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Unisys grows in Q1, swings to profit

Services fills hardware gaps

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Mainframe and services seller Unisys saw some growth in the first quarter, with sales up 1.9 per cent to $928.4m thanks to a bump in services bookings and despite a slight downtick in hardware sales.

The company swung from a $39.4m loss in the year-ago quarter to a $13.4m profit this time around.

In the quarter, technology sales (which means hardware and systems software, and is predominantly on the ClearPath mainframes at this point) fell 5 per cent, to $105.4m. In a conference call with Wall Street analysts, Janet Haugen, CFO at Unisys, said that enterprise-class servers and software accounted for $96m in sales, down 5 per cent, while other technology made up $9m in revenues and fell 14 per cent compared to Q1 2011.

"While ClearPath revenue declined year-over-year, we remain committed to our annual goal of maintaining stable ClearPath revenue." Haugen said.

Ed Coleman, president and CEO at Unisys, said in the Q&A part of the call that sales for ClearPath machines were indeed flat in 2009 and 2010 and up a bit in 2011, and that flat sales would be its goal in 2012. Coleman also said that Unisys was "rolling out an exciting long-term vision" for the ClearPath machines that would build on their mainframe heritage but open up the boxes to new uses and new markets.

While hardware sales were down in Q1, Unisys had a richer mix of enterprise software sales in the quarter and gross margins rose by 11 points to 62.2 per cent for the technology biz at the company.

On the services side of the Unisys house, despite a 20 per cent drop in the company's US Federal government business, to $125m, overall services revenues rose by 2.8 per cent to $823m in the first quarter. Gross margins rose by nearly a point to 18.9 per cent. Systems integration revenues were up 8 per cent to $308m, IT outsourcing was flat at $285m, infrastructure services was up 5 per cent to $115m, business process outsourcing was flat at $66m, and maintenance services for Unisys products was down 9 per cent to $49m.

Unisys ended the quarter with $654.7m in cash at the end of Q1 after retiring $66m in high-coupon notes. Unisys had a $5.4bn services backlog as the March quarter came to a close and expects for around $700m of that to automatically turn into revenue in the second quarter. So it has a good start on Q2 already. The company has $295.5m in long term debts, which is a whole lot better than the $1.1bn it had three years ago, and is net cash positive to the tune of $359.2m and growing.

It is safe and fair to say that Coleman and Haugen have done a good job of getting Unisys through the Great Recession and shoring up its balance sheet dramatically. ®

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