Unisys Plans $300M Restructuring, To Lay Off 8 Percent Of Workforce

Unisys' new CEO announced in Thursday's earnings call that his company will lay off 1,840 employees as part of a $300 million restructuring plan after enduring another quarter of subpar results.

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 March 31 grow 1 percent, to $721.2 million, when factoring in foreign currency exchange rates. That fell well short of the Wall Street consensus of $736.1 million, according to Seeking Alpha.

Unisys stemmed the bleeding on the earnings side, though, with year-over-year non-GAAP net losses improving from $34.2 million last year to $15.8 million this year, or negative 32 cents per share. That beat analysts' expectations of losses of 63 cents per share.
Investors sent Unisys' stock down 0.2 percent in after-hours trading Thursday to $23.50 on the quarterly results, which were released after the market closed.

[Related: New Unisys CEO Snags Ex-Accenture Exec to Lead Services Unit]

"With my arrival, it was time to make structural changes and bite the [restructuring] cost bullet to make ourselves more competitive from an expense standpoint and from a margin standpoint," Peter Altabef, who started as CEO Jan. 1, said during the earnings call.

Unisys will spend $300 million between now and the end of 2016 to reduce the size of its global headcount and its facilities footprint, Altabef said. The cuts will yield $200 million annualized savings by the end of 2016.

Altabef said Unisys plans to lay off 8 percent of its employees, or 1,840 people based on a 23,000-person global workforce. Most of the expenses associated with the layoffs will be incurred in late 2015 or 2016, according to Chief Financial Officer Janet Haugen, since many countries require advance notice be given to governments, unions or other work groups before job reductions can be carried out.

The most significant cuts will be felt across the selling, general and administrative (SG&A) units, Altabef said, while the operating and delivery units will be subject to smaller cuts so that Unisys' ability to deliver services is not adversely affected. The personnel cuts are global in scope, Altabef said, and will not at all be offset by new offshore hires.

"Right now, we are really focused on taking these costs out and making sure, from a go-forward standpoint, we have the right solutions in the right markets," Altabef said.

He added that he is looking to get Unisys' SG&A performance to the bottom of the top quartile of its peer group (or roughly the 25th position out of a selection of 100 companies), which will require substantial improvement from how the company operates today.

"This is not easy stuff," Altabef said. "It's a very difficult thing to do quarter by quarter, cut by cut."

The company has already, though, taken divestiture to its natural conclusion, Altabef said, meaning the company is unlikely to sell off additional business units in the future.

"Frankly, most of the units remaining in the company are really integral to growth going forward," he said.

The only possible exception to that are some of Unisys' joint ventures, which Altabef said are less vital to the company's growth strategy. Still, he said he doesn't necessarily anticipate that Unisys will sell its stake in the projects.

Unisys struggled with its Latin America, public sector and financial business in the most recent quarter, while excelling with its technology business, North America region and U.S. federal government business, according to the company.

The company's services revenue remained flat on a constant currency basis in the most recent quarter, at $639 million, with business process outsourcing services off 12 percent, cloud and infrastructure sales down 11 percent and application services climbing by 3 percent, Haugen said. Services made up 89 percent of Unisys' overall revenue in the most recent quarter.

Technology division revenue was up 13 percent on a constant currency basis, to $82 million, Haugen said, thanks to higher sales of proprietary software and servers. Technology sales make up the remaining 11 percent of Unisys' revenue.

North American revenue climbed by 9 percent in the most recent quarter, but sales fell elsewhere else on a constant currency basis -- revenue declined by 9 percent in Latin America, 5 percent in Asia-Pacific and 4 percent in EMEA (Europe, the Middle East and Africa). Latin America struggled because of one-time IT sales in Brazil at this time last year during the lead-up to the 2014 FIFA World Cup.

About 49 percent of Unisys' revenue comes from the U.S. and Canada, while 30 percent comes from EMEA, 11 percent comes from Asia Pacific, and 10 percent comes from Latin America.

Unisys' vertical performance was a mixed bag, with sales in the U.S. federal sector climbing 13 percent and commercial sales climbing by 1 percent on a constant currency basis. Public sector sales (which include everything except U.S. federal) fell by 3 percent on a constant currency basis, while financial sector sales fell by 2 percent.

These verticals make up 18 percent, 35 percent, 26 percent and 21 percent of Unisys' revenue base, respectively.

Some of the success in the U.S. federal sector is thanks to an agreement with the U.S. Department of Homeland Security, Altabef said, where Unisys is expanding its license plate reader deployment program to 16 locations along the border separating Mexico from the United States.

PUBLISHED APRIL 23, 2015