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Unisys announces 10-to-1 stock compression

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Struggling server and services company Unisys said this morning that its board of directors had authorized a reverse stock split for the company's shares, collapsing 10 shares down to one and thereby making its stock appear to be worth ten times as much to the automated trading systems that are trained to get nervous when stock values go near a few bucks, and get downright jittery when they approach a buck.

Shares in Unisys trade on the New York Stock Exchange, and were flat at the news that the board had decided on a 10-to-1 compression at a share price of $2.77. That gives Unisys a market capitalization of $1.03bn, which is a lot better than back in March 2009, when Unisys shares were trading at 28 cents a pop. This was even lower than the bottom the shares hit when the economic meltdown was roaring in November and December last year. At the time, revenues were dropping at the company and it went deeper into the red than usual.

However, by the end of the second quarter, Unisys had cut costs and grew sales sequentially to $1.13bn, managing to bring $38.1m in profits to the bottom line. Things were on the upswing. But at its annual shareholders meeting in May, shareholders were not as optimistic as they probably are now, and they gave the Unisys board permission to compress the stock by anywhere from between 5 to 20 times the current price, which was north of $1 a share.

As Unisys has stabilized, however, its shares have pushed up on their own, without the need for the reverse stock split. But the board decided today to do it anyway, so on October 26, the company will issue 72 million new shares and retire 720 million old shares. If current trends persist and the third quarter is not awful, Unisys stock should soon be trading at around $30 a pop.

What Unisys might have done, when its stock was in the tank back in March, was take itself private and be done with the nagging of Wall Street altogether. Unisys had $720.8m in accounts receivable and $468.7m in cash and equivalents, and could have done so easily.

Imagine if Sun Microsystems had been this smart a few years ago, when its stock was in the tank and it had billions of dollars in cash in the bank. But in September 2007, Sun decided to change its stock symbol from SUNW to JAVA and do a 4-to-1 reverse stock split instead.

At least Unisys isn't changing its stock ticker to SERV from UIS and touting itself as a services giant. But it may have missed an opportunity back in March to untether itself from the taskmasters on Wall Street and run its business its own way, on its own terms. ®

The smart choice: opportunity from uncertainty

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