Unisys tops estimates, but sales flat

Unisys Corp.'s (NYSE: UIS) fourth quarter looks like a repeat performance of its third quarter as sales came in flat. This time, however, the outlook is a bit better.

In October, the stock plummeted after the company reported strong earnings, but said sales were flat, and revenue would be sluggish going forward. The technology services company said Tuesday its fourth-quarter earnings were $144.4 million, or 46 cents per share, a penny above consensus, and reported flat revenue again.

Shares in the company closed at 30 3/4 Friday. The stock hopped after an upgrade in November, recovering slightly from the big dip it took after third quarter earnings came in flat with those a year ago.

This quarter's earnings were up only slightly compared to net income of $135.7 million, or 40 cents per diluted share, in the year-ago period.

U.S. revenue was basically flat in the fourth quarter compared to the year-ago period, with revenue in international markets also flat without the negative effect of currency fluctuations, the company said. Revenue was down 4.8 percent to $1.96 billion from $2.06 billion in the year-ago period. Without the negative impact of foreign currency translation, revenue in the quarter increased approximately 1 percent from a year ago.

"As we forecasted, we were impacted at the top line by Y2K customer spending lockdowns and by a more than five percentage-point negative impact of foreign currency translation in the quarter," said Unisys CEO Lawrence A. Weinbach in a company release. Despite this, Unisys was able to meet its earnings target and achieve a more than 55 percent increase in earnings per share for the full year, he said.

The good news? Things are improving.

Unisys gave a rosy forecast for what's ahead in 2000. As organizations focus on new IT projects after the Y2K transition, the company expects 8 to 10 percent revenue growth in 2000. Unisys also said it plans to grow earnings per share at twice the rate of revenue growth in 2000, though technology revenue will be below the first quarter of 1999.

Unisys also reported results for the full year of 1999. Net income was $510.7 million compared to $376.4 million in 1998. Excluding certain items, including a one-time tax benefit of $22.0 million, Unisys said earnings per share in 1999 rose 54 percent to $1.56 per share. Revenue in 1999 grew 4.2 percent to $7.54 billion from $7.24 billion in 1998. On a constant currency basis, revenue grew approximately 7 percent in 1999.

The company's gross margin in the fourth quarter increased slightly over a year ago to 34.8 percent driven by higher gross margins in the services business. Customer revenue in the company's services business was flat in the fourth quarter versus the year-ago-period. Double-digit growth was offset by declines in proprietary maintenance and by a slight decline in networking services revenue, the company said.

Other accomplishments for the quarter included the reduction of debt by more than $1.3 billion, and the progression of the business realignment on schedule.

At the end of the first quarter, Unisys said it expects to begin customer shipments of its new Unisys e-@ction ES7000 enterprise-class servers.