Unisys Announces First Quarter 2008 Financial Results

Company reports $28.0 million operating profit, double-digit services orders growth

SYDNEY, April 30, 2008 – Unisys Corporation (NYSE: UIS) today reported a first quarter 2008 operating profit of $28.0 million compared with a first quarter 2007 operating loss of $29.6 million.   Revenue for the first quarter of 2008 declined three per cent to $1.30 billion from $1.35 billion in the year-ago quarter.  Foreign currency exchange rates had an approximately five percentage-point positive impact on revenue in the quarter.

“We continued to improve our operating profit in the first quarter despite some weakness in our U.S. business,” said Unisys President and Chief Executive Officer Joseph W. McGrath.  “Our federal business was impacted by contracting delays at certain agencies, and we saw some impact in our U.S. technology sales as organisations tightened spending on IT projects due to economic concerns.  Even with this, we were able to continue improving profit margins in our services business as a result of our repositioning actions over the past two years.

“We were also pleased with continued revenue growth in outsourcing and double-digit gains in services orders in the quarter,” McGrath said.  “Based on this order strength and a strong pipeline, we look for our federal business to recover in the second quarter and for our services business to return to growth as we move through the year.”

Unisys reported pre-tax income of $0.4 million in the first quarter of 2008 compared with a pre-tax loss of $23.0 million in the first quarter of 2007.  The company incurred $23.8 million of tax expense in the current quarter compared with a $26.6 million tax benefit in the year-ago period, which included a $39.4 million benefit for settlement of a tax audit.  After taxes, the company reported a first quarter 2008 net loss of $23.4 million, or diluted loss per share of seven cents, compared with net income of $3.6 million, or diluted earnings of one cent per share, in the year-ago period.  Unisys results in the year-ago period included a $32.7 million pre-tax restructuring charge and a $23.7 million pre-tax gain on the sale of a business.  Pre-tax retirement-related expense in the first quarter of 2008 was $0.6 million compared with $23.5 million in the year-ago period.

First Quarter Company Results

Services orders showed substantial double-digit gains in the first quarter, driven by order gains for outsourcing and systems integration and consulting.  Services order backlog at March 31, 2008 was $6.97 billion, up two per cent from $6.86 billion at year-end 2007.

Revenue in the United States declined 11 per cent in the quarter to $537 million, reflecting declines in the company’s technology and federal businesses.  Revenue in international markets increased three per cent to $764 million.  On a constant currency basis, international revenue declined six per cent in the quarter.

The company’s gross profit margin and operating profit margin in the first quarter of 2008 improved to 22.5 per cent and 2.2 per cent, respectively.  These compared with gross and operating profit margins of 19.1 per cent and (2.2) per cent, respectively, in the first quarter of 2007.

First Quarter Business Segment Results

Unisys has a long-standing policy to evaluate business segment performance on operating income exclusive of restructuring charges and unusual and non-recurring items.  Therefore, the comparisons below exclude these items.

Customer revenue in the company’s services segment declined one percent in the first quarter of 2008 compared with the year-ago period.  The company reported revenue growth in outsourcing, which was more than offset by revenue declines in infrastructure services and core maintenance. 

Systems integration and consulting revenue was flat in the quarter.  Gross profit margin in the services business improved to 18.5 per cent compared with 15.0 per cent a year ago.  Services operating margin improved to 2.3 per cent compared with (1.0) per cent a year ago.

Customer revenue in the company’s technology segment declined 16 per cent from the first quarter of 2007, reflecting double-digit declines in both enterprise servers and specialised technologies.  The technology revenue decline was centred in the company’s U.S. and federal businesses; international technology revenue grew in the quarter.  Gross profit margin in the technology business was 42.9 per cent compared with 43.3 per cent a year ago.  Technology operating margin in the quarter was 0.8 per cent compared with 3.5 per cent in the first quarter of 2007.

Cash Flow and Balance Sheet Highlights

Unisys used $49 million of cash from operations in the first quarter of 2008 compared with operational cash usage of $104 million in the year-ago quarter.  The company used approximately $21 million of cash in the first quarter of 2008 for restructuring payments compared to approximately $50 million in the year-ago period.

Capital expenditures in the first quarter of 2008 were $65 million compared to $83 million in the year-ago quarter.  After deducting for capital expenditures, Unisys used $114 million of free cash in the quarter compared with free cash usage of $187 million in the first quarter of 2007. 

During the quarter the company redeemed at par all $200 million of its 7 7/8 per cent senior notes due 2008.  The company ended the quarter with $490 million of cash on hand. 

Note to Editors - Full financial results are available on request.  All figures represented within this release are in US dollars.

About Unisys

Unisys is a worldwide information technology services and solutions company.  We provide consulting, systems integration, outsourcing and infrastructure services, combined with powerful enterprise server technology.  We specialise in helping clients use information to create efficient, secure business operations that allow them to achieve their business goals.  Our consultants and industry experts work with clients to understand their business challenges and create greater visibility into critical linkages throughout their operations.  For more information, visit www.unisys.com
 

Forward-Looking Statements

Any statements contained in this release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include, but are not limited to, any projections of earnings, revenues, or other financial items; any statements of the company’s plans, strategies or objectives for future operations; statements regarding future economic conditions or performance; and any statements of belief or expectation.  All forward-looking statements rely on assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations.  Risks and uncertainties that could affect the company’s future results include general economic and business conditions; the effects of aggressive competition in the information services and technology markets on the company’s revenues, pricing and margins and on the competitiveness of its product and services offerings; the level of demand for the company’s products and services and the company’s ability to anticipate and respond to changes in technology and customer preferences; the company’s ability to successfully implement its repositioning strategy; the company’s ability to retain significant clients; the company’s ability to grow outsourcing and infrastructure services and its ability to effectively and timely complete the related solutions implementations, client transitions to the new environment and work force and facilities rationalisations; the company’s ability to continue to effectively address its challenging outsourcing operations through negotiations or operationally and to fully recover the associated outsourcing assets; the company’s ability to drive profitable growth in consulting and systems integration; the level of demand for the company’s high-end enterprise servers and maintenance on those servers; the risk that the company’s contracts may not be as profitable as expected or provide the expected level of revenues and that contracts with U.S. governmental agencies may be subject to audits, criminal penalties, sanctions and other expenses and fines; the risk that the company may face damage to its reputation or legal liability if its clients are not satisfied with its services or products; the performance and capabilities of third parties with whom the company has commercial relationships; the risks of doing business internationally; the potential business and financial risk in implementing future acquisitions or dispositions and the potential for infringement claims to be asserted against the company or its clients.  Additional discussion of these and other factors that could affect Unisys future results is contained in its periodic filings with the Securities and Exchange Commission.  Unisys assumes no obligation to update any forward-looking statements.

Media Contact

Claire Hosegood, Unisys, 0411 253 663
claire.hosegood@au.unisys.com