MMI Investments Takes a 6% Stake in Unisys Stock

In a 13D filing this morning on Unisys Corporation (UIS), MMI Investments disclosed a 6% stake (20.6 million shares) in the company.

In a standard disclosure, the firm said they made the purchase for investment purposes and may communicate with the Issuer's management, directors and other shareholders in the future. The firm said it has no current plan or proposal that relates to or would result in any of the transactions or other matters specified in clauses (a) through (j) of Item 4 of Schedule 13D.

The firm said the total purchase price of its 20,621,700 shares was $133,727,480.

Comments

[Saul Sterman:]

Unisys Corp. (UIS): How to Spin a Downsize

On Tuesday 1/23/07, Goldman Sachs downgraded Unisys from hold to sell. We all know that it is rare indeed for GS or any other of the big boys for that matter, to utter the word ‘sell’. What we found interesting is the timing. Unisys was due to announce earnings the following day, 1/24/07, for Q4 2006. Did Goldman know something?

We waited for the figures and just in case they did know something, unsuccessfully attempted to open a small short position. After taking a look at the figures we figured out why Goldman is saying SELL. The market however is looking at the wonderful blissful ‘suckers’ trap pointing out that Unisys has gone from a loss to an all amazing .06 profit per share.

The bottom line is that Unisys is downsizing and in a big way. The only way to temporarily eek out a small paltry profit over the next few quarters is to continue cutting costs to a greater extent than the loss of revenue and profit margins. Don’t be fooled by the spin. The bottom line is as follows;

Year Ended
December 31, 2006
------------------
Elimi-
Total nations Services Technology
Customer revenue $5,757.2 $4,917.2 $840.0
Inter-segment ($250.3) 14.8 235.5
-------- -------- -------- --------
Total revenue $5,757.2 ($250.3) $4,932.0 $1,075.5
======== ======== ======== ========

Gross profit percent 17.5% 15.1% 44.2%
======== ======== ========
Operating profit
(loss) percent (5.7%) (0.5%) 1.7%
======== ======== ========

Now compare the 2006 figures with 2005 below!!!

Year Ended
December 31, 2005
------------------
Customer revenue $5,758.7 $4,788.5 $970.2
Inter-segment ($259.6) 18.7 240.9
-------- -------- -------- --------
Total revenue $5,758.7 ($259.6) $4,807.2 $1,211.1
======== ======== ======== ========

Gross profit percent 20.2% 12.1% 48.4%
======== ======== ========
Operating profit
(loss) percent (2.8%) (4.3%) 4.2%

* Revenue is stagnant
* Operating loss increased from 2.8% in 2005 to 5.7% in 2006
* Gross profit declined from 20.2% to 17.5%

Perhaps less interesting, yet drives home the reason Goldman downgraded, is the Balance Sheet figure for “Stockholder’s deficit” tripling from 32M to 96M in 2006. This is not a sign of a turnaround by any measure. You can spin a ‘downsize’ anyway you want, but eventually it catches up with you.

MMI did well going long between 6.50 and 7.00. At 8.20, UIS is a short.

Saul Sterman
CrossProfit

2007 Jan 25 01:35 PM