|
Unisys issues 2Q warning
|
 |
June 29, 2000: 2:31 p.m. ET
Contract delays, weak sales to U.S. and financial services firms hurt results
|
NEW YORK (CNNfn) - In another sign that the computer services industry is hitting a wall, Unisys Corp. issued its second warning this year about its financial performance, alerting investors that second-quarter profits will be about half of Wall Street forecasts.
Its stock promptly lost more than a third of its value, tumbling 7-7/8 to 15-1/4 in mid-afternoon New York Stock Exchange trading.
The Blue Bell, Pa.-based computer services company said it will earn 18 to 20 cents a share in the quarter, excluding one-time items, compared with forecasts of 37 cents a share by First Call, which tracks analysts' estimates. The company earned 37 cents a share a year earlier.
 Unisys also said sales will be $1.62 billion to $1.65 billion, off about 14 percent from strong levels a year earlier.
Unisys (UIS: Research, Estimates) blamed delays in several large contracts and continued weakness in its federal government and financial services businesses. The company expects its revenue and earnings per share to decline about 5 percent for all of 2000, excluding a one-time charge in the second quarter.
In a conference call, Unisys' management discussed several steps it will take to shape up its services division, including a hiring freeze, training of all sales personnel in e-business, and "a complete review of the services strategy."
"We believe that this services review -- due to complete in mid-August --
is necessary, but will again detract from the main goal of increasing
revenue just as the sales force realignment did in previous quarters," Merrill Lynch analyst Steven Milunovich said in a research note. The analyst reduced his rating on the stock to "neutral" from "accumulate" and cut his earnings estimates for fiscal 2000 and 2001.
Problems plague large computer service firms
Unisys' woes demonstrate how large, diversified computer service providers are struggling to compete against smaller companies that specialize in Internet and wireless communications consulting, such as Razorfish, Scient Corp., Viant Corp., Proxicom Inc. and Sapient Corp.
Razorfish (RAZF: Research, Estimates), for example, creates "digital solutions" for companies that use the Web, broadband and satellite communications, and a variety of digital devices and information appliances. Its first-quarter revenues rose 97 percent to $64 million, a vastly faster growth rate than its larger competitors.
"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 Chairman and CEO Lawrence Weinbach said in a news release. "Purchasing decisions are taking longer than in the past as customers finalize their strategies before initiating complex e-business implementations."
On June 9, the stock of Electronic Data Systems Corp., one of Unisys' main competitors, plunged after that computer services provider forecast disappointing second-quarter revenue. EDS said then that it expects to report "soft" second-quarter revenue, news that hurled its stock down nearly 24 percent.
In a research report issued earlier this week, Merrill's Milunovich expressed similar concerns abut IBM's computer services business.
"Although (IBM) CEO Gerstner said in May he has no concerns about services, we do," Milunovich wrote. "EDS, SCS, and Perot have each suffered recently. Contract signings appear solid, but the time between outsourcing order and implementation may be increasing in the mature U.S."
Thursday's announcement is not the first time Unisys has disappointed investors. In April, it warned investors that sales would be below expectations for the first quarter, although it left earnings guidance unchanged. It met that forecast about a week later. It also blamed slow sales to the government and financial services sector at that time.
The company announced a realignment of its business services in October in an effort to bolster sales. Unisys, which once was a computer hardware manufacturer, made services its prime business in 1994. 
|
|
|
|
|
|
Unisys
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
