was $676.8 million, or $4.12 a share.

The loss from operations was wider than the 26-cent-a-share average estimate by Wall Street analysts.

Revenue rose 5.1%, to $1.84 billion from $1.75 billion, on higher sales from service and equipment maintenance contracts, but sales of mainframe computers and equipment fell 8%.

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“The problem is customers aren’t buying big boxes [mainframe computers] like they used to,” said Bob Djurdjevic, analyst at market research firm Annex Research. “Ultimately, the lives of vendors like these are going to close.”

Unisys, whose predecessor sold the first commercial computers in the 1950s, has been trying to wean itself off computer sales to focus on computer services, as the big mainframes that contribute most of its revenue bow to cheaper workstations and personal computers.

Unlike rivals International Business Machines Corp. and Digital Equipment Corp., which have refocused on PCs and software for revenue, Unisys has few new products to bring in sales, analysts said.

Unisys Shares fell 12.5 cents to $7 in New York Stock Exchange trading.

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Even with Friday’s job cuts, which will slash about 21% of the Blue Bell, Pa.-based company’s work force, investors and analysts are skeptical that Unisys can recover. It’s the third attempt in about 13 months to revamp its businesses and cut costs.

“Since we’ve been through this two times before, one tends to be conservative about the company’s projection” that it will turn itself around, said Michael Geran, an analyst at Pershing, a division of investment bank Donaldson Lufkin & Jenrette Securities.

In October, Unisys set up one business to sell computer hardware and software and two others to run computers for customers. Services revenue grew 21% in the quarter and now accounts for 35% of total revenue, compared with 23% two years ago.

A Unisys spokesman declined to say which operations are going to be closed. He said about 60% of the firings will be in its U.S. operations and 40% in Europe. Most of the firings will take place in the second and third quarters and should be completed by the end of the year.

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Unisys expects the job cuts and consolidation to reduce annual costs by $500 million by the end of this year and $600 million in 1997.

“Although we were disappointed in our financial results in 1995, we were encouraged by continued strong revenue growth in information services,” said James Unruh, Unisys chairman and chief executive.

At a Glance:

In other earnings news, Dial Corp. said fourth-quarter profit fell 36%, as expected, to $21.9 million, or 24 cents a share, from $34.3 million, or 39 cents, a year earlier. . . . Southern Pacific Rail Corp. reported fourth-quarter net income of $2.9 million, or 2 cents a share, down from $34.7 million, or 22 cents, a year ago. The railroad operator, set to be acquired by Union Pacific Corp., was expected to earn 10 cents a share. . . . Hershey Foods Corp. said fourth-quarter earnings fell a less-than-expected 1.1%, to $103.9 million, or $1.34 a share, from $105 million, or $1.21, a year earlier.

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