Unisys Continues Turnaround With Strong Q2 Technology Results

Unisys reported its second-quarter results, showing a revenue increase in its technology segment of nearly 31 percent and an increase in profit margin.

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Unisys has reported its second-quarter 2016 financial results, showing revenues of $748.9 million—down 2 percent from the same period a year ago.

Though revenue for the quarter declined, Unisys saw year-over-year increases in operating profit margin, operating cash flow and free cash flow, as the company continues to transition to higher-value business opportunities, said Peter Altabef, president and CEO of Unisys, during the company's earnings call July 26.

Unisys reported an operating profit margin of 6.6 percent, including cost reduction charges and pension expense, Altabef said. Operating cash flow for the quarter versus the prior year increased by $55.7 million to $34.6 million, while adjusted free cash flow in the second quarter of 2016 increased $78.7 million from the prior year to $54.3 million, the company said.

Meanwhile, the company's net income grew to $21.6 million versus a loss of $58.2 million in the second quarter of 2015. Altabef said the increase in profitability came primarily from decreased operating expenses resulting from the company's ongoing cost-cutting efforts. But it also was helped by an increase in revenues from higher-margin technology products, he noted.

Altabef said Unisys ended 2015 with $100 million in cost savings, and to date the company has cut $155 million in costs and is on target to achieve its goal of $200 million in cost savings by the end of this year.

"We are continuing to execute against the strategy we commenced in 2015, which focuses on providing security in everything we do, growing demand for both cyber- and physical-security offerings, while investing to improve our go-to-market effectiveness by aligning vertically," Altabef said in a statement.

Unisys' technology revenue, which represented 18 percent of total revenue for the quarter, increased 30.7 percent year over year, driven largely by increased ClearPath Forward sales.

Unisys is known for its ClearPath Forward architecture and super-secure operating system. The company's latest splash in the security space is its Stealth technology. The National Institute of Standards and Technology (NIST) ranked The Unisys ClearPath OS 2200 and Unisys ClearPath MCP as two of the most secure operating systems around.

"Unisys Stealth is a distinguishing technology and we're trying to build out that middle layer of many different security products," Altabef said. "We're putting next-generation security into all of our offerings." He also noted that Unisys is working on delivering a new digital collaboration platform that will tap the company's cloud technologies, Stealth security products and other offerings.

Meanwhile, Unisys' services revenue, which represented 82 percent of total revenue for the quarter, declined by 7.2 percent to $613.8 million. Yet, the decline in the services business was offset largely by a strong quarter for the technology business, Altabef said.

After several years of gradual decline in revenue hanging on to its traditional market segments—amid the current Decade of Disruption—Unisys appointed Altabef as the new Unisys president and CEO Jan. 1, 2015, with a mandate for growth. Altabef was named based on his track record of launching or turning around underperforming businesses. He has held CEO or senior leadership positions at MICROS, Perot Systems and Dell Services.

"Unisys' Q2 2016 financial results show that its strategy under president and CEO Peter Altabef is making demonstrable progress," said Charles King, principal analyst at Pund-IT. "Since Altabef joined the company in early 2015, Unisys has shifted tack from enterprise-class IT services and systems to integrating security features across its solutions."

Immediately, Altabef addressed and prioritized the disruptive changes in IT—cloud computing, mobility, big data analytics, security and the consumerization of technology among them. He designed and implemented a new operating model to be a more nimble, focused and responsive company well-positioned to serve a "consumerized" business and government mindset. Unisys would focus on bringing innovative, differentiated solutions in the newer growth categories to address customers' most pressing business and technology problems.

"Unisys is a very important company; it is integral to the history of information technology and technology in general," Altabef told eWEEK. "It's a company that still has remarkable people and really important technology, but they had stopped growing. I took the challenge to come in and run the company because I thought there were a huge amount of assets there and by refocusing it I knew we could get growth and increase value for our clients."

Increased sales of higher margin technology products, along with ongoing cost-cutting efforts delivered Unisys results that are solidly in the black, King said.

"That's excellent news for a company that, while deeply rooted in traditional mainframe technologies has successfully transitioned to modern enterprise systems leveraging Intel Xeon processors and software from leading vendors, including Microsoft, SAP and VMware," he added.