IT services vendor and server reseller Unisys Corp reported a 55% fall in profit in its third quarter, after being hit by escalating pension costs and a $60 million net charge relating to a headcount reduction.
In the three months to September 30, 2004, the Blue Bell, Pennsylvania-based company made a net profit of $25.2 million, down from a profit of $56.2 million in the year-ago quarter, on revenue that remained flat at $1.45 billion.
The company announced earlier this month that it was axing 1,400 back office employees and consolidating facility space in order to make annualized cost savings of $70 million by the end of 2005.
Unisys also blamed lower profit margins in its outsourcing business, which underlines the growing price pressure in the sector that has been partly triggered by the growth of India’s low-cost offshore service providers.
On a brighter note, the company expects $30 million in net cash from an income tax refund that it expects to receive either before the end of this year or in early 2005. As a result of this, the company also gained a tax benefit of $68.2 million in the third quarter.
Chief executive Larry Weinbach said that the company had achieved its targets for the quarter, adding that he was encouraged by the double-digit growth in new orders, as well as strong growth in sales of consulting and systems integration projects and in ES7000 server sales.
Sales from services grew 2% to $1.15 billion, which offset an 8.2% decline in product revenue to $298.6 million. Unisys said that enterprise server sales were flat during the quarter, which included a slight revenue decline in sales of ClearPath servers.
On a geographic basis, Unisys’ revenue from the US fell 4% to $655 million, but international sales grew 3% to $791 million.