Unisys tumbles on earnings warning

The computer services company's shares fall nearly 30 percent on news that the company expects to report lower-than-anticipated second-quarter earnings and revenues.

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Computer services company Unisys today said it expects to report lower-than-anticipated second-quarter earnings and revenues because of continued weakness in its government business and the deferral of some large technology contracts.

News of the shortfall sent Unisys shares tumbling nearly 30 percent. In early trading, shares of Unisys shed $6.63 to $16.50.

For the quarter, the Blue Bell, Penn.-based company said revenues are expected to be in the range of $1.62 billion to $1.65 billion, a decline of 13 to 15 percent compared with the year-ago period. The company also expects second-quarter earnings to be in the range of 18 to 20 cents per share.

Analysts polled by First Call/Thomson Financial projected the company to report 37 cents per share.

Like other traditional computer services companies, such as rivals Electronic Data Systems, IBM Global Services and Computer Sciences, Unisys has been busy revamping its strategy to add revenues by acquiring more lucrative Internet contracts for Web site design, development and strategy consulting. The companies have been working overtime to catch up to the success of smaller counterparts such as Razorfish, Scient, Proxicom and MarchFirst in the area of Internet consulting.

"Throughout the industry, customers are turning their attention to new e-business projects and placing less focus on more traditional solution and service packages," Unisys chief executive Lawrence Weinbach said in a statement. "Because of the strategic nature of these initiatives, purchasing decisions are taking longer than in the past, as customers finalize their strategies before initiating complex e-business implementations...resulting in delays in the initiation of new contracts."

Earlier this month, EDS saw its shares plunge after the services behemoth warned of lower-than-expected second-quarter revenues. EDS said second-quarter revenues are expected to be in the low single digits, compared with the previously forecast growth rate in the mid-single digits.

Today's warning marks the second consecutive earnings warning that Unisys has had to issue this year.

In April, Unisys served a disappointing financial outlook to Street analysts. At the time, Weinbach reiterated prior guidance by the computer services supplier that its revenues growth would not resume double-digit levels until the second half of this year, which disappointed analysts who had hoped for better.

The company said it expects upcoming second-quarter services revenue and orders to show low double-digit percentage declines compared with the year-ago period, but to be up sequentially from the first quarter.

Technology orders are expected to increase over the year-ago period, but overall, Unisys expects a mid-single-digit percentage decline in fiscal 2000 revenues and earnings per share, compared with last year's revenue levels.

Separately, the company announced the finalization of its original equipment manufacturer (OEM) deal with Compaq Computer, under which Compaq will deliver Unisys CMP-based systems--the company's flagship Intel-based mainframe servers.

Unisys is slated to report second-quarter results July 18 before the markets open.