New Unisys CEO Calls For Stronger Software Solutions, Vertical Focus

Unisys' new CEO said his company will deepen its domain-specific expertise and develop software to differentiate its services business after recording another rough quarter.

The Blue Bell, Pa.-based company, No. 17 on the CRN Solution Provider 500 list, saw year-over-year revenue for its fourth quarter ended Dec. 31 drop 6 percent to $906 million when factoring in foreign currency exchange rates. The Wall Street consensus was $889.9 million, according to Thomson Reuters.

Quarterly earnings plummeted from 47 percent at $117.4 million last year to $61.8 million this year, or $1.60 per share when adjusted for nonrecurring costs. That was still well above analyst expectations of $1.27 per share.

[RELATED: Unisys Names 20-Year Channel Executive Veteran As New CEO]

Investors sent Unisys' stock down 2.7 percent in after-hours trading Thursday to $24.59 on the quarterly results, which were released after the market closed.

"We need to evolve the company so that it operates as a world-class services company and gets the kind of margins you'd expect from a company of our stature," said Peter Altabef in some of his first public comments since starting as CEO Jan. 1.

Altabef faces a difficult road ahead in taking over for Ed Coleman, who left in December after the company said it was the "right time" for a change. Unisys has been dealing with declining revenue in its services division and has recorded losses in seven of the previous 12 quarters.

Altabef cited growing revenue in Unisys' services business as a goal of his, which he acknowledged the company hasn't consistently delivered. He hopes to do that by directing more effort toward vertically aligned and value-add solutions in technology areas such as security.

"Unisys will play an important role in the rapidly evolving tech landscape," he said.

He also plans to examine the company's involvement with cloud providers and adoption of an "as-a-service" model, and noted Unisys already does a surprisingly good job in pivoting to back-end infrastructure.

"We have an extraordinarily capable team of people," Altabef said.

Other key areas of focus cited by Altabef include developed software and integrated solutions that can differentiate Unisys' service business, aligning the company's resources with its areas of strength and driving operational efficiencies.

Altabef said he also intends to look at how to best allocate Unisys' cash between organic growth, merger and acquisition activity and shareholder returns.

Unisys' new CEO brings more than 20 years of executive experience to the table, having served as CEO of point-of-sale company Micros Systems and Perot Systems, as well as president of Dell Services after it was acquired by Perot.

NEXT: Technology Division, Americas Region, U.S. Government Bright Spots

Unisys struggled with its international, public sector and services business in the most recent quarter, while the solution provider's technology business, Americas region and the U.S. federal government vertical made up some of the only bright spots.

The company's services revenue declined 8 percent on a constant currency basis in the most recent quarter to $721 million, with systems integration sales off 11 percent and IT outsourcing sales down 10 percent, Chief Financial Officer Janet Haugen said during the earnings call.

Services comprised 80 percent of Unisys' overall revenue in the most recent quarter.

Technology division revenue was up 3 percent on a constant currency basis to $185 million, Haugen said, with the company's ClearPath enterprise software and services unit leading the way with 13 percent annual growth. Technology sales make up the remaining 20 percent of Unisys' revenue.

Lower IT outsourcing revenue prompted Unisys' Asia-Pacific sales to fall by 32 percent on a constant currency basis, Haugen said, while revenue from Europe, the Middle East and Africa (EMEA) was off 24 percent on a constant currency basis.

Some 32 percent of Unisys' revenue comes from EMEA, while 13 percent comes from Asia-Pacific.

Success in the technology division and systems integration sector caused Latin American sales to skyrocket by 56 percent on a constant currency basis, Haugen said, while revenue from the United States and Canada were up 6 percent.

Approximately 42 percent of Unisys' revenue comes from the U.S. and Canada, while 13 percent comes from Latin America.

Most Unisys verticals didn't perform well in the most recent quarter, with public sector sales down 21 percent, commercial sales down 12 percent and financial industry sales down 9 percent, Haugen said. These verticals make up 26 percent, 35 percent and 23 percent of Unisys' revenue base, respectively.

The exception was the U.S. federal sector, where sales climbed by $27 million -- or 18 percent -- to $178 million, Haugen said. Some 42 percent of sector sales come from defense and intelligence agencies, she said, while 37 percent and 21 percent come from civilian agencies and homeland security, respectively.

Plus, after getting caught up in political cross-hairs, a five-year, $460 million border management enforcement contract for Unisys is moving forward under the purview of the U.S. Customs and Border Patrol.

While Unisys didn't provide any sales or revenue projections for 2015, Haugen said a negative 6 percent currency headwind and few ClearPath customers coming up for renewals at the start of the year will make things difficult in the short run.

PUBLISHED JAN. 29, 2015