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Unisys Squeezes A 3Q Profit From Efficiencies

Revenue was down slightly but profit almost tripled.
Unisys Corp.'s push to improve processes and move software development offshore paid off in the third quarter of fiscal 2002 despite a slowdown in sales. The maker of hardware, software, and services is reporting sharply increased profit on slightly lower revenue for the quarter ended Sept. 30, compared with the same period last year. "Most clients are sitting with needs, but they're not sure that they want to open their pocketbooks yet," Unisys CEO Lawrence Weinbach says. "Not a whole lot of companies want to borrow money for technology projects. I don't see a huge increase in budgets for 2003."

Unisys' profits were $59 million for the quarter, almost three times the $20.9 million the company reported a year ago. Revenue, however, was down to $1.3 billion from $1.4 billion a year ago. Spending on outsourcing (particularly business-process and transaction-processing outsourcing), managed-network services, and security continues to be strong, Weinbach says. Not so for systems integration, consulting, and hardware and software, however, he says.

Key contracts with the U.S. Transportation Security Administration and the commonwealth of Pennsylvania strengthened Unisys' revenue for the quarter and have the potential to deliver revenue for several quarters to come. The company is scheduled to make $244 million in the first 14 months of a security project for the Transportation Security Administration. Unisys is contributing security technology and integration services to the project. The company also won a three-year, $252 million contract extension with Pennsylvania to manage the commonwealth's "Data PowerHouse" data-center hosting project.

Unisys cut expenses in several areas for the quarter, including $7 million from its research and development budget, down from $73 million to $66 million. Weinbach says his company was able to do this by improving overall efficiencies and by moving more of its software development to offshore locations. Unisys' U.S.-based revenue was $619 million, up 3% from the $599 million reported a year ago.

Unisys recently won a seven-year, $80 million business-process outsourcing contract with RAMS Home Loans in Australia and a three-year, $50 million managed-services contract with a German government agency. Both will help bolster Unisys' international revenue base, which sank 8%, to $713 million in the third quarter.