Mainframes pump up profits at Unisys

Bucking Uncle Scrooge Sam


Mainframe maker and services provider Unisys continues to improve its financial situation despite the loss of a major contract with the US Transportation Security Agency last fall. The currency exchange rate of the US dollar against other currencies in countries where Unisys does business didn't hurt matters, either.

In the third quarter ended September, Unisys rang up just a tad bit more than $1bn in sales, an increase of 6.2 per cent over the prior year's Q3. (Currency accounted for most of that growth, by the way.) Net earnings rose by a factor of 3.6 on a continuing operations basis, to $78.6m.

Sales of hardware and systems software – what Unisys blandly calls "technology" – shot up by 36.4 per cent to $143.8m, driven by strong sales of the company's ClearPath mainframes. On a conference call with Wall Street analysts after the markets closed on Monday,Unisys CFO Janet Haugen warned Wall Street not to get overly excited about mainframes, and that the best way to look at the ClearPath business – which is lumpier than an old mattress or bad gravy – was on an annual basis.

As it stands, ClearPath mainframe sales are flat through the first three quarters of 2011 compared to the same period in 2010, and Unisys expects for ClearPath sales to hold steady in Q4. So don't expect a big bump.

Unisys is predominantly an IT services company, and its services biz was under pressure because of the loss of that TSA contract, which brought the company somewhere between $30m and $33m a quarter when it was in effect. Services sales were only up 2.5 per cent in the quarter, to $876.3m.

The systems integration business was up 5 per cent to $306m, outsourcing was up 1 per cent to $330m, infrastructure services increased by 7 per cent to $124m, and business process outsourcing fell 5 per cent to $61m. Core maintenance on Unisys systems was flat in the quarter at $55m.

Unisys CEO Ed Coleman said during the call that excluding the US Federal business – which is hard to do with Unisys – revenues grew by 14 per cent in the quarter. Outside of Uncle Sam, the outsourcing business was up 12 per cent and systems integration was up 21 per cent.

Clearly, in the wake of severe budget pressures in Washington, Unisys sales reps have been banging on doors among manufacturers, distributors, and financial services companies. Outsourcing has now shown seven straight quarters of consecutive growth for Unisys, and its help desk offering continues to be strong, said Coleman.

Say uncle!

In the third quarter, about 30 per cent of the revenues that Unisys got from the US government came from various defense and intelligence agencies, with 26 per cent coming from the Department of Homeland Security and another 44 per cent coming from civilian agencies. The US Federal agencies made up 18 per cent of the company's total sales in Q3, and the public sector, including foreign, state, and local governments, made up 43 per cent of revenues.

Financial services firms accounted for 23 per cent of the Unisys revenue pie, with corporations spanning other industries making up the other 34 per cent. The commercial business was up 14 points in the quarter and financial business rose by 18 points, but the public sector dropped 4 points.

Unisys exited the quarter with a $5.3bn services backlog, which is utterly dwarfed by the one that IBM has, but which is key to the Unisys business just the same. Haugen said about $730m of this was scheduled to flip to revenue in the fourth quarter.

Things are going well enough for Unisys to retire $66m of debt early, which Haugen announced the company will do in the next quarter. Three years ago, Unisys was almost $750m under water even though it had nearly half a billion dollars in cash, and Coleman pushed the company to breakeven in the fourth quarter of this year.

The company now has $667.3m in cash and equivalents and $444.4m in long-term debt. So it is actually has $222.9m of nose above water. Oddly enough, none of this has helped the company's share price. It still only has a market capitalization of $825m as El Reg goes to press.

Unisys announced last week that it would pay out a $1.56 dividend on preferred shares in December. ®

Similar topics

Narrower topics


Other stories you might like

  • IBM highlights real-time fraud detection in z16 mainframe
    Big iron also claimed to be safe against encryption breakage by quantum computers

    IBM has lifted the covers off the z16, the newest member of its Z Series mainframe family, which focuses on the financial services industry with a processor that has built-in AI acceleration for real-time fraud detection.

    The z16, generally available from May 31, is the successor to the z15 that launched in 2019, and Big Blue will be hoping that it can replicate the success of that system, which was adopted by many banks. A new mainframe typically delivers a spike in revenue to IBM because plenty of such customers rely on them as a mission-critical part of their business and are keen to upgrade.

    For the z16, the new capabilities come in the shape of the 7nm Telum processor, which adds on-chip AI inference capabilities that IBM claims can be used to run real-time fraud detection checks against a transaction while that transaction is taking place.

    Continue reading
  • IBM deliberately misclassified mainframe sales to enrich execs, lawsuit claims
    Lawsuit accuses Big Blue of cheating investors by shifting systems revenue to trendy cloud, mobile tech

    Special report IBM has been sued by investors who claim the company under former CEO Ginni Rometty propped up its stock price and deceived shareholders by moving revenues from its non-strategic mainframe business to its strategic business segments, allegedly in violation of securities regulations.

    The investors' securities fraud lawsuit [PDF] was filed on Tuesday, April 5 in a southern New York federal court. It names as defendants not only IBM but current and former executives including Rometty, former CFO Martin J. Schroeter (now CEO of IBM spin-off Kyndryl), current CFO James J. Kavanaugh, and current CEO Arvind Krishna.

    IBM "improperly and in violation of Generally Accepted Accounting Principles ('GAAP') embarked on a fraudulent scheme to shift billions of dollars in revenues from its mainframe line of business to its Strategic Imperatives and CAMSS line of business," the complaint reads.

    Continue reading
  • IBM files IP lawsuit against mainframe migration firm
    Claims shell company formed to license mainframe products for reverse engineering

    IBM is taking legal action against LzLabs, a company specializing in mainframe modernization services, claiming that it has violated IBM's intellectual property rights in relation to its mainframe technology.

    In a statement, IBM said that LzLabs had deliberately misappropriated IBM trade secrets by reverse engineering, reverse compiling, and translating its mainframe software. The case has been filed in the US District Court in Waco, Texas.

    LzLabs provides a platform called Software Defined Mainframe (SDM) that is designed to allow IBM mainframe users to migrate their mission-critical applications to a modern platform – typically a cluster of x86 servers – without having to modify the applications or the associated data.

    Continue reading

Biting the hand that feeds IT © 1998–2022