Unisys Expects Fourth Quarter Loss

The Blue Bell, Pa.-based, computer services and equipment company said lower revenue and delayed revenue recognition on a large contract signed in December also contributed to the expected loss of seven cents to 10 cents a share. The company had earlier forecast earnings of between 27 cents and 31 cents a share.

Among the major items contributing to the loss was a $120 million, or 25 cents per share, write off of "contract-related capitalized assets" related to its outsourcing operation.

In addition, a shortfall of eight cents a share was due to having to delay revenue recognition on a "large, complex, multi-element contract."

"Unisys had anticipated that revenue on the hardware and operating system software elements of this contract would be recognized in the fourth quarter as equipment was delivered and accepted and as software licenses began," the company said in a statement. "However, upon review of the final contract, it was determined that the appropriate accounting would be to recognize revenue on a month-to-month basis over the five-year term of the contract."

Revenue for the quarter was expected to be down 7 percent from the same period in 2003, ranging from $1.52 billion to $1.53 billion. Technology revenue, which the company had expected to be up year-over-over, is expected to be down 20 percent. Service revenue was expected to be down slightly from year-ago levels.

"We are disappointed by our fourth-quarter results, which came in below our expectations," Joseph W. McGrath, president and chief executive of Unisys, said in a statement.

Nevertheless, McGrath said company executives "remain confident in our value-added strategy and are committed to delivering against our financial objectives for 2005."

Free cash flow, which equals operational cash flow minus capital expenditures, was expected to be more than $30 million, down from previous expectations of more than $50 million, the company said.

In October, Unisys reported a 55 percent drop in net income for the third quarter, citing a charge related to trimming its work force, pension expenses and lower margins in its outsourcing business. The company said net income was $25.2 million, and revenues were flat compared with the same period a year ago at $1.45 billion.