Unisys Stock In Free Fall As Losses Mount, Outlook Worsens

Unisys' stock price plummeted 19 percent in early trading Friday after company leaders reiterated a weak sales outlook and costs associated with a $300 million restructuring plan.

The Blue Bell, Pa.-based company, No. 19 on the CRN Solution Provider 500, saw losses climb from $12.1 million in the second quarter of last year to $58.2 million for the same quarter this year because of $53 million in severance and reorganization costs associated with more than 1,800 planned layoffs.

Revenue for the quarter actually rose 4 percent, to $765 million, after factoring out changes in foreign currency exchange rates, handily beating a Yahoo Finance estimate of $749.2 million. Likewise, after factoring out restructuring and amortization costs, Unisys' profit actually grew from $5.8 million in the second quarter last year to $16.3 million in the second quarter this year, or 33 cents per share, decimating a Yahoo Finance estimate of a 38-cent-per-share loss.

[Related: Unisys Plans $300M Restructuring, To Lay Off 8 Percent Of Workforce]

But company executives warned in the earnings call Thursday that sales and earnings would be much worse in the second half of 2015 because of fewer renewal opportunities and less U.S. federal business compared with last year.

"This was an exceptionally strong quarter, and we expect the level of growth during the second half to be considerably lower," Unisys CEO Peter Altabef said during the call.

Chief Financial Officer Janet Haugen echoed Altabef, reiterating that while Unisys is pleased with the technology revenue growth in the first half of 2015, the company doesn't expect it to hold for the remainder of the year.

To wit, Haugen said Unisys' 2015 first-half technology revenue is expected to be more than 40 percent of the full-year figure; in 2014, first-half technology revenue was just 30 percent of the full-year figure.

Wall Street responded very unfavorably to this bleak outlook, with Unisys' stock tanking 19 percent, to $16.01 per share, in early trading Friday. Unisys' quarterly results were released Thursday after the market closed.

Altabef, who started as CEO of Unisys on Jan. 1, announced in April that the company would spend $300 million by the end of 2016 to reduce its global head count and facilities footprint. The first of those charges -- totaling $53 million -- came in the most recent quarter.

Altabef said in April that Unisys plans to lay off 8 percent of its employees, or roughly 1,840 people based on a 23,000-person global workforce. The cuts will yield $200 million in net annualized savings by the end of 2016 because of lower operating costs, Unisys projects.

Altabef said Thursday that although Unisys has made progress in achieving its restructuring goals, "there is still much work to do."

Unisys is hoping to improve gross services margins by refining its service delivery models, workforce pyramids and mix of onshore and offshore resourcing, as well as leveraging more automation and reducing the vendor's dependence on subcontractors.

In the future, Unisys expects these changes will improve services gross margins and allow the company to reduce expenses related to presales, solution architecture and contracting, while increasing the volume and velocity of transactions for its sales team.

The company also reported a 420 basis point decline in gross profit margin, of which 270 points stemmed from costs related to restructuring and increased pension expense.

Currency fluctuations accounted for 90 points of gross profit margin decline, the company said, while the remaining 60 points stem from lower technology margins, which are partially offset by a higher percentage of overall revenue coming from technology.

Going forward, Altabef said, Unisys is going to focus on becoming more responsive to "new market opportunities" on a global scale.

Michael Novinson contributed to this story.

PUBLISHED JULY 24, 2015