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Services Produce Different Results for IBM, Unisys
By John Moore, Ziff Davis Internet


Opinion: While IBM benefited in its third-quarter results from its services business, it was a different story for rival Unisys.


IT services played a role in third-quarter results for both IBM and Unisys Corp., with the impact generally favorable for the former and less so for the latter.

IBM on Monday cited double-digit growth in service signings among the highlights in its September quarter earnings announcement. IBM Global Services' strategic outsourcing business experienced an 18 percent surge in signings. The largest signing: a $1.7 billion deal with ABN AMRO. IBM was one of five companies to win a slice of that bank's outsourcing program.

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IBM Global Services generated revenue of $11.7 billion in the third quarter, a 3 percent increase over the year-ago quarter.

The business unit's profit rose 16 percent year-to-year. In his earnings presentation, Mark Loughridge, IBM's chief financial officer, said IBM Global Services signed nine deals larger than $100 million during the quarter.

Companywide, IBM reported an 8 percent decline in third-quarter revenue to $21.5 billion from $23.3 billion last year. Revenue would have increased 4 percent without the impact of IBM's divested PC business.

Net income dropped 2.5 percent to $1.52 billion from $1.55 billion. The company reported diluted earnings per share of $0.94, a 2.2 percent increase compared with $0.92 for last year's third quarter.

The services story was different at Unisys, where difficulties with outsourcing contracts and a decline in the company's integration business contributed to an earnings shortfall.

Unisys on Tuesday reported preliminary third-quarter results showing a loss of $54.3 million, or $0.16 per share.

The company's September quarter revenue of $1.39 billion represented a 4 percent decline.

In July, the company predicted third-quarter earnings per share of 4 cents to 6 cents and mid-single-digit revenue growth over the year-earlier quarter.

Weaker-than-expected revenue from enterprise servers was the cause of the shortfall.

But Unisys' services business contributed as well.

Joseph McGrath, Unisys' president and chief executive officer, cited the costs of renegotiating a large outsourcing contract as contributing 20 percent of the earnings miss.

In addition, revenue derived from project-based work in systems integration and consulting declined 3 percent in the quarter "against our expectations of growth in the business," McGrath said.

The decline in project work contributed 20 percent to the shortfall.

In response, Unisys will focus on four areas within the services field.

Those areas are outsourcing, enterprise security, open source and Linux services, and Microsoft services and solutions.

Companywide, Unisys will reduce its workforce by 10 percent over the next year, the company said.

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