Unisys May Unload Federal Business Unit

Unisys Corp. of Blue Bell, Pa., has hired an investment banking firm to explore strategic alternatives for the company's Federal Systems division, which could include the sale of the unit or the making of acquisitions, the company said Dec. 7.


The hiring of an investment bank, which company officials declined to name, was one of several initiatives that company Chairman and Chief Executive Lawrence Weinbach announced.


Unisys has about $6.9 billion in annual revenue, of which about $865 million come from the federal government.


Unisys also is looking to get out of the lower end commodity products business, Weinbach said. The federal unit does about $200 million a year in products business, a source said. The rest of the unit's revenue is from its services business.


The company is shifting much of its product business to Ingram Micro Inc. of Santa Ana, Calif.


To stay competitive in government market and compete with larger companies such as Computer Sciences Corp. of El Segundo, Calif., Unisys needs to have a government services business of at least $1 billion, the source said.


The investment banking firm is looking at which choice is best for the company as a whole ? selling the unit or stepping up and making acquisitions, he said.


Finding a buyer may take some time because of the size of the unit and the fact that Unisys Federal, based in McLean, Va., has a large reseller business, said Thomas Meagher, vice president of equity research for BB&T Capital Markets in Richmond, Va.


Unisys' state and local and international government business is not included in the sale, Meagher said. "They have those with their commercial businesses," he said.


The move out of the reseller business might help with the sale of the federal unit because it would reduce the size of the unit's lower margin business, Meagher said.


"This one may be out there for awhile," he said.