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:
* 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 supporting the reasoning for the Goldman downgrade, is the Balance Sheet figure for “Stockholders' 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.
We were able to short on Thursday at $8.20.
Disclosure: Author is short UIS