When I was at Financial World Magazine, we would do a list of the ten worst managed companies in America. The cycle was about once a year. To make the list, a company had to do a lot wrong compared to the rest of the stock market and its peer group. The financial results would have to be very poor, and companies in industries that were down across the board were usually not included. For this tech list, a number of financial sources were consulted along with research from Wall Street and sources like ValueLine, Morningstar, and Investor's Business Daily.
A good first look at Unisys Corp. (NYSE:UIS) can be done through two lenses: The first is the recent Wall Street Journal article on executive compensation. The survey looks at 350 very large companies for the 2004 and 2005 period. Of the 29 companies in the Technology section, Unisys shows by far the worst 1 year total shareholder return at -42.9% and ranks among the worst for 5 year return at -16.7. Both are substantially below the Technology Medians in the study.
Then, turn for a moment to the Morningstar report on the company. There is an interesting chart on Unisys and its competitors showing sales compared to market capitalization. Unisys shows trailing twelve month sales of nearly $5.8 billion and a market cap of $2.3 billion. For the other companies which include IBM (NYSE:IBM), Sun (NASD:SUNW), EDS (NYSE:EDS), Accenture (NYSE:ACN), and Computer Sciences (NYSE:CSC), market cap and sales are much more closely aligned. In other words, the market discounts the Unisys revenue.
In 1999, Unisys had revenue of $7.545 billion and operating income of $961 million. In 2005, revenue had dropped to $5.759 billion and the company had an operating loss of $162 million.
The company's stock price was close to $15 two years ago. It now stands at $6.70.
Unisys was once known as a large mainframe company. It is now, based on its own description in the business of supplying "expertise in consulting, systems integration, outsourcing, infrastructure, and server technology to help clients achieve secure business operations". The company is still in the high end server business but says that this sector is shrinking.
On the balance sheet side of things, debt is up to $1.1 billion, far below the company's cash balance of $642.5 billion at year end 2005.
Unisys is a company that got itself stuck between two closed doors, one in IT consulting and the other in high-end hardware. Given the size and strength of its competitors, neither is likely to open soon.
UIS 1-yr Chart
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited site on the internet, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at email@example.com.
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