PhillyDeals: Successful turnaround at Unisys

J. Edward Coleman

became chief executive officer at

Unisys Corp.

, of Blue Bell, in October 2008, when orders were drying up, financing was freezing over, and the share price was collapsing.

As top boss at Gateway Inc. and CompuCom Systems Inc., Coleman honed a reputation as a turnaround specialist. At Unisys, he met with engineers and technicians, customers and investors. He laid out plans to cut product lines, management layers, and labor costs and to trim debt. He made Unisys easier to work with, all in a howling recession.

The multinational computer-services company reported a quarterly profit in July for the first time since 2007, and it doubled the profit three months later.

Unisys shares closed at a split-adjusted $33.27 Friday, 10 times its low of $3.30 fewer than 12 months ago.

Like many big companies this year, Unisys profits were higher, not from new sales - that figure has been flat at $5 billion to $6 billion for the last five years - but from lower costs. Coleman told investors last month that he shaved $200 million from Unisys' yearly expenses and plans to slice $50 million more.

Unisys now employs 26,000, including 1,200 at its Blue Bell headquarters, Malvern research center, and other local sites; that's down from 29,000, including 1,600 locals in 2008.

In May, Unisys plans to leave its 500,000-square-foot home in Blue Bell for a nearby building one-third the size.

Coleman knows that cutting is not enough. Unisys faces tough competitors in complex markets: International Business Machines Corp., Computer Sciences Corp., Raytheon Co.

"The only long-term differentiation" that could justify a higher profit margin "is the quality of the service as viewed by the customer," Coleman told me by phone Friday after meeting with Sen. Arlen Specter (D., Pa.) at Unisys' federal contracting center in Reston, Va.

Few customers know Unisys like

Jeff Shelton

, IT boss at

Global Partners L.P

. outside Boston.

Shelton left the Massachusetts Institute of Technology in 1973 to be a one-man information-technology department at Global's predecessor when it had $2 million in yearly sales. Thirty-six years later, Global's sales top $8 billion.

In the '70s, Shelton's computer purchases included a Burroughs unit and a Sperry data-entry machine. Burroughs and Sperry merged in 1986 to form Unisys, a hybrid whose shifting structure seemed designed for the products it inherited more than for the customers it served.

Shelton is still buying systems from Unisys. "They've always had great engineers and technology. Their [stuff] just runs and runs," Shelton told me last week. "But there have been times when we thought they must be hiding it under a barrel."

Before Coleman's consolidation, Unisys divided its sales efforts by product, region, and industry. "It was like they were three companies," Shelton said. "Sometimes I didn't know which to talk to. It was frustrating as hell."

Coleman's team made a big impression on Shelton. "His new crew, they understand that they're both a technology company and a service company," he said.

On repeat visits, Coleman "made a real effort to sit and listen to challenges the commonwealth has," said Naomi Wyatt, secretary of administration for Pennsylvania. "We have an improved relationship."

She is pleased in part because changes in contracts for managing the state's data systems have cut the expense to about $70 million a year from $100 million.

Lower prices don't boost Unisys' sales. But Coleman expects personal contact will pay off: "You have to make sure you not only do the basics of service delivery, but also deal with the customer, around subjective feelings."

If customers Wyatt and Shelton feel better, so do shareholders. Coleman pulled Unisys out of Thailand, but talk from dissidents of spinning off big lines like defense contracting followed, as the share price rose. "I like the businesses that we're in now," Coleman told me. "They're good businesses."