Nouveau Riche,
An article from EL. I hope tech doesn't take a big hit tomorrow.
NW
CEO leads Unisys turnaround
By Joe Wilcox
Staff Writer, CNET News.com
July 16, 1999, 5:15 p.m. PT
Services giant Unisys is continuing on a turnaround
that two years ago seemed virtually impossible, making it a potential
takeover target and an example for beleaguered Compaq.
The reversal in part, according to analysts, can be attributed to Larry
Weinbach, who took over as chief executive two years ago.
Like a tanker taking on water and adrift without a rudder, Unisys appeared
too large, too inflexible, and too much in debt to right itself. But Weinbach
shed $1.2 billion in debt and turned manufacturing of its PCs over to
Hewlett-Packard and storage devices to EMC and Data General. By August
2, Unisys will have eliminated about $1.4 billion in preferred stock, saving
around $100 million a year in overhead. In addition, Unisys began to bid
more selectively on large projects.
The results are impressive. Unisys beat by 5 cents the second-quarter
predictions of 33 cents a share. The services company earned 38 cents a
share on income of $119.7 million, up from $90.1 million, or 24 cents a
share, a year earlier. Success has in turn made it a takeover target.
"There are several vendors in the market that have unique attributes in the
enterprise market that could be valuable to some other players," said Tony
Iams, server analyst with D.H. Brown Associates.
Weinbach's name is increasingly mentioned in chat rooms and bar rooms as
a good candidate to take over Compaq, which ousted its CEO in April due to
weak performance. Weinbach's success could, at the least, be a lesson for
Compaq's new chief as he seeks to turn the company around, analysts said.
Weinbach wouldn't comment on Compaq's plight or CEO search, but he
proudly stated Unisys' turnaround had only just begun.
CNET News.com: What are some of the most significant changes you
made in your tenure at Unisys?
Weinbach: We have gone through this transformation of the company,
[resulting in] a much tighter focus, a harder focus on what we're after.
Before I got here, we were going after every RFP [request for proposal] that
came into the company, whether we had a chance or not or whether we had
the capability or not. What we've done is create a very strong focus. If we're
not good at something, we don't have the capability, we don't try and
compete until we have our act together. What we've done is reduce the
number of RFPs, focus on the ones where we have core competence for, and
you can see from the results the revenue growth has moved up dramatically.
Q: What has been the result of your increased focus on services?
A: In the second quarter, revenue growth for services was 12 percent. If you
knock out proprietary maintenance, it was 15 percent. If you take away
currency impact, it was 18 percent. So the services business has been very
robust. The decision to move into services and in effect be a services
company with a technology arm, strategically was the right decision. And I
say that now looking back. At the time when you're making these broad
decisions, and looking forward, you're never quite sure.
Q: But you still develop and manufacture servers. What kind of
breakdown do you eventually see between services and technology?
A: Over the next couple of years we'll get to a point where services is about
75 percent of our business and technology about 25 percent. The reason for
that: The technology business after we get through the next couple of years
and our new products come out on stream, will be growing somewhere in the
6 to 8 percent range. But without being in the commodity business, we don't
think we can get into double digits, nor do we want to get into the
commodity business because we can't earn money on it. If you look at the
services business, we should be able to generate twice the growth that we'll
get out of the technology business.
Q: What are some of the areas where you expect to see services growth,
especially considering the high-tech employee shortage?
A: If you look at the marketplace a couple of factors are critical. If you look at
IT [information technology] today, the value add is in services. You can buy
hardware--I'm not saying all hardware is a commodity--but a box is a box. It's
really the application, the systems integration, and the service that make it
work.
The competitiveness of the global marketplace almost ensures companies
need the technology. They can't do it on their own. With the shortage of
people with specialized skills required in short periods of time, they tend to
go to a third party who can bring that to the table. We're at the right space at
this time with a series of skills that are relevant to the marketplace.
Q: You still have a strong technology business, particularly with
"big-iron" servers, but are pushing into the NT market. Why?
The big-iron stuff is our forte. Scalability, availability,
interoperability, that's Unisys. You start looking at the eight-processor
server and the capacity of those servers then you start moving up to
16- and 32-processors, and I'm talking about an Intel environment
and NT, this is what we see is the future, because it's a lot less to run
that than a Unix environment or a proprietary environment.
Q: Does IBM's buying Sequent also make you a more attractive
takeover target?
A: I've said repeatedly, the company's goal is to build the company
and try to acquire, not be acquired. But at the same, I'm very
realistic. I have a fiduciary responsibility to our shareholders, and if
someone came after us we would have to deal with it. We're not
looking for it. |
