Unisys stock slammed after earnings warning

Unisys Corp. Friday warned that second-quarter earnings and revenue would be lower than expected because of delays in service projects and computer sales contracts, primarily in the United States and Latin America.

Unisys, whose shares fell more than 15 percent to its lowest level since May 2003, has been focusing on its consulting and technology services to offset its flagging fortunes in the mainframe computer business. But the company said that both businesses suffered in the second quarter.

Schwab Soundview analyst John Jones said he believes about half of the shortfall at Unisys is from delayed sales of high-end server computers used by companies.

"One quarter doesn't make a concern but it is troubling because the services side of the business is slow this quarter also," Jones said.

Blue Bell, Pennsylvania-based Unisys brings in most of its revenue from technology services and roughly 25 percent from computer products sales.

IDC analyst Anna Danilenko ranks Unisys among the top five U.S. providers of outsourcing services such as managing companies' computer systems.

"It is somewhat surprising but we know spending on IT services remains volatile globally," Danilenko said.

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Overall demand for outsourcing has been increasing globally but competition is fierce. The number of contracts signed each quarter tend to fluctuate because their relatively large size mean customers take longer to make decisions.

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"Companies are evaluating opportunities but they're very cautious about signing contracts," Danilenko said.

Unisys cut its second-quarter forecast to earnings of 10 cents to 11 cents a share before pension costs on revenue of $1.38 billion to $1.39 billion.

Unisys previously forecast a quarterly profit of 14 cents to 17 cents a share, excluding pension costs. Including all items, the company on Friday forecast a profit of 5 cents to 6 cents a share.

Analysts on average were expecting a profit of 13 cents on revenue of $1.51 billion, according to Reuters Estimates.