Unisys is pegging the unexpected turn of events on a number of factors, including an 8 cents-per-share trim caused by revenue recognition issues connected to an unspecified contract it signed last month, a spokesman said. In essence, Unisys expected to take all the revenue up front for the hardware and operating-system software elements of the contract. But when it reviewed the final agreement, it decided to recognize the revenue on a monthly basis over the five-year deal.
In addition, Unisys said it will record a pretax charge of approximately $120 million, or 25 cents per share, to write off contract-related capitalized assets associated with an undisclosed outsourcing operation first mentioned last month at the company's annual financial analyst's conference, a spokesman told VARBusiness.
"That was a problem for them in this quarter. Obviously, it's a big deal so there's a big impact on revenues. But I don't believe this is the beginning of a trend for Unisys, or other companies, where outsourcing [becomes an issue] or dries up," said Stephen Josselyn, IDC research director.
The Unisys spokesman said the company cannot release more details about the contract because it is in its quiet period prior to its earnings announcement. The developments present a harsh welcome for newly named CEO Joseph W. McGrath, the company's president and chief operating officer, who took over the top role Jan. 1, replacing Lawrence A. Weinbach.