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Unisys anoints ex-Gateway chief as CEO

Another sale, Mr. Coleman?

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Well, that didn't take very long. Only two weeks ago, server and services specialist Unisys said that Joe McGrath, its president and chief executive officer, was stepping down at the end of the year and that its board of directors were beginning a search for a new executive to accelerate its strategy. And today, Unisys announced that former Gateway CEO Ed Coleman is not only its new CEO, but also the chairman of the board.

Back in August 2007, it was Coleman who sold struggling Gateway - a $4bn supplier of PCs and a few servers - to Taiwanese PC maker Acer for $710 million. That gave Acer the number three position in PCs behind Hewlett-Packard and Dell - and ahead of China's Lenovo, which ate IBM's PC business in December 2004.

Prior to being brought into Gateway to turn it around - which involved selling it, really - Coleman was in charge of Arrow Electronics' Enterprise Computing Solutions business, which is one of the two big master resellers of servers, storage, software, and other IT stuff. (The other one is Avnet).

Before heading up Arrow ECS, Coleman was in charge of systems integrator and reseller CompuCom Systems, where he was CEO from December 1999 to November 2004 and chairman from 2001 through 2004. He has also spent time at Computer Sciences Corp, another systems integrator, and did a 17-year stint at IBM in its used equipment and channel financing units.

To say that Coleman is well acquainted with the data center is an understatement, which is why Henry Duques, chairman of the Unisys board, was happy to give up his chair and become just a director again. It looks like Greg Baroni - a senior vice president and in charge of the Federal Systems unit at Unisys - was hoping to get the job, because Baroni left the company this morning to pursue other interests.

The other reason, of course, is that Coleman has a pretty tough job ahead of him: Either turn Unisys around or sell it in this rough economic environment.

Unisys has been shrinking a little bit every year for the past eight years. In 2007, the company had sales of $5.65bn and a loss of $79.1m. In 2005, the company lost $1.7bn. In fact, the last time it made a profit on an annual basis was in 2004 - and that was only $38.6m against sales of $5.86bn.

Server and Storage Shrinkage

The company's technology business - meaning servers and storage - has shrunk from $1.2bn in 2003 to $805m in 2007, while its services business has grown a tiny bit from $4.7bn in 2003 to $4.85bn in 2007. The Unisys services biz peaked in 2006 at $4.92bn. For the first six months of 2008, Unisys had $2.64bn in sales and lost $37.4m.

What are Colemans plans for Unisys? That's unknown. But we will get an inkling on October 30, when Unisys releases its third quarter financial results and Coleman gives his view of the options that Unisys has.

Back in July, Unisys hired investment banker Goldman Sachs to help it come up with a strategy to maximize shareholder value, as they always say about these efforts. That usually ends up meaning "selling the company." This may not be the case at Unisys under Coleman's stewardship, but if it does go that way, he obviously has the experience to sell the company to someone.

That means you, NEC, for the mainframe and server business, and you, Dell, for the services business. Or HP or IBM for services, if you feel like it.

With a market capitalization of only $698m as we go to press, all or part of Unisys could be acquired for a relatively small amount of dough. (Two years ago, Unisys had a valuation of close to $3.3bn). Assuming a certain amount of restructuring to get it profitable, Unisys might be worth more as a whole company generating around $5 billion in sales that its current valuation suggests.

The trouble is that the key government and financial services markets where Unisys sells its mainframe and x64 servers are being crunched, and it doesn't look like that will change any time soon. So the prospects looking ahead are worse than they were over the past few years, when money should have been easier to make for Unisys but was not. ®

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