Revenue decline of 13% (to $810m) in Q1 has pushed Unisys into a net loss of $34m compared with a profit of $13m a year ago. Services revenue (89% of total revenue) declined 12% to $723m on Q1 FY12. The remainder of revenue comes from Technology, which was down 18%.
All segments of the services business declined (i.e. support services, BPO and systems integration) with the exception of IT outsourcing, which grew 5% - a reasonable achievement in the current market. Furthermore, Unisys says it has a “strong pipeline of opportunities for IT outsourcing engagements”.
Of note is the 31% decline in SI revenue (to $212m). Two key reasons for this are the way the SI business is structured. Firstly its vertical focus (i.e. skewed towards public sector). Secondly its lack of broad-based application outsourcing offerings, which limits its ability to pick up broader work on the back of projects. CEO, J. Edward Coleman, plans to rectify this by investing in a dedicated set of offerings and a team focused on pursuing growth opportunities for application managed services.
For sure the IT services markets in the Western world are mature and highly competitive. Having additional issues around execution is making the situation a whole lot harder for Unisys. Ultimately, we reiterate our comment from Q4, which is that Unisys is just not in a position where it is able to produce consistent and predictable profitable growth. It looks like another year of ups and downs could well be on the cards (see - Unisys completes a year of ups and downs).