Earnings roundup: Unisys hit by slow server sales

Unisys citing slow sales of its enterprise servers and weaknesses in its systems integration business, yesterday reported a 35 per cent drop in first-quarter profits and warned that earnings in the current second quarter will likely be just half of what they were in the same period last year.

Unisys was one of several technology vendors that released financial results or preliminary numbers for the quarter that ended last month. Among the others was Computer Associates which said operating profits in its fiscal fourth quarter are expected to be up 72 per cent on a year-to-year basis under a new software licensing and revenue accounting formula adopted last fall.

At Unisys, first-quarter sales were lower than expected for both its ClearPath servers and its newer ES7000 line of 32-processor systems. Lawrence Weinbach, the company's chairman and CEO, said in a statement that technology sales were down 9 percent from the same quarter a year ago because the softening economy prompted users to delay server purchases.

"Customers continue to be cautious about undertaking new large-scale capital [IT] projects," Weinbach said. That resulted in "a challenging quarter" and is expected to again affect Unisys during the current three-month period, he added. Weinbach said he only expects "modest revenue growth" on a year-to-year basis during the second quarter.

First-quarter profits totalled US$69.3 million on a pro forma basis, down from the year-earlier level of $107.4 million. Revenue came in at $1.62 billion, up 6 percent from $1.53 billion in last year's quarter. But Unisys said most of the increase was due to residual sales of commodity hardware as part of a previously disclosed plan to get out of that business.

Unisys announced the commodity hardware exit late last year along with a workforce cutback affecting 2,000 employees. The company also disclosed at the time that it was considering the sale of its federal government IT services division, but yesterday it said that idea has been dropped "based on weak market conditions."

CA said revenue for its fiscal fourth quarter is expected to total $1.44 billion under its new licensing and accounting approach, up from the year-earlier figure of $1.39 billion. Operating earnings should come in at about 47 cents per share before acquisition costs and other special charges, up from 34 cents per share in last year's fourth quarter.

CA switched to a subscription-based software licensing scheme last fall, under which users can buy its products via monthly subscriptions -- a move aimed at giving the company a more predictable revenue stream. The final fourth-quarter results are due to be announced May 22, and CA declined to comment on its expected net income until then.

Also releasing its financial results was NCR Corp., which today reported first-quarter operating earnings of $22 million compared with a $4 million operating loss in the same period a year ago. Revenue totalled $1.38 billion, up 10 percent from the year-earlier level of $1.26 billion. Second-quarter revenue growth is targeted at 5 per cent year-to-year, said NCR.

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