) reported revenues of $928 million in the first quarter of 2012,
up 2% from a year ago but down 6% sequentially. Foreign currency
fluctuations did not have much of an impact on revenue in the
Services revenues increased 3% year over year due to growth in
systems integration revenue. However, revenues from the U.S.
federal business continue to decline posting a 20% decline in the
Excluding the U.S. Federal business, services revenue grew 7%
from the year-ago quarter, driven by continued growth in IT
outsourcing and systems integration revenue.
Services orders showed double-digit growth in the quarter,
reflecting substantial order gains for outsourcing and
infrastructure services. As of March 31, 2012, services backlog was
$5.4 billion, down 6% from a year ago and down 1% sequentially.
Technology revenue declined 5% in the quarter driven by lower
sales of third-party equipment.
Gross margin came in at 24.3%, down from 28.4% in the previous
quarter, but up from 22.8% in the year-ago quarter. Operating
margin came in at 6.9%, down from 12.3% in the previous quarter but
up from 4.6% in the year-ago quarter.
Net income came in at $13.4 million or $0.30 per diluted share
in the first quarter of 2012 compared to a net loss of $40.8
million or $0.95 per diluted share in the year-ago quarter.
The results include a charge of $7.2 million related to debt
reduction and $24.6 million of pension expense. Excluding
these expenses, net income came in at $0.97 per diluted share.
Unisys generated $33 million of cash from operations
in the first quarter of 2012, down from $28 million in the year-ago
quarter. Capital expenditures in the first quarter of 2012 declined
to $30 million compared with $43 million in the
The company ended the quarter with cash and equivalents of
$654.7 million, down from $714.9 million at the end of the previous
quarter. As part of its debt reduction program, Unisys completed
its previously announced redemption of $66 million of outstanding
senior notes. Unisys ended the quarter with a long-term debt of
$295.5 million, down from $359.7 million at the end of the previous
Since September 2010, Unisys has reduced its debt nearly 2/3 or
more than $540 million. The company is now 87% of the way towards
its 2013 debt reduction goal. These actions, in turn, have
reduced the company's annual interest expense by $69
The macro-economic conditions continue to be challenging. Hence,
we continue to have a Zacks #4 Rank on the stock which translates
into a short-term rating of Sell. Nevertheless, in the long run, we
have a Neutral recommendation on the stock.
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