After an upbeat performance in Q2 (see Unisys reports another quarter of improvement), figures reported by Unisys last night do not make for pleasant reading. Revenues declined 10% yoy (constant currency - ccy) to $877m. The US took a very significant 23% hit to the topline shaken by a drop in its Federal business, while Europe also felt the pain with a 16% decline over last year. Operating margins were squeezed from 11.1% to 7.0% thanks to Services (85% of total revenues), which saw its margin drop 270bp to 6.0%. Technology (hardware) margins improved, however, by 330bp to 29.1%.
Services revenues declined 10% yoy ccy, while Technology revenues fell 6% yoy. Year-to-date numbers look better, with Services down ‘just’ 2% and the Technology business actually managing 1% growth ccy. All parts of the Service portfolio have been hit significantly with the exception of BPO (+4%). Systems Integration revenue bore the brunt with a spectacular 25% decline. ITO, which accounts for 40% of the Services business was down 9%. Services order signings were flat (ccy).
Unisys CEO, Ed Coleman, blamed the poor performance on all the usual suspects, i.e. weaker demand for short-term project services and continued softness in the US Federal business. While he cites growth opportunities through disruptive IT trends (e.g. Cloud, consumerisation of IT and Big Data), so of course does everybody else. Despite the occasional rally, it’s hard to draw any other conclusion than Unisys is in a lingering – and eventually terminal – decline.