Unisys reports strong order growth in Q3

Unisys has reported third-quarter 2004 net income of $25.2 million, or 7c per diluted share, compared with third-quarter 2003 net income of $56.2 million, or 17c per diluted share. Revenue for the third quarter of 2004 was flat at $1.45 billion compared with the year-ago quarter. Currency had a 3% positive impact on the company`s revenue in the third quarter, reflecting a weak US dollar against most major currencies worldwide.

The third-quarter 2004 results included pre-tax pension expense of $23.5 million compared with pre-tax pension income of $8.5 million in the prior-year quarter. Excluding the effect of pension accounting in both periods, net income for the third quarter of 2004 was $41.1 million, or 12c per diluted share, compared with net income of $50.5 million, or 15c per diluted share, in the year-ago period.

The third-quarter 2004 results also included a previously announced net benefit of $8.2 million, or 2c per diluted share, from the items below:

* During the quarter the US Congressional Joint Committee on Taxation approved an income tax refund to Unisys related to the settlement of tax audit issues dating to the mid-1980s. The refund, including interest, totals $40 million. After payment of related state taxes, Unisys expects a net cash refund of $30 million by the end of 2004 or in early 2005. As a result of the resolution of these audit issues, the company recorded favourable adjustments to its existing tax liability reserves, which resulted in a tax benefit of $68.2 million, or 20c per diluted share, to net income in the third quarter of 2004.

* As part of its ongoing efforts to reduce its cost base and enhance its administrative efficiency, on 30 September Unisys consolidated facility space and committed to a reduction in global headcount of 1 400 employees, primarily in general and administrative areas. These actions resulted in a pre-tax charge to earnings of $82 million ($60 million after tax), or 18c per diluted share, in the third quarter.

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"After a tough second quarter, the company regained its momentum and achieved its financial targets for the third quarter," says Barry Holt, MD of Unisys Africa. "Our strong double-digit order growth in the quarter was driven by a number of contract signings in outsourcing and infrastructure services. We also saw strong growth in consulting and systems integration revenue and in our ES7000 server sales, making this the highest revenue quarter for our ES7000 servers in the history of the programme.

"We took a number of actions to enhance our success in the marketplace and drive profitable revenue growth. We have implemented integrated sales and marketing programmes to ensure clients and prospects are aware of the full `one Unisys` portfolio of services and solutions. We are focusing more resources on key accounts, market segments and geographies where we have the greatest opportunity to win market share. We also are being more aggressive in bringing Unisys solutions to market. For instance, we launched the Unisys Global Visible Commerce family of solutions to help organisations build secure, flexible supply chains. In our technology business, we introduced new Linux-based offerings for the ES7000 family - opening us to a fast-growing market that complements our existing Windows-based ES7000 programme.

"We also continue our ongoing efforts to reduce costs and enhance efficiency," Holt says. "During the quarter we initiated actions to reduce expenses by consolidating facility space and reducing global headcount. The company expects these actions will yield $70 million of annualised cost savings on a run-rate basis by the end of 2005. These cost actions, and our enhanced sales and marketing efforts, will position us well for 2005."

For the nine months ended 30 September 2004 Unisys reported net income of $73.5 million, or 22c per diluted share, compared with net income of $147.2 million, or 44c per diluted share, in the year-ago period. As mentioned above, net income for the nine months ended 30 September, includes income of $8.2 million, or 2c per diluted share, related to the tax refund and cost reduction items. Excluding the impact of pension accounting in both periods, the company reported net income of $121.4 million, or 36c per diluted share, for the first nine months of 2004 compared with $131.9 million, or 40c per diluted share, in the year-ago period. Revenue for the first nine months of 2004 was $4.30 billion compared with $4.27 billion in the first nine months of 2003.