Unisys puzzles over federal future

Following poor financial results in 2000, Unisys Corp. is contemplating

whether to sell its federal business or reinvent it as a billion-dollar

unit focused on e-business, company officials said Thursday.

After the Year 2000 rollover, sales at Unisys slowed more than expected

and federal business flattened, Larry Weinbach, Unisys chairman and chief

executive officer, told investors at a briefing Thursday. Unisys, which

traditionally focused its services on back-office systems, was unprepared

this year for the emphasis on front-office and customer-focused applications,

he said.

As a result, the company cut costs and offered early retirement to thousands

of employees. Unisys ended its commodity hardware business and is now looking

at how to recover from poor performance in its federal business, Weinbach

said.

The federal purchasing model is continually changing and in recent years

has shifted from a focus on indefinite-delivery, indefinite-quantity contracts

to large outsourcing deals, for which Unisys was unprepared, Weinbach said.

"The [federal] market says that size is very important," he said, so

Unisys has hired an investment bank to explore the results of acquiring

a new business to boost the size of its $600 million to $700 million federal

systems business, and, alternatively, dissolving the government unit.

Unisys will focus its resources on providing e-commerce and e-procurement

solutions via partnerships with solutions providers such as Ariba Technologies

Inc. and Siebel Systems Inc. as well as hardware resellers and manufacturers.

It also will use its expertise in back-office enterprise systems to help

integrate new front-end solutions with legacy systems.

If Unisys were to acquire a company to increase the size of its federal

business, it would need to bring the company to $1.5 billion to $2 billion

in annual revenues, Weinbach said.

If the company can sell the federal business "at the right price," Weinbach

said, it could use the proceeds to reduce its debt and invest in its e-services

outsourcing business.

Whatever the outcome, Unisys will work to make the transition smooth

for federal customers, a Unisys spokeswoman said.