Unisys Stock Rebounds on Rumors of Unit Sale

The company's systems integration and services divisions -- coupled with the possible sell-off of its defense unit -- are boosting stock prospects

Stronger-than-expected income in its services and mainframe sectors and the possible sale of its defense sector are making Unisys Corp. an attractive buy, say analysts. The Blue Bell, Pa.-based company's stock rose almost 10 percent to $11.50 after company officials signalled they were putting their ailing defense sector up for sale.

Although the company had tried earlier to sell its defense sector, expectations of widespread mergers in the defense industry improves the prospects of an immediate sale, said Bruce Hadburg, an analyst at Raymond James & Associates Inc. of St. Petersburg, Fla.

The company's stock should rise to $14.50 by late 1995, said Hadburg. The driver: Unisys' services and systems-integration sector, whose contribution to the company's $1.8 billion quarterly revenue rose from 18 percent in second quarter 1993 to 27 percent in second quarter 1994. Quarterly revenue from the services sector rose 31 percent to $487 million, up from $336 million for the same period in 1993.

In contrast, the defense sector lagged, with revenue falling from $556 million to $284 million over the same period. The drop reduced the sector's contribution to the firm's revenues from 29 percent to 16 percent. Sale of the defense sector to another defense electronics company could net as much as $1 billion, allowing the company to retire much of its debt, now valued at $3.3 billion. The company had 1993 revenues of $8.4 billion.

a high-powered

computer strategy

Sequent Computer Systems Inc., Stratus Computer Inc., and Silicon Graphics Inc. stand to gain from continued company purchases of high-capacity computers, according to Bruce Hadburg, an analyst at Raymond James & Associates Inc., based in St. Petersburg, Fla.

The stock of all three companies has been hit hard by unrealistic fears of a severe drop in high-end sales, he said. But because the companies are reacting faster than the market's shift towards smaller but more powerful machines to operate enterprise-wide networks, their stock should rise faster than the overall market over the next 18 months, he said.

Sequent had 1993 revenues of $500 million, and makes its home in Beaverton, Ore. Stratus has revenues of $500 million and is based in Marlboro, Mass., while Silicon Graphics has revenues of $1.5 billion and is based in Mountain View, Calif.

All three companies have a solid business, and have the technology, software and support strengths to stay healthy as the market gradually shifts from large mainframes to smaller client-service computer systems, Hadburg said. Unisys and IBM Corp. stock also stand to gain as unrealistic fears over the future of mainframe businesses are proven unfounded, he said.

IPO likely for emass

Garland, Texas-based EMASS Inc. and its newly expanded line of mass-storage equipment have been spun off from E-Systems Corp., the defense electronics firm, leading to a likely initial public offering in 1996. EMASS also acquired Advanced Archival Products, Greenwood Village, Colo., and Grau Automation GmbH, Boehmenkirch, Germany, as well as manufacturing and distribution rights for technologies controlled by Bosch Storage Systems, Bridgman, Mich.

However, the firm has no immediate plans to offer stock, said company spokesman Bob Farkaly. EMASS makes a range of very high-capacity data storage and transfer systems, including a massive jukebox for data tapes. Much of the research to develop the products was underwritten by the intelligence agencies, which need to collect, store and review scads of data.

CellStar Stocks Attractive

Propelled by strong sales in Mexico and Hong Kong, cellular phone company CellStar Corp. stocks should grow in value by up to 50 percent, according to John Bain, a stock picker at Raymond James & Associates, Inc., St. Petersburg, Fla. The company's stock now rests at $15, but should rise up to $22 over the next year, according to Bain's report. The company earned $138.6 million in its third quarter, up 33 percent. Its revenue was boosted by sales in Mexico and by $22 million in phone sales to mainland China.

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