Not only have we seen no (weakness), we’ve had the strongest quarter we’ve ever had in terms of orders. We go into the new year with a comfortable backlog, Unisys chief executive Michael Blumenthal told Dow Jones reporter Paul Carroll this week. Blumenthal, in what is becoming an annual state of the company message, was […]
Not only have we seen no (weakness), we’ve had the strongest quarter we’ve ever had in terms of orders. We go into the new year with a comfortable backlog, Unisys chief executive Michael Blumenthal told Dow Jones reporter Paul Carroll this week. Blumenthal, in what is becoming an annual state of the company message, was responding to concern on Wall Street that the computer market may have weakened since Meltdown Monday. He forecast good, solid, double-digit profit growth in 1988 on a single-digit increase in turnover. He also said the company was encouraged by initial results from its plans for generating revenue in 1989 and beyond – crucial, since Unisys’ initial successes have come from cost-cutting, and those benefits can’t carry through for many more quarters. For 1987 the company expects to report earnings of $2.90 to $2.95 a share fully diluted, and hopes to be toward the high end of that range. At the time of the merger, Blumenthal talked of earning $2.67 to $3 a share in 1987, but analysts generally expected $2 a share or even less. The current company forecast would put net income at $580m to $590m, compared with a loss last time of $43.4m after $280m in charges. Blumenthal said turnover increased 15% to 17% in the fourth quarter over turnover from continuing operations of $2,400m, implying sales of $2,760m to $2,810m in the quarter, and $9,670m to $9,720m in the year, still shy of the magic 10 billion dollar figure. Going into detail, Blumenthal said that growth in US government business lagged in 1987 – a recent study by Computer Intelligence suggests that IBM has overtaken Unisys as the top supplier to the US Federal government. Debt down to 29% of equity But business with commercial enterprises grew 20% in the fourth quarter and 9% in the year. The fear that the company would long labour under a mountain of debt after the merger seems unfounded: Blumenthal said Unisys had cut its debt to $2,100m by the end of the year, 32% of equity, and down from 60% at the time of the merger. A $210m payment that arrived this month from the restructuring of Unisys’ Japanese operations has cut the percentage further, to 29%. Blumenthal said that Unisys could produce a 15% return on equity in 1988, up from between 13% and 14% in 1987, assuming moderate growth in the the US economy. And if the economy turns sour, we have developed what we consider to be a prudently conservative plan. The company may defer capital spending, limit hiring and generally delay any expenditures that don’t have to occur during the year. But Unisys will increase research and development spending 15% to 20% – from a somewhat low base of $642m in 1987 – and will step up its marketing, adding up to 500 salesmen here in Europe, where there are presently about 2,000. Good news for those aghast that the company has been re-running the tired merger TV commercials in the UK is that a new ad campaign will begin next month. The company also plans to spend more on advertising. The Burroughs side of the house was much less successful than Sperry in winning entirely new customers with low-cost additions at the bottom of its mainframe line, but the $60,000 A1 sold faster than Unisys could produce them in the fourth quarter, Blumenthal said, with 50% being first time customers – it had been hoping for 70%.