Unisys Corporation (UIS) reported revenues of $937 million in the second quarter, down 10% from a year-ago. Foreign currency fluctuations had a five percentage-point positive impact on revenue in the quarter.
Services revenues declined 6% year over year primarily due to lower revenue in the company’s U.S. Federal business. Outside of the U.S. Federal business, services revenues was essentially flat with the second quarter of 2010 as growth in IT outsourcing and infrastructure services was offset by a decline in systems integration.
Technology revenues declined 35% from the year-ago quarter. The decline was due to lower sales of ClearPath systems following growth in the prior quarter and in 2010.
Gross margin came in at 22.8%, down from 27.8% in the year-ago quarter primarily due to lower sales of ClearPath systems. Services gross profit margin improved to 20.1% from 19.3% a year ago due to continued improvements in service delivery execution.
Operating margin came in at 5.1% of revenue, down from 10.3% in the second quarter of 2010. Services operating margin improved to 7.1% from 6.1% a year ago.
Net loss came in $11.6 million or $0.27 per share in the quarter compared to a net income of $120.2 million or $2.82 per share in the year-ago quarter. The results include a previously announced charge of $45.7 million related to debt reduction and a pre-tax charge of $13.5 million related to the loss of an old non-income tax case concerning the company's former Brazilian manufacturing operations.
Excluding these charges, net income came in at $0.93, much better than the Zacks Consensus Estimate of a loss of $0.01.
Unisys generated $36 million of cash from operations in the second quarter of 2011, down from $52 million in the year-ago quarter. Capital expenditures in the second quarter of 2011 declined to $29 million compared with $48 million in the year-ago quarter.
The company ended the quarter with cash and equivalents of $625.0 million, down from $823.million at the end of 2010. Unisys reduced its debt by $179 million and ended the quarter with a long-term debt of $447.4 million.
We continue to maintain an Outperform recommendation on the company. However, we currently have a Zacks #3 Rank on the stock which translates into a short-term rating of Hold.
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