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UPDATE 2-Unisys warns of lower 1st quarter revenue

04/04/00

(adds analyst comment paras 7-8)

By Nicole Volpe

NEW YORK, April 4 (Reuters) - Computer services supplier Unisys Corp. on Tuesday said its first-quarter revenues would be lower than expected, citing a Year-2000 related slowdown and a reorganization of the company.

The warning marks the second time in three quarters the company will post slack revenue growth, but Chairman and Chief Executive Lawrence Weinbach said he expects double-digit revenue growth in the second half of the year.

Weinbach said in a conference call he remains comfortable with forecasted earnings of 33 to 35 cents per share for the quarter, compared to 31 cents in the first quarter of 1999.

"In financial services, the lockdown (in customer spending due to Y2K) was dramatic and it is just starting to come back," he said. "We felt the brunt of that because so much of our businesss is in the financial services sector."

Shares fell 2-13/16 to 22-5/8 on the New York Stock Exchange late Tuesday morning.

Unisys lost more than a third of its market value in October when the company posted sluggish third-quarter revenue growth, despite beating analysts' earnings-per-share estimates.

Wit Soundview analyst Gary Helmig said that the revenue shortfall, while a sharp departure from Unisys' usual results, was understandable because of the unique situation presented by Y2K.

"You have to have concerns when there are issues of meeting expectations," he said. "Unisys in early 1999 was known to consistently beat expectations. But with something like Y2K, it's very difficult to forecast around something that never happened before," he said."

Unisys Tuesday forecast first-quarter revenues to be between $1.66 billion to $1.69 billion, versus $1.81 billion in the first quarter of 1999.

The company also said it got off to a slow start in the quarter due to retraining of its sales staff for a new business model for its 1,000 largest clients worldwide, and was negatively impacted by exchange rate pressures.

Full year earnings per share, before a charge, were expected to be in the $1.75 0 $1.80 range, Weinbach said.

"The good news is that with the Y2K transition behind us, our customers are turning to projects they had on the back burner," he said.

Weinbach said proposals for Unisys to tie together corporations' divergent computer systems were up 50 percent in the first quarter versus a year ago.

He said revenues could be realized on such contracts within three to six months, creating double-digit year-over-year revenue growth in the second half of 2000.

"We won't win all of these proposals but we will win our fair share," he said.

Given the weaker-than-expected orders and revenue in the first quarter, Unisys said it now expects revenue to be down slightly in the second quarter versus the year before, but higher than first quarter revenue.

Second-quarter diluted earnings per share, before a previously announced one-time $20 million charge for the retirement of $400 million of debt, are expected to be basically flat versus a year ago, Unisys said.

For the full year, Unisys expects revenue growth of 4 to 6 percent, with earnings of $1.75 to $1.80 per share before the debt retirement charge. The company will release its first-quarter results on April 13.

The company plans to report first quarter results on Thursday, April 13.

REUTERS

-- (Market@new.s), April 05, 2000