Unisys hanging on to fed biz

Unisys Corp. has decided not to sell its federal business unit because weak market conditions produced unattractive offers.

Instead, Unisys will more closely align Unisys Federal with the rest of the company, said Joe McGrath, president of Unisys Global Industries, the division that operates the federal unit.

The company announced its decision Monday when it released its first quarter 2001 earnings, which showed net income of $69.3 million compared with net income of $107.4 million in the first quarter of 2000. The 2000 income excludes income from businesses Unisys has left, such as the sale of commodity hardware.

As part of its annual strategic review, Unisys decided in 2000 to explore alternatives for its federal business because its growth rate and financial returns lagged behind the company's commercial business, McGrath said.

Unisys considered whether it should divest the federal business at a time when the industry is consolidating, he said. However, Unisys would not accept a stock offer in return for the company, he said.

"We received a number of offers, but it didn't hit the return rates for the value that we believed the business had, so we decided not to do it," McGrath said, adding that the decision is final and will not change once markets improve.

If Unisys targets segments such as e-government and customer relationship management, the company can achieve higher growth rates than the traditional federal business, he said.

Unisys will streamline the operations of the federal business to align it more closely with the rest of the company, increasing Unisys Federal's clout and access to corporate resources when it bids on large contracts, he said.

For instance, corporate lines of business could help the federal group market the Unisys ES 7000 product, which is a next-generation technology for server consolidation.