Correction, 12:45 p.m. PST: This story initially misstated the time period during which Unisys had over $1.3 billion in revenue. It was last quarter. Story also has been updated to clarify that the federal government has a proposed IT budget of more than $70 billion for 2009.
Lots of people lose money during recessions, so most tech vendors hunker down. They cut staff, trim budgets, and hoard cash to weather the storm. Some vendors buck this trend and look for risky opportunities that could lead to rich rewards. For those companies that remain on the offensive, buying venerable Unisys may be a fantastic bargain.
Yeah, I know. Unisys lost $14 million in fiscal year 2008 and recently swapped CEOs to straighten out this messy situation. Unisys is also a slow-moving monolithic firm with a corporate culture driven by lawyers. Think of an IT company comparison to AMC hit show Mad Men and you have a pretty good illustration of Unisys.
OK, so there is a good deal of risk here, but there is certainly some upside as well. Unisys has a global services organization capable of engaging in big enterprise projects. Last quarter, the company did over $1.3 billion in revenue, and it's especially well-positioned for large projects with the U.S. federal government, which has a proposed 2009 IT budget in excess of $70 billion. With its current share price, Unisys has a market cap of around $525 million. At the same time, the company has around $470 million in cash. The numbers seem attractive to me.
So how would a would-be suitor right the Unisys ship? Kill hardware right away. Yes, there is value there but not to a pure-play services firm. Second, cut selling and general administration costs by up to 10 percent (roughly $25 million in costs a quarter). These moves, along with consolidation of HR, IT, finance, and even legal, could pave the way to profitability. It won't be easy, but it could happen over two to three years.
Who should buy Unisys? EMC for one. It's a real systems player without a large services arm. Dell may be a cultural mismatch but the enterprise value-add would also be substantial. Others like Cisco Systems, CA, and Symantec also come to mind.
I know it is easy for me to write this stuff, but hey, that's the nature of my job. If I were in an operational role at a big company, however, I'd give this one serious consideration.