3rd Quarter & 9 Mths Results

Unisys Corp
12 October 2000

Media Contact:      Jay Grossman, Unisys, 215-986-6948
                                  [e-mail]

Investor Contact:   Jim Kerr, Unisys, 215-986-5795
                              [e-mail]

Unisys Reports Third-Quarter 2000 Financial Results; Outlines Plan to 
Focus on Higher-Growth, Higher-Margin E-Business Opportunities 

BLUE BELL, PA, OCTOBER 12, 2000 -- Unisys Corporation (NYSE: UIS) today reported
third-quarter 2000 net income of $42.9 million, or 14 cents per diluted common
share, compared to third-quarter 1999 net income of $138.4 million, or 43 cents
per diluted share. Excluding a one-time tax benefit and an extraordinary charge
for the repurchase of debt, diluted earnings in the year-ago period were 40
cents per share. Third-quarter 2000 revenue declined 9% to $1.7 billion from
$1.9 billion in the year-ago period. Without the negative impact of foreign
currency translation, revenue in the quarter declined 6% from a year ago. These
results were in line with the company's previously announced outlook for the
quarter. 

Unisys also said today that it has completed its strategic business review aimed
at focusing the company on e-business. As a result of this review, Unisys plans
to implement a series of actions during the fourth quarter to build its revenue
base in new high-growth markets; focus its research and development resources on
high-potential new markets; de-emphasize non-strategic, low-growth and
low-margin businesses and products; and reduce its cost structure in line with
its new, more focused business model. 
                                 
Comments from Chairman and CEO Larry Weinbach 

'As expected, this was a transitional quarter as we continued to evolve our
portfolio and skills mix to meet the new requirements of the e-business market,'
said Unisys Chairman and Chief Executive Officer Lawrence A. Weinbach.
'Continued weakness in services revenue, primarily in systems integration and
repeatable solutions, is reflective of the slow order activity in the first half
of the year. Our technology business also declined in the quarter as strong
growth in our new ES7000 server line was offset by seasonally lower sales of
ClearPath systems. These factors, in addition to the impact of unfavorable
currency translation in our European business, affected the results for the
quarter. 

'There were, however, a number of encouraging signs during the quarter. In
services, we experienced strong double-digit revenue growth in network services,
and we saw a sharp pickup in orders for outsourcing and network services
projects. In technology, ClearPath sales rebounded in September and we saw very
strong order demand for our new ES7000 Intel-based server line, based on our
groundbreaking Cellular MultiProcessing (CMP) architecture. Orders for CMP-based
servers have accelerated from both direct and indirect sales channels. We were
also pleased during the quarter to add Hewlett-Packard to our growing list of
OEM partners for our CMP-based servers. 

'On the strategic front, we completed an exhaustive review of our services and
technology businesses during the third quarter,' Weinbach said. 'The purpose of
this review was to focus our resources on businesses that offer the highest
potential for profitable revenue growth. Going forward, we will focus on
value-added, high-potential opportunities to help clients design, build, and
manage their e-business infrastructures for conducting secure, reliable,
high-volume e-business transactions, and tie those systems into their legacy
environments. This is the core competency of Unisys, and an area of high growth
and attractive margins.' 

As a result of this review, the company plans to: 

- Streamline its portfolio of industry-specific repeatable solutions from more
than 30 programs currently to approximately 15 strategic solutions, and
introduce new, high-potential solutions in growth areas such as wealth
management and m-commerce; 

- Enhance its outsourcing business to more aggressively pursue joint ventures
and other new business models to drive accelerated growth in this key growth
area; 

- Focus its networking business on high value-added services, such as managed
network outsourcing services, network consulting, and an expanded network
security management practice; 

- Continue to focus its technology business on high-end, enterprise-class
servers and de-emphasize low-margin commodity products. 

Weinbach also said that, as part of the strategic review, the company will
reduce its cost structure in line with its lower revenue levels this year and
its focus on high-growth, high-margin opportunities going forward. As the first
action in this cost structure realignment, the company is offering an early
retirement incentive to approximately 1,500 U.S. employees. The company
estimates it will take a one-time, pre-tax charge of approximately $200 million
in the fourth quarter of 2000 related to the early retirement and other actions.


'The actions we are announcing today will make us a more focused, profitable
company in our services and technology businesses,' Weinbach said. 'We will
announce other specific actions as they are completed. I believe the results of
our strategic review will enable us to hit the ground running in 2001 with a
highly focused set of services and technologies needed to deliver strong revenue
and earnings growth.' 

  
Overall Company Third-Quarter Highlights 

Unisys reported that U.S. revenue showed double-digit declines in the third
quarter compared to the year-ago period. Revenue in international markets
declined in the quarter as substantial gains in Asia, excluding Japan, were
offset by declines in other geographic regions. On a constant currency basis,
international revenue was flat compared to the prior-year quarter. 

Total worldwide orders increased in the third quarter versus a year ago as good
gains in international markets were offset by a decline in U.S. orders. On a
business segment basis, technology orders showed substantial double-digit gains,
driven by strong initial demand for the company's new CMP-based servers.
Services orders showed slight declines, with very substantial order gains in
outsourcing and network services. During the quarter the company received a
number of significant outsourcing orders, including an information technology
outsourcing project with BankWest in Australia. 

Unisys also signed a memorandum of understanding with Barclays Bank and Lloyds
TSB in the United Kingdom to run their check processing operations under an
agreement with a potential value of more than $750 million over 10 years; the
company expects to finalize this contract in the fourth quarter. 

Unisys reported an overall third-quarter 2000 gross profit margin of 28.1% and
an operating profit margin of 4.6%. The company said profit margins in its
services business increased by 1 percentage point over the second quarter of
2000, but continued to be impacted by underutilization of resources in the
quarter. Technology margins in the quarter reflected a lower mix of ClearPath
server content compared to the year-ago period. The company said it expects to
see improved profit margins in the fourth quarter driven by higher ClearPath
server sales as well as actions taken to reduce its cost structure and improve
resource utilization in its services business. 

The company said its selling, general, and administrative (SG&A) expenses
benefited from tight controls placed on discretionary spending during the
quarter. SG&A expenses in the third quarter declined 10% from year-ago levels to
$320.1 million. On a sequential basis, SG&A as a percentage of revenue declined
to 18.9% of revenue compared to 20.2% of revenue in the second quarter of 2000. 

  
Business Segment Highlights

Customer revenue in the company's services business declined 9% in the third
quarter compared to the year-ago-period, primarily driven by continued weakness
in systems integration and repeatable solutions and in proprietary maintenance.
Reflecting the revenue declines in these higher-margin areas, gross profit
margins in the services business declined 4 percentage points while operating
margins declined 6 percentage points from year-ago levels. 

In the technology business, customer revenue declined 10% in the third quarter
as strong initial sales of the company's new CMP-based servers were more than
offset by lower sales of ClearPath servers. Reflecting the lower mix of
higher-margin ClearPath systems, gross margins and operating margins in the
technology business both declined about 10 percentage points from year-ago
levels. 

  
Cash Flow and Balance Sheet Highlights

Unisys generated $37 million of operating cash in the third quarter compared to
cash generated of $188 million in the year-ago period. The company said it
remains focused on improving its asset management performance and expects
substantial operating cash flow in the fourth quarter. 

  
Year-to-Date Results

For the nine months ended September 30, 2000, Unisys reported net income of
$205.7 million, before special items, or 65 cents per diluted common share,
compared to net income of $356.4 million, before special items, or $1.10 per
diluted common share, for the comparable period in 1999. Including the special
items, which represented an extraordinary charge for the early extinguishment of
debt in both periods and a one-time tax benefit in the prior year, the company
reported net income of $185.9 million, or 59 cents per diluted share, in the
current period compared to $366.3 million, or $1.13 per diluted share, in the
prior-year period. Revenue through nine months of 2000 was $5.0 billion compared
to revenue of $5.6 billion for the same period of 1999. 

  
Business Outlook

'I am encouraged by the signs of recovery that we are seeing in some of our
businesses after the slow first half of the year,' Weinbach said. 'In services,
we were able to close a number of large outsourcing contracts that we had been
working on for some time, and we look for an even stronger order performance in
the fourth quarter. In our technology business, we are very pleased with the
initial market acceptance of our CMP-based servers. This new line presents a
much more cost-competitive alternative to current Unix-based enterprise servers
on the market, and orders continue to accelerate in markets around the world. In
addition, we continue to roll out new models of our ClearPath server line, and
expect stronger sales in the fourth quarter. 

'Driven by strength in technology, we look for a pickup in our business in the
fourth quarter, with revenue up from year-ago levels and earnings per share in
line with First Call estimates of approximately 41 cents, excluding the one-time
charge,' Weinbach said. 'In the meantime, we continue to reposition our business
portfolio for accelerated growth longer term. We will be moving aggressively
over the coming weeks to implement the actions related to our just-completed
strategic review. In our high-end systems integration and solutions business, we
continue to modernize our portfolio and retrain our delivery personnel on new
best-of-breed e-business solutions. While many challenges remain, we believe the
work we have been doing this year will provide a strong foundation for improved
results in 2001 and beyond.' 

 
About Unisys

Unisys is an e-business solutions company whose 36,000 employees help customers
in 100 countries apply information technology to seize opportunities and
overcome challenges of the Internet economy. Unisys people integrate and deliver
the solutions, services, platforms and network infrastructure required by
business and government to transform their organizations for success in this new
era. The company offers a rich portfolio of Unisys e-@ction Solutions for
e-business based on its expertise in vertical industry solutions, network
services, outsourcing, systems integration and multivendor support, coupled with
enterprise-class server and related technologies. The primary vertical markets
Unisys serves worldwide include financial services, transportation,
communications, publishing and commercial sectors, as well as the public sector,
including federal government customers. Unisys is headquartered in Blue Bell,
Pennsylvania, in the Greater Philadelphia area. For more information on the
company, access the Unisys home page on the World Wide Web at www.unisys.com.
Investor information can be found at www.unisys.com/investor.


  
Forward-Looking Statements 

Any statements contained in this release that are not historical facts are
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. All forward-looking statements are subject to various risks
and uncertainties that could cause actual results to differ materially from
expectations. The factors that could affect the company's future financial
results are discussed more fully in the company's latest Form 10-Q as filed with
the Securities and Exchange Commission. 



RELEASE NO.: 1000/6993 (See detailed financial information below) 
http://www.unisys.com/news/releases/2000/oct/10126993.asp

Unisys is a registered trademark and e-@ction is a trademark of Unisys
Corporation. All other brands and products referenced herein are acknowledged to
be trademarks or registered trademarks of their respective holders. 


                         UNISYS CORPORATION
                 CONSOLIDATED STATEMENT OF INCOME
                 (Millions, except per share data)
                            Three Months         Nine Months
                         Ended September 30   Ended September 30
                         ------------------   ------------------
                           2000      1999       2000      1999
                         --------  --------   --------  --------
Revenue                  $1,690.9  $1,865.4   $4,956.7  $5,584.7
                         --------  --------   --------  --------
Costs and expenses
  Cost of revenue         1,216.2   1,195.2    3,461.9   3,581.8
  Selling, general and
    administrative          320.1     354.8      924.1   1,034.9
  Research and development   77.5      86.2      237.8     251.4
                         --------  --------   --------  --------
                          1,613.8   1,636.2    4,623.8   4,868.1
                         --------  --------   --------  --------
Operating income             77.1     229.2      332.9     716.6

Interest expense             18.5      34.1       57.7     103.0
Other income
  (expense), net              6.4       1.0       36.5     (65.3)
                         --------  --------   --------  --------
Income before income taxes   65.0     196.1      311.7     548.3
Estimated income taxes       22.1      45.6      106.0     169.9
                         --------  --------   --------  --------
Income before
  extraordinary items        42.9     150.5      205.7     378.4
Extraordinary items           -       (12.1)     (19.8)    (12.1)
                         --------  --------   --------  --------
Net income                   42.9     138.4      185.9     366.3
Dividends on preferred
  shares                      -         1.9        -        36.7
                         --------  --------   --------  --------
Earnings on common shares   $42.9    $136.5     $185.9    $329.6
                         ========  ========   ========  ========
Earnings per common share
Basic
 Before extraordinary items $ .14     $ .49      $ .66    $ 1.22
 Extraordinary items                   (.04)      (.06)     (.04)
                         --------  --------   --------  --------
  Total                     $ .14     $ .45      $ .60    $ 1.18
                         ========  ========   ========  ========
Diluted
 Before extraordinary items $ .14     $ .47      $ .65    $ 1.17
 Extraordinary items                   (.04)      (.06)     (.04)
                         --------  --------   --------  --------
  Total                     $ .14     $ .43      $ .59    $ 1.13
                         ========  ========   ========  ========
Shares used in the per share
 computations (thousands):
 Basic                    313,744   302,183    312,473   279,678
                         ========  ========   ========  ========
 Diluted                  315,516   314,541    316,539   292,733
                         ========  ========   ========  ========



                        UNISYS CORPORATION
                       SUPPLEMENTAL SUMMARY
                           (Millions)
                                 Elimi-
                       Total     nations    Services  Technology
                      --------   --------   --------  ----------
Three Months Ended
September 30, 2000
------------------
Customer revenue      $1,690.9              $1,200.2      $490.7
Intersegment                       ($92.8)      10.6        82.2
                      --------   --------   --------    --------
Total revenue         $1,690.9     ($92.8)  $1,210.8      $572.9
                      ========   ========   ========    ========
Gross profit percent     28.1%                 21.6%       38.9%
                      ========              ========    ========
Operating income
  percent                 4.6%                  1.5%        9.8%
                      ========              ========    ========
Three Months Ended
September 30, 1999
------------------
Customer revenue      $1,865.4              $1,318.5      $546.9
Intersegment                      ($151.7)      17.7       134.0
                      --------   --------   --------    --------
Total revenue         $1,865.4    ($151.7)  $1,336.2      $680.9
                      ========   ========   ========    ========
Gross profit percent     35.9%                 25.8%       48.5%
                      ========              ========    ========
Operating income
  percent                12.3%                  7.8%       20.2%
                      ========              ========    ========

Nine Months Ended
September 30, 2000
------------------
Customer revenue      $4,956.7              $3,454.1    $1,502.6
Intersegment                      ($326.7)      35.2       291.5
                      --------   --------   --------    --------
Total revenue         $4,956.7    ($326.7)  $3,489.3    $1,794.1
                      ========   ========   ========    ========

Gross profit percent     30.2%                 21.1%       43.3%
                      ========              ========    ========
Operating income
  percent                 6.7%                  1.1%       15.3%
                      ========              ========    ========
Nine Months Ended
September 30, 1999
------------------
Customer revenue      $5,584.7              $3,901.3    $1,683.4
Intersegment                      ($415.6)      49.0       366.6
                      --------   --------   --------    --------
Total revenue         $5,584.7    ($415.6)  $3,950.3    $2,050.0
                      ========   ========   ========    ========

Gross profit percent     35.9%                 25.1%       49.6%
                      ========              ========    ========
Operating income
  percent                12.8%                  7.3%       21.9%
                      ========              ========    ========




                        UNISYS CORPORATION
                    CONSOLIDATED BALANCE SHEET
                            (Millions)
                                       September 30, December 31,
                                           2000         1999
                                        ----------   ----------
Assets
Current assets
 Cash and cash equivalents                  $234.9       $464.0
 Accounts and notes receivable, net        1,386.9      1,430.5
 Inventories
   Parts and finished equipment              241.5        236.8
   Work in process and materials             177.6        136.1
 Deferred income taxes                       482.3        472.7
 Other current assets                         94.8        105.6
                                        ----------   ----------
 Total                                     2,618.0      2,845.7
                                        ----------   ----------
Properties                                 1,612.0      1,723.0
 Less accumulated depreciation               996.1      1,102.2
                                        ----------   ----------
 Properties, net                             615.9        620.8
                                        ----------   ----------
Investments at equity                        224.5        225.5
Software, net of accumulated amortization    283.2        259.8
Prepaid pension cost                       1,080.8        975.9
Deferred income taxes                        655.6        655.6
Other assets                                 366.5        306.4
                                        ----------   ----------
 Total                                    $5,844.5     $5,889.7
                                        ==========   ==========

Liabilities and stockholders' equity
Current liabilities
 Notes payable                              $472.3        $26.9
 Current maturities of long-term debt         18.7         22.9
 Accounts payable                            990.5      1,036.7
 Other accrued liabilities                   965.6      1,183.1
 Estimated income taxes                      359.5        348.9
                                        ----------   ----------
 Total                                     2,806.6      2,618.5
                                        ----------   ----------
Long-term debt                               535.9        950.2
Other liabilities                            331.0        367.7
Stockholders' equity
 Common stock                                  3.2          3.1
 Accumulated deficit                        (868.4)    (1,054.4)
 Other capital                             3,641.8      3,575.0
 Accumulated other comprehensive loss       (605.6)      (570.4)
                                        ----------   ----------
 Stockholders' equity                      2,171.0      1,953.3
                                        ----------   ----------
 Total                                    $5,844.5     $5,889.7
                                        ==========   ==========


                         UNISYS CORPORATION
                CONSOLIDATED STATEMENT OF CASH FLOWS
                            (Millions)
                                              Nine Months Ended
                                                September 30
                                             ------------------
                                               2000       1999
                                             -------    -------
Cash flows from operating activities
Income before extraordinary items             $205.7     $378.4
Add (deduct) items to reconcile income
 before extraordinary items to net cash
 (used for) provided by operating activities:
Extraordinary items                            (19.8)     (12.1)
Depreciation                                   109.4      105.3
Amortization:
 Marketable software                            90.2       83.6
 Goodwill                                        7.7       10.2
(Increase) in deferred income
  taxes, net                                    (9.6)     (70.3)
Decrease (increase) in receivables, net          8.4      (47.1)
(Increase) decrease in inventories             (46.2)      64.4
(Decrease) in accounts payable
 and other accrued liabilities                (335.6)    (224.0)
Increase in estimated income taxes              10.5       68.1
(Decrease) in other liabilities                 (3.4)     (16.2)
(Increase) in other assets                    (110.6)     (94.4)
Other                                           20.6       74.2
                                             -------    -------
Net cash (used for) provided by
 operating activities                          (72.7)     320.1
                                             -------    -------
Cash flows from investing activities
 Proceeds from investments                     525.1      803.6
 Purchases of investments                     (454.0)    (778.2)
 Proceeds from sales of properties              17.0       21.7
 Investment in marketable software            (113.6)     (83.7)
 Capital additions of properties              (143.2)    (139.0)
 Purchases of businesses                       (13.9)     (53.9)
                                             -------    -------
Net cash used for investing activities        (182.6)    (229.5)
                                             -------    -------
Cash flows from financing activities
 Redemption of preferred stock                           (197.0)
 Proceeds from issuance of long-term debt                  30.3
 Payments of long-term debt                   (447.2)    (161.5)
 Net proceeds from (reduction in)
   short-term borrowings                       442.5       (9.1)
 Dividends paid on preferred shares                       (59.4)
 Proceeds from employee stock plans             42.5       74.4
                                             -------    -------
Net cash provided by (used for)
 financing activities                           37.8     (322.3)
                                             -------    -------
Effect of exchange rate changes on cash
 and cash equivalents                          (11.6)     (10.7)
                                             -------    -------
(Decrease) in cash and cash equivalents       (229.1)    (242.4)
Cash and cash equivalents, beginning of
 period                                        464.0      616.4
                                             -------    -------
Cash and cash equivalents, end of period      $234.9     $374.0
                                             =======    =======