Unisys Puts DefenseGroup on the Block

nisys Corp. soon will announce plans to sell pieces of its Government Systems Group defense business, formerly known as Paramax Defense Systems, industry sources said.

Sources said the Blue Bell, Pa.-based company already has transferred some of the group's information systems programs to the company's Federal Systems division, which has offices in Reston, Va.

Focusing on systems integration, the division has taken over the group's work on the Federal Bureau of Investigation's Automated Fingerprinting Identification System and other projects related to the Justice Department and public safety.

The company also has moved the group's air traffic control programs, including work on the Federal Aviation Administration's Advanced Automation System being built by Loral Federal Systems, to Unisys' transportation business based in Blue Bell.

Unisys spokesman Peter Hynes described the shifts as "part of our normal realignment of businesses as it makes sense." They should not be interpreted as signs that Unisys plans to sell the group, though rumors of a sale have circulated for some time, he said.

But knowledgeable sources say a sale could be imminent. Unisys has wanted to get rid of its defense business for some time, and sources believe the distribution of the group's personnel and revenues signals the company's willingness to sell the group. The company has begun to take the necessary steps to prepare for a sale, sources said.

The sale of the McLean, Va.-based defense electronics group follows another layoff of 4,000 people Unisys announced last month. The company plans to reduce personnel from its mainframe computer operations while simultaneously boosting its more profitable information services businesses, such as systems integration.

Meanwhile, Hynes acknowledged that last year "revenue from our government business declined." In 1993, the 14,000-employee group brought in more than 30 percent of Unisys' total $7.74 billion revenues.

Although 1994 revenue figures will not be ready until the end of the month, Hynes said the company expects the group's percentage to drop to under 30 percent.

Rumors of a sale have led to unrest within the group, with employees looking for new jobs because of their uncertain future at Unisys.

The group last month furloughed some staff to control costs and abruptly canceled a press briefing because of scheduling problems. A group spokeswoman said it plans to reschedule the meeting soon.

By unloading the old Paramax operation -- which the firm unsuccessfully tried to spin off three years ago -- Unisys would give up work on command, control, communications and intelligence systems, surveillance systems and fire control systems.

The sale would affect the group's communications systems division in Salt Lake City, Utah, the electronic systems division in Eagan, Minn., and the systems development division in Great Neck, N.Y. and Reston, Va.

Sources said Unisys could release details of the planned sale as early as Jan. 18. They added that Unisys recently found an interested buyer, but the deal fell through. They would not identify the company. Likely candidates to buy all or part of the defense business would include Loral and Hughes.

Investment analysts said Unisys' plans to get out of the defense business make sense, given the firm's increasing focus on commercial and civilian information technology services.

The latter involves a growing and promising business at the Department of Justice and contracts at the Department of Housing and Urban Development.

The group in December lost a lucrative Air Force network products and services contract, worth $595.9 million, but won a $100 million award to maintain Justice Department computer systems. It is awaiting word on a key Coast Guard contract -- the loss of which could trigger a new round of layoffs.