Unisys stockholder calls for sale of federal unit

Unisys Corp. might sell its federal business unit if it agrees to the demand of a major stockholder to take the step and end what it called the company's "ruinous stock-price performance."

MMI Investments of New York, the third-largest shareholder of Unisys stock with almost 35 million shares, said in a letter to the board of directors that selling or spinning off the division would unlock its value.

MMI said Unisys' overall poor performance has also damaged the value of the federal unit, which had $785.3 million in revenue in 2006.

The Blue Bell, Pa., company has been undergoing a deep restructuring since 2005 that involves job cuts, outsourcing, sale of stakes in other companies and a focus on its fastest-growing market segments, according to media accounts.

However, MMI said the restructuring is "not enough to correct Unisys' dramatic undervaluation" and urged the company to bring in an independent investment bank to consider its proposal.

MMI gave Unisys until Jan. 23 to respond or it promised to raise the issue at the next annual shareholders' meeting. MMI also filed the letter with the Securities and Exchange Commission Monday.

Unisys acknowledged receipt of MMI's demand on its Web site and said it is evaluating the proposal.

"The company takes investors' viewpoints seriously," Unisys said in its statement, "and we share their commitment to enhancing shareholder value. Unisys is executing a major, multiyear repositioning plan and has made significant progress in enhancing its profitability by refocusing its business, reducing costs, and divesting noncore assets."

"Many times it makes sense to split up various business divisions of a company because often when you run analyses, the sum of the parts is greater than what the [company's] stock price is," said Chuck Jones, senior vice president and technology analyst at investment advisers Atlantic Trust. With Unisys stock down now, MMI's demand could very well have merit, he said.

However, Jones said, there are other factors to consider. One, is it cost effective to create two management teams and, two, "are there synergies between various divisions that you then lose?"

Unisys' stock opened Friday at $3.54 a share on the New York Stock Exchange. It has ranged over the past 52 weeks between a high of $9.70 and a low of $3.13.

This is not the first time that MMI, which is owned by hedge fund Millbrook Capital Management Inc., has attempted to shake up one of its portfolio companies. In November, MMI proposed its own slate of candidates for the board of directors of Brinks Co., the Richmond, Va.-based security firm.

MMI also urged Brinks to consider selling one of its divisions.

Unisys ranks No. 27 on Washington Technology's 2007 Top 100 list of the largest federal government prime contractors.