wsj_0568.xml

WSJ891030-0132 WSJ891030-0132 = 891030
= 891030
891030-0132 . 891030-0132 . Unisys ' $ 648.2 Million 3rd-Period Loss @ Shows Intensified Fight for Turnaround @ ---- @ By Paul B. Carroll @ Staff Reporter of The Wall Street Journal Unisys ' $ 648.2 Million 3rd-Period Loss @ Shows Intensified Fight for Turnaround @ ---- @ By Paul B. Carroll @ Staff Reporter of The Wall Street Journal 10/30/89 10/30/89
10/30/89
WALL STREET JOURNAL ( J ) WALL STREET JOURNAL ( J ) UIS UIS EARNINGS ( ERN ) COMPUTERS AND INFORMATION TECHNOLOGY ( CPR ) EARNINGS ( ERN ) COMPUTERS AND INFORMATION TECHNOLOGY ( CPR ) Unisys Corp. 's announcement Friday of a $ 648.2 million loss for the third quarter showed that the company is moving even faster than expected to take write-offs on its various problems and prepare for a turnaround next year . At the same time , the sheer size of the loss , coupled with a slowing of orders , made some securities analysts wonder just how strong that turnaround will be at the computer maker and defense-electronics concern . `` Unisys is getting clobbered . Just clobbered , '' said Ulric Weil , an analyst at Weil & Associates who had once been high on the company . `` The quarter was terrible , and the future looks anything but encouraging . '' Unisys , whose revenue inched up 3.7 % in the quarter to $ 2.35 billion from $ 2.27 billion in the year-earlier quarter , had an operating loss of about $ 30 million . On top of that , the Blue Bell , Pa. , concern took a $ 230 million charge related to the layoffs of 8,000 employees . That is at the high end of the range of 7,000 to 8,000 employees that Unisys said a month ago would be laid off . Unisys said that should help it save $ 500 million a year in costs , again at the high end of the previously reported range of $ 400 million to $ 500 million . The company also took a write-off of $ 150 million to cover losses on some fixed-price defense contracts , as some new managers took a hard look at the prospects for that slow-growing business . In addition , Unisys set up an unspecified reserve -- apparently $ 60 million to $ 70 million -- to cover the minimum amount it will have to pay the government because of its involvement in the defense-procurement scandal . Unisys also noted that it paid $ 78.8 million in taxes during the quarter , even though tax payments normally would be minimal in a quarter that produced such a big loss . The tax payments will leave Unisys with $ 225 million in loss carry-forwards that will cut tax payments in future quarters . In addition , Unisys said it reduced computer inventories a further $ 100 million during the quarter , leaving it within $ 100 million of its goal of a reduction of $ 500 million by the end of the year . Still , Unisys said its European business was weak during the quarter , a worrisome sign given that the company has relied on solid results overseas to overcome weakness in the U.S. over the past several quarters . The company also reported slower growth in another important business : systems that use the Unix operating system . That would be a huge problem if it were to continue , because Unisys is betting its business on the assumption that customers want to move away from using operating systems that run on only one manufacturer 's equipment and toward systems -- mainly Unix -- that work on almost anyone 's machines . In addition , Unisys must deal with its increasingly oppressive debt load . Debt has risen to around $ 4 billion , or about 50 % of total capitalization . That means Unisys must pay about $ 100 million in interest every quarter , on top of $ 27 million in dividends on preferred stock . Jim Unruh , Unisys 's president , said he is approaching next year with caution . He said the strength of the world-wide economy is suspect , and does n't see much revenue growth in the cards . He also said that the price wars flaring up in parts of the computer industry will continue through next year . He said the move toward standard operating systems means customers are n't locked into buying from their traditional computer supplier and can force prices down . That , he said , is why Unisys is overhauling its whole business : It needs to prepare for a world in which profit margins will be lower than computer companies have been used to . `` We 've approached this not as a response to a temporary condition in the industry but as a fundamental change the industry is going through , '' Mr. Unruh said . `` The information-systems industry is still going to be a high-growth business , and we 're confident that we have tremendous assets as a company . But we do n't minimize the challenges of the near term . '' Securities analysts were even more cautious , having been burned repeatedly on Unisys this year . Some had predicted earnings of more than $ 4 a share for this year , up from last year 's fully diluted $ 3.27 a share on earnings of $ 680.6 million . But the company said Friday that it had losses of $ 673.3 million through the first nine months , compared with earnings a year earlier of $ 382.2 million , or $ 2.22 a share fully diluted , as revenue inched up 1.4 % to $ 7.13 billion from $ 7.03 billion . And Unisys is expected to do little better than break even in the fourth quarter . So Steve Milunovich at First Boston said he is cutting his earnings estimate for next year to $ 2 a share from $ 3 . `` I was feeling like I was too high to begin with , '' he said . Mr. Weil of Weil & Associates said he will remain at $ 1 a share for next year but said he wonders whether even that low target is at risk . `` The break-even point for next year is much lower , but is it low enough ? '' he asked . Reflecting the concern , Unisys stock fell a further 75 cents to $ 16.25 in composite trading Friday on the New York Stock Exchange .