Revenues Decline at Unisys - Analyst Blog

Unisys Corp. (UIS) reported a net loss of $11.6 million or 27 cents per share in the first quarter of 2010 compared to a net loss of $24.4 million or 66 cents in the first quarter of 2009. 

The results included an approximately $35 million of pre-tax foreign exchange loss in other income, including $20 million relating to the January 2010 currency devaluation in Venezuela. Excluding the impact of the currency devaluation, earnings per share came in at 20 cents. The Zacks Consensus Estimate was 4 cents. 

Revenue declined 7% year-over-year to $998 million in the first quarter of 2010. Approximately two percentage points of the decline was due to divested businesses. The company has decided to sell its health information management business. Foreign exchange rates had an approximately 5 percentage-point positive impact on revenue in the quarter. 

Revenue in the United States declined 16% to $430 million, with about half of the decline coming in the company's federal business. Revenue in international markets grew 1% to $568 million. Foreign currency fluctuations had an approximately 10 percentage-point positive impact on international revenue in the quarter.
 
Unisys has two operating segments – Services and Technology. Revenues in the Services segment declined 9% year over year. Foreign currency fluctuations had an approximately 5 percentage-point positive impact on services revenue in the quarter. 

Within services, Outsourcing revenue – the company’s largest business – declined 2% in the quarter as growth in IT Outsourcing was offset by double-digit declines in Business Process Outsourcing. Systems Integrations and Consulting revenue declined 13% in the quarter. Services orders showed double-digit growth from year-ago levels, primarily driven by order gains for outsourcing and systems integration and consulting. 

Revenues in the Technology segment increased 9% year over year driven by double-digit growth in ClearPath mainframe revenue. Enterprise Server revenue grew 29% in the quarter driven by ClearPath sales, which were up by more than 30% over the year-ago period. Foreign currency fluctuations had an approximately 7 percentage-point positive impact on technology revenue in the quarter. 

Gross margin came in at 23.7%, up from 20.0% recorded a year ago driven by higher ClearPath sales and improved cost efficiencies in services delivery. Operating margin increased to 5.9% compared to1.4% recorded in the first quarter of 2010 as the company continued to streamline and simplify its operations and reduce costs. 

Unisys has already met its previous target for $500 million of annualized cost reductions across cost-of-service delivery and SG&A expenses. 

During the quarter, Unisys used $28 million of cash in operating activities compared to cash generation of $39 million in the first quarter of 2009. Capital expenditures came in at $69 million compared to $47 million in the year-ago quarter, primarily reflecting increased investments in assets related to new outsourcing contracts. 

During the quarter, Unisys repaid the remaining $64.9 million principal amount of senior notes due March 2010. The company did not draw against its available $150 million U.S. accounts receivable securitization facility in the quarter. Unisys had earlier utilized $100 million of this facility in the fourth quarter. Over the past year the company has reduced its long-term debt by approximately $200 million. At Mar 31, 2010, Unisys had $469 million of cash and equivalents, down from $648 million of cash on Dec 31, 2009. 

The company’s goal for 2010 is to generate profitability and generate positive cash flow along with strengthening the balance sheet. The sale of the Information Management business to Molina Healthcare should fetch the company about $135 million.

Based in Blue Bell, Pennsylvania, Unisys is an information technology (IT) company.
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