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Unisys Corporation

Unisys Corporation

Unisys Way
Blue Bell, Pennsylvania 19424
U.S.A.
Telephone: (215) 986-4011
Fax: (215) 986-2312
Web site: http://www.unisys.com

Public Company
Incorporated:
1886 as American Arithmometer Company
Employees: 35,800
Sales: $7.54 billion (1999)
Stock Exchanges: New York Amsterdam Brussels London Switzerland
Ticker Symbol: UIS
NAIC: 334111 Electronic Computer Manufacturing; 334112 Computer Storage Device Manufacturing; 334113 Computer Terminal Manufacturing; 334119 Other Computer Peripheral Equipment Manufacturing; 511210 Software Publishers; 541512 Computer Systems Design Services; 541519 Other Computer Related Services

Unisys Corporation is a major provider of computer-related services and technologies to customers in the financial services, communications, transportation, publishing, commercial, and government sectors, in more than 100 countries. The company offers an integrated suite of products and services known as Unisys e-@ction Solutions designed to help its customers meet the challenges and seize upon the opportunities of the Internet economy. Unisys provides consulting, systems integration, and outsourcing services; designs, implements, and maintains computer networks and multivendor information systems; and manufactures high-end, mission-critical servers for such organizations as the NASDAQ and the New York Clearinghouse.

Adding Machine Origins

Unisys, formed from the 1986 merger of the Burroughs Corporation with Sperry Corporation, traces its origins to over 100 years before that; in 1885, William Seward Burroughs invented the first recording adding machine. Burroughs called his device an arithmometer and the next year he and three partners founded the American Arithmometer Company in St. Louis, Missouri. Creating a commercially viable version proved difficult; Burroughs was unable to patent a salable model until 1892. Once on the market though, the adding machine became a successin 1897 Burroughs was awarded the Franklin Institutes John Scott Medal in honor of his invention. Burroughs died of tuberculosis the next year, however, sadly before realizing much profit from his invention. The company, which moved to Detroit in 1905, was renamed the Burroughs Adding Machine Company in his memory.

During the early years of the 20th century, Burroughs consolidated a position in the adding machine business by acquiring both Universal Adding Machine and Pike Adding Machine in 1908, and Moon-Hopkins Billing Machine in 1921. By 1914 the company offered 90 different types of data-processing machines which, with the help of interchangeable parts, could be modified into 600 different configurations. Accountants formed the core customer base, and in 1917 Burroughs increased court-ship of those customers with the debut of a magazine devoted to accounting called Burroughs Clearing House. By the 1920s Burroughs was an established mainstay of the office-machine industry and remained so for the next three decades, with adding machines still at the heart of the product line.

1950s: Expanding into Computers

All of that changed, however, as a result of J. Presper Eckert and John W. Mauchlys invention of ENIAC, the first electronic computer, in 1946. At first the market for computers appeared to be limited to a handful of government agencies that used them for large-scale number crunching. The only companies to commit themselves to computer research and development were large electronics and office-machine firms for whom the computer was a natural extension. When the Defense Department awarded the design contract for the new SAGE early-warning computer system in 1952, Burroughs, IBM, RCA, Remington Rand, and Sylvania were all prime choices. IBM won, giving that company an advantage competitors struggled to overcome.

Burroughs did not immediately plunge wholeheartedly into computer technology, preferring, along with Sperry Rands UNIVAC unit, NCR, Control Data, and Honeywell, to keep up with IBM during the 1950s. At the end of the decade Burroughss reputation was still, in the words of a Time magazine correspondent, that of a stodgy old-line adding machine maker. Even so, in 1952 the company developed an add-on memory for Eckert and Mauchlys ENIAC. The following year the company name was shortened to Burroughs Corporation, in recognition of its diversification. In 1956 Burroughs introduced its first commercial electronic computer and acquired ElectroData Corporation, a leading maker of high-speed computers. Burroughs also entered the field of automated office machines, introducing the Sensitronic electronic bank bookkeeping machine in 1958.

Burroughs entered the computer field during the tenure of John Coleman, whose last major act as president was to negotiate a partnership agreement between his companys computer operations and those of RCA, which was also looking for a way to catch up to IBM through a pooling of financial resources. RCA approved the agreement in 1959, but Coleman died before he could sway Burroughss board of directors and the plan was never realized. Business historian Robert Sobel wrote that the Burroughs-RCA partnership might have produced the best possible challenger for IBM.

1960s Through Early 1980s: Struggling to Compete with IBM

Coleman was succeeded by executive vice-president Ray Eppert. Under Eppert, Burroughs expanded its place in the rapidly growing bank-automation market in 1960, as the company began selling magnetic inks and automatic check-sorting equipment. In 1961 the company introduced the B5000 computer, which was less expensive and simpler to operate than other commercial mainframes. Expansion and diversification during the early years of the computer age led to a fourfold increase in sales between 1948 and 1960, from $94 million to $389 million. At the same time, however, increased research and development costs cut profit margins, a problem the company struggled with until the late 1960s.

Despite this surge in earnings, Burroughs remained among the smallest of IBMs main competitors in the early 1960s. Although the B5000s distinctive design had earned a solid following, Burroughss computer product line remained narrow and the company was still too dependent on accounting machines. Research and development costs continued hacking away at profit margins, leaving the companys future clouded.

In 1964 Ray Macdonald became executive vice-president and began overseeing the companys day-to-day operations. With the help of several like-minded executives, he took control of Burroughs from Eppert and committed the company to a course of steady profit growth through cost cutting. Macdonald succeeded Eppert as CEO in 1967. Burroughss financial performance continued improving and the company became a Wall Street favorite before the decade was out.

The Defense Department awarded Burroughs a contract in 1967 to build the Illiac IV supercomputer which had been de-signed by a team at the University of Illinoisa major coup for the company. The Illiac IV was ten to 20 times faster than any existing supercomputer in 1972 and was delivered to NASAs Ames Research Center in California. The sudden lag in research and development created by Macdonalds policy of cutting costs also contributed to two significant technical failures around this time. The B8500 mainframe, which had been scheduled for delivery in 1967, had to be scrapped altogether in 1968, after Burroughs engineers realized they could not produce reliable components at a reasonable price. The B6500 was riddled with breakdowns caused by the development teams strategy for bringing the project in on time and under budgetnamely, cutting corners in the high-speed circuitry design and neglecting to test the completed machines properly before delivery.

An interesting aspect of Macdonalds stewardship was his reemphasis on accounting machines as an integral part of Burroughss product line. Foremost among his talents was a genius for salesmanship; the company won a considerable chunk of the high-speed accounting machines market from rival NCR. In 1974 Burroughs entered the facsimile equipment business, acquiring Graphic Services for $30 million. The next year the company paid $8.8 million for Redactron, a maker of automatic typewriters and computer-related equipment.

Ray Macdonald retired in 1977 and was replaced by Paul Mirabito, his hand-picked successor. During Mirabitos brief tenure, the consequences of Macdonalds fiscal policies began manifesting themselves in earnest. In 1979 IBM announced a powerful new generation of computer systems. Burroughs countered by announcing its own new series of systems. Unfortunately, although Burroughss design ideas were good, the company did not have the development or manufacturing re-sources to translate them into actual computers. Burroughss inability to deliver finished products resulted in an embarrassing stream of canceled orders. Years of salary cuts and other forms of budget-tightening had engendered low morale among field engineers and a reputation for poor service among clients. Customer complaints came to a head in 1981, when 129 Burroughs users sued the company over product unreliability and difficulty in getting their machines fixed.

Company Perspectives

What makes Unisys unique in its ability to serve tens of thousands of customers worldwide?

Our people.

Unisys people have the creativity, technical excellence, tenacity, and can-do spirit to help our clients solve their business problems. In more than 100 countries around the world, leading financial services institutions, airlines, communications providers, commercial market leaders, and government agencies rely on Unisys. We help them apply information technology to streamline operations antici-pate and adapt to change attract and retain new clients enable executives to make informed decisions support front-line employees responding to customer needs and achieve new levels of competitiveness and success.

Mirabito had retired in 1979 and was replaced by W. Michael Blumenthal, the former chairman of Bendix and secretary of treasury in the Carter administrationa move that surprised many industry observers. Blumenthal took over a company that was deceptively profitable, chalking up record sales of $2.8 billion in 1979. He immediately set about shaking up Burroughss corporate culture, firing veteran executives and replacing them with his own appointees, phasing out the adding machine and calculator businesses, implementing a plan to improve repair service, and discontinuing accounting practices that tended to inflate earnings. Blumenthals reforms did not come without cost, however; in July 1980, the company reported its first drop in quarterly profits in 17 years.

Blumenthal concentrated on Burroughss computer business in an effort to secure the position of the largest of IBMs U.S. competitors. In 1981 the company covered one weak spot by acquiring System Development Corporation, a software development firm, for $9.6 million. Burroughs also procured Memorex that year, maker of disc drives and other data-storage equipment, for $85.2 million, despite Memorexs shaky financial condition. These moves added $1 billion to the companys annual sales.

Mid-1980s: Burroughs + Sperry = Unisys

Blumenthal eventually decided that economies of scale were necessary to compete with IBM. In 1985 Burroughs launched a $65-per-share takeover bid, worth $3.7 billion, for Sperry Corporation. Sperry had been a takeover candidate since holding unsuccessful merger talks with ITT in March 1984. The Sperry board of directors and investors, from whom Burroughs hoped to obtain shares, balked at the offer, though, and the deal fell through. Burroughs came back with a $70-per-share bid, worth $4.1 billion, in May 1986, and a four-week battle ensued. Sperry executives, anxious to preserve the companys independence, argued against selling out. The board put up a defense that included an $80-per-share stock buyback offer while casting about for a white knight. Sperry eventually agreed to a $76.50-per-share deal worth $4.8 billionat the time, by far the largest merger in the history of the computer industry and one of the largest in U.S. corporate history. The resulting company was the second largest computer firm in the nation, leapfrogging over Digital Equipment Corporation.

Sperry, which was founded in 1933 but traced its roots back to the 1910-formed Sperry Gyroscope Co., originally made aircraft instruments. In 1955 the manufacturer jumped into the computer business, merging with Remington Rand, whose history dated back farther than Burroughs or Sperry. In 1873 E. Remington & Sons, forerunner of Remington Typewriter Co., introduced the first commercially successful typewriter. After producing the first noiseless typewriter in 1909, Rem ington introduced the first electric typewriter in the United States in 1925. Two years later, Remington Typewriter merged with Rand Kardex to form Remington Rand. The latter introduced the worlds first business computer, the 409, in 1949. The following year, Remington Rand acquired Eckert-Mauchly Corporation, the company founded by the developers of the ENIAC and the UNIVAC. The 1955 merger of Sperry and Remington Rand resulted in Sperry Rand, which quickly be-came one of the industrys leading companies due to its technical prowess and by the 1960s had gained a reputation for wonderful products. At the same time Sperry had inherited a legacy of poor management and marketing from Remington Rand. By the time Burroughs showed interest, the renamed Sperry Corporation had profitable defense-electronics operations, but a struggling computer business.

Key Dates

1873:
E. Remington & Sons, forerunner of Remington Typewriter Co., introduces the first commercially successful typewriter.
1885:
William Seward Burroughs invents the first recording adding machine, the arithmometer.
1886:
Burroughs and partners found the American Arithmometer Company.
1905:
American Arithmometer is renamed the Burroughs Adding Machine Company.
1910:
Sperry Gyroscope Co. is formed as a maker of aircraft instruments.
1925:
Remington introduces the first electric typewriter in the United States.
1927:
Remington merges with Rand Kardex to form Remington Rand.
1933:
Sperry Corporation is formed.
1946:
J. Presper Eckert and John W. Mauchly invent ENIAC, the first electronic computer.
1949:
Remington Rand introduces the worlds first business computer, the 409.
1950:
Eckert and Mauchly found Eckert-Mauchly Corporation, which is acquired later in the year by Remington Rand.
1953:
Burroughs Adding Machine is renamed Burroughs Corporation.
1955:
Sperry merges with Remington Rand to form Sperry Rand.
1956:
Burroughs introduces its first commercial electronic computer and acquires high-speed computer maker ElectroData.
1961:
Burroughs introduces the B5000 computer.
1986:
Burroughs and Sperry merge to form Unisys Corporation.
1987:
Unisys acquires Convergent Technologies, maker of office workstations.
1991:
Company settles its role in a Pentagon procurement scandal by pleading guilty to fraud and bribery and agreeing to pay $190 million in damages, penalties, and fines.
1992:
Company forms a unit dedicated to providing information technology services.
1996:
ClearPath line of computers is introduced.
1999:
The Unisys e-@ction Solutions suite of integrated hardware and services is unveiled.

Six months after the acquisition, the combined company adopted the name Unisys Corporation. The moniker was selected from suggestions submitted by Burroughs and Sperry employees and was conceived as a synthesis of the words United Information Systems. But the real work of fusing the two companies still remained. Over the next two years the Unisys workforce was reduced by 20 percent24,000 of the 121,000 positions were eliminatedwhile unwanted and redundant businesses were placed on the market in order to generate cash. In December 1986, Unisys sold Sperry Aerospace to Honeywell and later sold off Memorexs marketing arm.

Late 1980s and Early 1990s: Sinking Fortunes and a Turnaround

Meanwhile Unisys stepped up diversification of its product line. In 1987 Unisys obtained Timeplex, a high-tech communications equipment company, for $300 million, and Convergent Technologies, a maker of office workstations, for $351 million. By 1989 the company had begun to move into the small and mid-sized computer market, adopting AT&Ts popular Unix operating system as the standard configuration for Unisys machines. In 1989 Unisys also began manufacturing its own personal computers for the first time.

Unisys was not entirely successful in the late 1980s, however. Despite strong earnings growth from the time of the Sperry deal through 1988, the company posted a loss of nearly $100 million in the first quarter of 1989. Management shakeups in 1987 had resulted in the departure of two key executivesvice-chairman Joseph Kroger, the former president of Sperry who commanded intense loyalty from former Sperry employees, and Paul G. Stern, a physicist whom Blumenthal had brought into the company from IBM and made president and chief operating officer in 1982. Sluggish sales, manufacturing cost overruns, and fierce price competition among the many companies using the Unix system all cut into revenues.

Unisys also found itself caught up in the Pentagon procurement scandal of 1988. Federal prosecutors brought charges against some Unisys executivesincluding former vice-president Charles Gaines, who headed the Washington, D.C., office of one of the companys defense unitswith fraud, bribing Defense Department officials into yielding classified procurement documents, and making illegal campaign contributions to members of Congress; these activities allegedly occurred at Sperry prior to the merger. Unisys had already begun an internal investigation when the government made the accusations public. According to Paul Mann of Aviation Week & Space Technology, the company settled its part in the Operation 111 Wind court case in September 1991, pleading guilty to fraud and bribery and agreeing to pay a record of up to $190 million in damages, penalties, and fines. In the same article, James A. Unruh, who succeeded Blumenthal in 1990, was quoted as saying, we as a company must accept responsibility for the past actions of a few people, even though today we have a completely different management team and different shareholders.

Unisyss difficulties continued and deepened in the early 1990s, with much of the troubles easily traced back to the merger of Burroughs and Sperry. The operations of the two companies had never been properly integrated, leaving duplicate R&D, marketing, and accounting departments. Already saddled with a huge debt load from the 1986 merger, Unisys was forced to take on an additional $1.4 billion in debt to cover negative cash flow, as the companys mainframe computers were quickly losing market share to IBM and Amdahl. The companys stock, which sold for about $50 in 1987, collapsed to a low of $1.75 during 1990. Unisys posted successive net losses of $639 million in 1989, $436 million in 1990, and $1.39 billion in 1991. Bankruptcy neared.

Amid a depressed global economy, Unruh managed to turn Unisyss fortunes around by 1992 through a draconian restructuring, the success of which surprised many observers. Unisys exacted additional drastic employee reductions, eliminating some 23,000 people from 1989 through 1991. At the end of 1991, the remaining Unisys workforce was roughly half the size of that at the time of the merger. An additional 6,000 jobs were cut in 1992, leaving a workforce of 54,300. Other major restructuring costs led Unisys to take massive charges of $1.2 billion in 1991, directly contributing to overall unprofitability for the year. These measures, however, were expected to reduce costs on an annual basis by approximately $800 million. In its aggressive drive to cut costs, Unisys reduced its 50,000-product line by 15,000 items, having determined that ten percent of its products were bringing in 90 percent of the revenue. Its mainframe computer lines were reduced from four to two (Sperrys 2200 series and Burroughss A series). The Timeplex subsidiary, responsible for only a small fraction of overall revenues, was divested. The company shuttered seven of its 15 manufacturing facilities, and Unisys began concentrating on those market sectors where it was traditionally the strongest: banking, airlines, government, and communications. Debt was brought down to a more manageable $1.4 billion, from its peak of $3.5 billion.

This massive reengineering effort not only pulled Unisys from the brink of disaster, it also resulted in two solid years of financial performance: for 1992, net income of $361.2 million on sales of $8.7 billion, and for the following year, net income of $565.4 million on $7.74 billion in revenues. Unisys was much smallerrevenues had totaled $10.11 billion in 1990but much more profitable.

Mid-1990s and Beyond: Shift to Services and Continued Restructuring

As the turnaround was taking shape, Unruh pushed the company in a new direction. With a clear shift taking place from mainframes to networked computing, Unruh moved to deemphasize the former through an expansion into computer services. Beginning in 1992 with the formation of a unit dedicated to providing information technology services, Unisys became active in the areas of systems consulting and design and systems integration services. One rationale behind the shift to services was that as computer systems grew ever more complex, in-house personnel were less and less able to cope, leading to a growing market for outside information technology expertise. Building on its existing mainframe maintenance activities, Unisys was able to generate $1.3 billion from services in 1992, then $2 billion the following year. By 1994 the companys services and solutions unit was generating more revenue than the mainstay mainframe hardware operations.

Unfortunately, Unisyss comeback proved short-lived. Services revenues were growing about 30 percent per year but the company had failed to make a profit from its new activities, losing about $54 million during 1995 alone. Part of a 1994 profit decline was attributed to a delay in getting the companys latest servers, the 550 and 580, to market. Another factor was a $186 million charge for a further restructuring of the mainframe operations, including a workforce reduction of 4,000 and the long overdue merging of the 2200 series and the A series into a single mainframe line. After the depressed profit figure of $100.5 million for 1994, Unisys posted a net loss of $624.6 million in 1995 thanks to a $717.6 million charge for another restructuring (the fifth in seven years). This time the company reorganized itself into three units: hardware and software, which included mainframes, servers, and a recent foray into PCs; maintenance and networking, which concentrated on servicing and connecting computers; and services, which involved consulting and outsourcing in integrated systems design. This restructuring also involved the paring of a few thousand more workers from the payroll and the consolidating of facilities and manufacturing, as well as the 1995 sale of its defense contracting unit to Loral for $862 million.

The following year Unisys introduced to positive market reaction the ClearPath line of computers, which combined proprietary mainframes with open systems capable of running standard Unix and Windows NT software and applications in a single system. In April 1996 Unruh managed to defeat Greenway Partners proposal to shareholders for a breakup of Unisys into three parts. (Greenway held nearly a five percent stake in Unisys.) A similar breakup proposal one year later failed as well. In September 1997 Unruh stepped aside from his leadership position at Unisys, having kept the company alive but having never fully turned it around. The financial ups and downs and the frequent restructurings had left the remaining workforce demoralized. Nevertheless, most observers praised Unruhs shift into services, and during 1997 that unit finally turned its first profit.

Unruh helped select his successor, Lawrence A. Weinbach, former head of accounting and consulting giant Andersen World-wide. The new chairman, CEO, and president immediately began working to improve employee morale, meeting with more than one-third of the workforce and revoking unpopular policies from recent austerity programs, such as the elimination of the company match on 401(k) contributions. Weinbach also initiated $1.04 billion in fourth-quarter 1997 charges, which resulted in a net loss for the year of $853.6 million. Some $900 million of the charges were to write down the value of goodwill left from the acquisition of Sperry, with the remainder going toward reducing debt. At year-end 1997 debt stood at $1.4 billion but was reduced to less than $1 billion by the end of 1999.

In addition to focusing on debt reduction, Weinbach moved Unisys out of the manufacturing of PCs and smaller servers. The company began outsourcing the manufacture of such hard-ware to Hewlett-Packard in 1998. He also jettisoned the companys three unit structure in favor of a simpler division between hardware, which would now focus on high-end servers and mainframes, and services, which included maintenance as well as consulting and systems design. On the hardware side, Unisys worked to upgrade its existing mainframe line, while also introducing in 1999 a mainframe-class server called the Unisys e-@ction ClearPath Enterprise Server, which was Intel microprocessor-based and ran Windows NT (later Windows 2000) software. This server was part of a comprehensive and integrated portfolio of hardware and servicesknown as Unisys e-@ction Solutionsthat Unisys unveiled in 1999 to support the burgeoning e-business market. On the services side, Unisys became more selective in the type of projects it took on, concentrating on key markets where it had the most expertiseincluding financial services, government, communications, transportation, and publishing.

By 1999, 70 percent of the companys revenues were being generated by the services operations. For the year, Unisys posted net income of $510.7 million on sales of $7.54 billion, its best year since 1993. It was difficult to predict whether this turnaround would last longer than that of the early 1990s. As Unisyss services side grew, profit increases were likely to be harder won, as its services business was markedly less profitable than its hardware side. Nevertheless, one possible avenue for early 21st-century growth was in international markets, and Unisys was seeking acquisitions to fuel an overseas push in services. In 1999 the company made several acquisitions, including Datamec, a Brazilian application outsourcing company, and City Lifeline Systems Limited, a U.K.-based provider of services and solutions for firms trading in fixed-income securities.

Principal Subsidiaries

Unisys Canada, Inc.; Unisys Australia Limited; Unisys New Zealand Limited; Unisys Espana S.A. (Spain); Unisys (Schweiz) A.G. (Switzerland); Unisys Osterreich Ges.m.b.H. (Austria); Unisys Belgium; Unisys Deutschland G.m.b.H. (Germany); Unisys Sudamericana S.A. (Argentina); Unisys Electronica Ltda. (Brazil); Datamec, S.A. (Brazil); Unisys France; Unisys Italia S.p.A. (Italy); Unisys Limited (U.K.); Unisys Nederland N.V. (Netherlands); Unisys de Mexico, S.A. de C.V.; Unisys Korea Limited; Unisys South Africa, Inc.; Unisys de Colombia, S.A.; Unisys World Trade, Inc.

Principal Competitors

Amdahl Corporation; American Management Systems, Incorporated; Andersen Consulting; AT&T Corp.; British Telecommunications plc; Bull; Cap Gemini Ernst & Young; Compaq Computer Corporation; Computer Sciences Corporation; DecisionOne Holdings Corp.; Dell Computer Corporation; Electronic Data Systems Corporation; Ernst & Young International; Fujitsu Limited; Getronics NV; Hewlett-Packard Company; Hitachi, Ltd.; InaCom Corp.; International Business Machines Corporation; International Computers Limited; NCR Corporation; Perot Systems Corporation; PricewaterhouseCoopers; Sabre Inc.; Siemens AG; Silicon Graphics, Inc.; Sun Microsystems, Inc.

Further Reading

At Last, Sperry Leaps into the Office, Business Week, November 8, 1982, pp. 124+.

Barrett, Amy, Unisys Aims for the Top of the Tree: Will Weinbachs New Push Erase Its Second-Tier Status?, Business Week, November 9, 1998, p. 138.

______, UnisysHas It Hit Bottom?, Financial World, November 28, 1989, p. 16.

Benoit, Ellen, All Dressed Up, Forbes, March 24, 1986, pp. 106 +.

Bock, Gordon, and Russell Mitchell, How Burroughs Finally Won Sperry, Business Week, June 9, 1986, pp. 28 +.

Bulkeley, William M., Unisys, Back from the Edge, Stresses Service, Comfort, Wall Street Journal, April 22, 1999, p. B4.

______, Unisys Expects Profit to Trail Forecasts, Wall Street Journal, June 30, 2000, p. B6.

Byrne, John A., Univacuum, Forbes, June 6, 1983, pp. 156+.

Can Burroughs Catch Up Again?, Forbes, March 28, 1983, pp. 78 +.

Carey, David, Once Is Not Enough, Financial World, July 12, 1988, pp. 22 +.

England, Robert Stowe, A Bet Against: Whither Mainframes? At Unisys, James Unruh Is Betting the Company That Their Future Is Bleak, Financial World, August 1, 1995, pp. 4648.

______, Ugly Duckling, Financial World, October 12, 1993, pp. 3637.

Hooper, Laurence, Unruh Saves Unisys, Now Aims to Put It on Cutting Edge, Wall Street Journal, September 25, 1992, p. B4.

Linden, Dana Wechsler, The Bean Counter As Hero, Forbes, October 11, 1993, pp. 46 +.

The Long Road Back for Burroughs, Business Week, May 18, 1981, pp. 119 +.

Macdonald, Ray W., Strategy for Growth: The Story of Burroughs Corporation, New York: Newcomen Society in North America, 1978, 28 p.

Mann, Paul, Unisys Admits Bribery and Fraud, Will Pay Record $190 Million Fine, Aviation Week & Space Technology, September 16, 1991.

Mitchell, Russell, Unisys: So Far, So Goodbut the Real Test Is Yet to Come, Business Week, March 2, 1987, pp. 84 +.

Mitchell, Russell, and Gordon Bock, Can Burroughs Break Out of the Bunch in the Mainframe Race?, Business Week, December 9, 1985, pp. 78 +.

Narisetti, Raju, Campaign at Unisys Emphasizes Firms Vigor in Bid for New Image, Wall Street Journal, September 24, 1998, p. B12.

______, Unisyss New Chairman Is Bullish Despite Slow Sales: Weinbachs Plan Calls for Paring Debt and Relying on New Technologies, Wall Street Journal, January 7, 1998, p. B12.

Narisetti, Raju, Joann S. Lublin, and Elizabeth Macdonald, Unisys Bets on Weinbach, Top Manager, Names Him As Chief to Turn It Around, Wall Street Journal, September 24, 1997, p. B5.

Petre, Peter, The Struggle over Sperrys Future, Fortune, December 9, 1985, pp. 78 +.

Reingold, Jennifer, Unisys: Nobody Said Diversifying Was Easy, Business Week, July 15, 1996, p. 32.

Reingold, Jennifer, and Phillip L. Zweig, Can He Stop the Unisys Slide?, Business Week, June 3, 1996, pp. 6467.

Sperry: Pouring Its Resources into High-Growth Products, Business Week, February 15, 1982, pp. 80 +.

Unisys Posts $48M Net, Electronic News, April 27, 1992.

Unisys Profile, Blue Bell, Penn.: Unisys Corporation, 1989.

Uttal, Bro., The Blumenthal Revival at Burroughs, Fortune, October 5, 1981, pp. 128+.

______, How Ray Macdonalds Growth Theory Created IBMs Toughest Competitor, Fortune, January 1977.

______, A Surprisingly Sexy Computer Marriage, Fortune, November 24, 1986, pp. 46 +.

Verity, John W., and Joseph Weber, So Far, Married Life Seems to Agree with Unisys, Business Week, October 3, 1988, p. 123.

Weber, Joseph, This Is Hardly the Turning Point Unisys Had in Mind, Business Week, August 28, 1989, pp. 82 +.

______, Unisys: Out of the Bleak and into the Black, Business Week, June 8, 1992.

Ziegler, Bart, and Joann S. Lublin, Task at Unisys Isnt for Faint of Heart As Unruh Confirms Plans to Step Down, Wall Street Journal, June 20, 1997, p. B6.

Douglas Sun and Jay P. Pederson

updated by David E. Salamie

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Unisys Corporation

Unisys Corporation

P.O. Box 500
Township Line and Union Meeting Roads
Blue Bell, Pennsylvania 19424-0000
U.S.A.
(215) 986-4011
Fax: (215) 986-6850

Public Company
Incorporated: 1886 as American Arithmometer Company
Employees: 60,300
Sales: $8.69 billion
Stock Exchanges: New York Midwest Pacific Cincinnati Amsterdam Antwerp Basel Brussels Geneva Lausanne London Zürich

Unisys Corporation, known as the Burroughs Corporation until a merger with Sperry Corporation in 1986, is one of the largest providers of computer systems, software, and related technologies in the world, serving some 60,000 organizations and businesses in more than 100 countries. Within the United States, a market that generates slightly less than half of the companys revenue, Unisys ranks fourth in industry sales behind IBM, Hewlett-Packard, and Digital Equipment. The corporations principal product emphasis has been mainframes, peripherals, document-handling equipment, intelligent workstations, and customized solutions to a variety of business needs. Unisys is perhaps best known, though, as a government contractor, through the Paramax subsidiary, and as a leading processor of transactions for airlines, banks, and other telecommunications-oriented businesses.

Unisys originated in 1885, when William Seward Burroughs invented the first recording adding machine. Burroughs called his device an arithmometer and the next year he and three partners founded the American Arithmometer Company in St. Louis, Missouri. Creating a commercially viable version proved difficult; Burroughs was unable to patent a salable model until 1892. Once on the market though, the adding machine became a successin 1897 Burroughs was awarded the Franklin Institutes John Scott Medal in honor of his invention. Burroughs died of tuberculosis the next year, however, sadly before realizing much profit from his invention. The company, which moved to Detroit in 1905, was renamed the Burroughs Adding Machine Company in his memory.

During the early years of the twentieth century, Burroughs consolidated a position in the adding machine business by acquiring both Universal Adding Machine and Pike Adding Machine in 1908, and Moon-Hopkins Billing Machine in 1921. By 1914 the company offered 90 different types of data-processing machines which, with the help of interchangeable parts, could be modified into 600 different configurations. Accountants formed the core customer base, and in 1917 Burroughs increased courtship of those customers with the debut of a magazine devoted to accounting called Burroughs Clearing House.

By the 1920s Burroughs was an established mainstay of the office-machine industry and remained so for the next three decades, with adding machines still at the heart of the product line. All of that changed, however, as a result of J. Presper Eckert and John W. Mauchlys invention of ENIAC, the first electronic computer, in 1946. At first the market for computers appeared to be limited to a handful of government agencies that used them for large-scale number crunching. The only companies to commit themselves to computer research and development were large electronics and office-machine firms for whom the computer was a natural extension. When the Defense Department awarded the design contract for the new SAGE early-warning computer system in 1952, Burroughs, IBM, RCA, Remington Rand, and Sylvania were all prime choices. IBM won, giving that company an advantage competitors have yet to overcome.

Burroughs did not immediately plunge wholeheartedly into computer technology, preferring, along with Sperry Rands UNIVAC unit, NCR, Control Data, and Honeywell, to keep up with IBM during the 1950s. At the end of the decade Burroughss reputation was still, in the words of a Time magazine correspondent, that of a stodgy old-line adding machine maker. Even so, in 1952 the company developed an add-on memory for Eckert and Mauchlys ENIAC. The following year the company name was shortened to Burroughs Corporation, in recognition of its diversification. In 1956 Burroughs introduced its first commercial electronic computer and acquired ElectroData Corporation, a leading maker of high-speed computers. Burroughs also entered the field of automated office machines, introducing the Sensitronic electronic bank bookkeeping machine in 1958.

Burroughs entered the computer field during the tenure of John Coleman, whose last major act as president was to negotiate a partnership agreement between his companys computer operations and those of RCA, which was also looking for a way to catch up to IBM through a pooling of financial resources. RCA approved the agreement in 1959, but Coleman died before he could sway Burroughss board of directors and the plan was never realized. Business historian Robert Sobel wrote that the Burroughs-RCA partnership might have produced the best possible challenger for IBM.

Coleman was succeeded by executive vice president Ray Eppert. Under Eppert, Burroughs expanded its place in the rapidly growing bank-automation market in 1960, as the company began selling magnetic inks and automatic check-sorting equipment. In 1961 the company introduced the B5000 computer, which was less expensive and simpler to operate than other commercial mainframes. Expansion and diversification during early years of the computer age led to a fourfold increase in sales between 1948 and 1960, from $94 million to $389 million. At the same time, however, increased research and development costs cut profit margins, a problem the company struggled with until the late 1960s.

Despite this surge in earnings, Burroughs remained among the smallest of IBMs main competitors in the early 1960s. Although the B5000s distinctive design had earned a solid following, Burroughss computer product line remained narrow and the company was still too dependent on accounting machines. Research and development costs continued hacking away at profit margins, leaving the companys future clouded.

In 1964 Ray Macdonald became executive vice president and began overseeing the companys day-to-day operations. With the help of several like-minded executives, he took control of Burroughs from Eppert and committed the company to a course of steady profit growth through cost cutting. Macdonald succeeded Eppert as chief executive officer in 1967. Burroughss financial performance continued improving and the company became a Wall Street favorite before the decade was out.

The Defense Department awarded Burroughs a contract in 1967 to build the Illiac IV supercomputer which had been designed by a team at the University of Illinoisa major coup for the company. The Illiac IV was 10 to 20 times faster than any existing supercomputer in 1972 and was delivered to NASAs Ames Research Center in California. The sudden lag in research and development created by Macdonalds policy of cutting costs also contributed to two significant technical failures around this time. The B8500 mainframe, which had been scheduled for delivery in 1967, had to be scrapped altogether in 1968, after Burroughs engineers realized they could not produce reliable components at a reasonable price. The B6500 was ridden with breakdowns caused by the development teams strategy for bringing the project in on time and under budgetnamely, cutting corners in the high-speed circuitry design and neglecting to test the completed machines properly before delivery.

An interesting aspect of Macdonalds stewardship was his re-emphasis of accounting machines as an integral part of Burroughss product line. Foremost among his talents was a genius for salesmanship; the company won a considerable chunk of the high-speed accounting machines market from rival NCR. In 1974 Burroughs entered the facsimile equipment business, acquiring Graphic Services for $30 million. The next year the company paid $8.8 million for Redactron, a maker of automatic typewriters and computer-related equipment.

Ray Macdonald retired in 1977 and was replaced by Paul Mirabito, his hand-picked successor. During Mirabitos brief tenure, the consequences of Macdonalds fiscal policies began manifesting themselves in earnest. In 1979 IBM announced a powerful new generation of computer systems. Burroughs countered by announcing its own new series of systems. Unfortunately, although Burroughss design ideas were good, the company did not have the development or manufacturing resources to translate them into actual computers. Burroughss inability to deliver finished products resulted in an embarrassing stream of canceled orders. Years of salary cuts and other forms of budget-tightening had engendered low morale among field engineers and a reputation for poor service among clients. Customer complaints came to a head in 1981, when 129 Burroughs users sued the company over product unreliability and difficulty in getting their machines fixed.

Mirabito had retired in 1979 and was replaced by W. Michael Blumenthal, the former chairman of Bendix and secretary of treasury in the Carter administrationa move that surprised many industry observers. Blumenthal took over a company that was deceptively profitable, chalking up record sales of $2.8 billion in 1979. He immediately set about shaking up Burroughss corporate culture, firing veteran executives and replacing them with his own appointees, phasing out the adding machine and calculator businesses, implementing a plan to improve repair service, and discontinuing accounting practices that tended to inflate earnings. Blumenthals reforms did not come without cost, however; in July of 1980, the company reported its first drop in quarterly profits in 17 years.

Blumenthal concentrated on Burroughss computer business in an effort to secure the position of the largest of IBMs U.S. competitors. In 1981 the company covered one weak spot by acquiring System Development Corporation, a software-development firm, for $9.6 million. Burroughs also procured Memorex that year, maker of disc drives and other data-storage equipment, for $85.2 million, despite Memorexs shaky financial condition. These moves added $1 billion to the companys annual sales.

Blumenthal eventually decided that economies of scale were necessary to compete with IBM. In 1985 Burroughs launched a $65-per-share takeover bid, worth $3.7 billion, for Sperry. Sperry had been a takeover candidate since holding unsuccessful merger talks with ITT in March of 1984. The Sperry board of directors and investors, from whom Burroughs hoped to obtain shares, balked at the offer, though, and the deal fell through. Burroughs came back with a $70-per-share bid, worth $4.1 billion, in May 1986, and a four-week battle ensued. Sperry executives, anxious to preserve the companys independence, argued against selling out. The board put up a defense that included an $80-per-share stock buyback offer while casting about for a white knight. Sperry eventually agreed to a $76.50-per-share deal worth $4.8 billionby far the largest merger in the history of the computer industry and one of the largest in U.S. corporate history. The resulting company was the second-largest computer firm in the nation, leapfrogging over Digital Equipment Corporation.

Sperry, which was founded in 1933, originally made aircraft instruments. In 1955 the manufacturer jumped into the computer business, merging with Remington Rand, which had acquired Eckert-Mauchly Corporation, a company founded by the developers of the ENIAC and the UNIVAC, in 1950. Sperry Rand quickly became one of the industrys leading companies due to its technical prowess and by the 1960s had gained a reputation for wonderful products. At the same time Sperry had inherited a legacy of poor management and marketing from Remington Rand. By the time Burroughs showed interested, Sperry had profitable defense-electronics operations, but a struggling computer business.

Six months after the acquisition, the combined company adopted the name Unisys. The moniker was selected from suggestions submitted by Burroughs and Sperry employees and was conceived as a synthesis of the words United Information Systems. But the real work of fusing the two companies still remained. Over the next two years the Unisys work force was reduced by 20 percent24,000 of the 121,000 positions were eliminatedwhile unwanted and redundant businesses were placed on the market in order to generate cash. In December 1986, Unisys sold Sperry Aerospace to Honeywell and later sold off Memorexs marketing arm.

Meanwhile Unisys stepped up diversification of its product line. In 1987 Unisys obtained Timeplex, a high-tech communications equipment company, for $300 million, and Convergent Technologies, a maker of office workstations, for $351 million. By 1989 the company had begun to move into the small- and mid-sized computer market, adopting AT&Ts popular Unix operating system as the standard configuration for Unisys machines. In 1989 Unisys also began manufacturing its own personal computers for the first time.

Unisys was not entirely successful in the late 1980s, however. Despite strong earnings growth from the time of the Sperry deal through 1988, the company posted a loss of nearly $100 million in the first quarter of 1989. Management shake-ups in 1987 had resulted in the departure of two key executivesvice chairman Joseph Kroger, the former president of Sperry who commanded intense loyalty from former Sperry employees, and Paul G. Stern, a physicist whom Blumenthal had brought into the company from IBM and made president and chief operating officer in 1982. Sluggish sales, manufacturing cost overruns, and fierce price competition among the many companies using the Unix system all cut into revenues.

Unisys also found itself caught up in the Pentagon procurement scandal of 1988. Federal prosecutors brought charges against some Unisys executivesincluding former vice president Charles Gaines, who headed the Washington, D.C., office of one of the companys defense unitswith fraud, bribing Defense Department officials into yielding classified procurement documents, and making illegal campaign contributions to members of Congress; these activities allegedly occurred at Sperry prior to the merger. Unisys had already begun an internal investigation when the government made the accusations public. According to Paul Mann of Aviation Week & Space Technology, the company settled its part in the Operation III Wind court case in September 1991, pleading guilty to fraud and bribery and agreeing to pay a record of up to $190 million in damages, penalties, and fines. In the same article, James A. Unruh, appointed successor to Blumenthal, was quoted as saying, we as a company must accept responsibility for the past actions of a few people, even though today we have a completely different management team and different shareholders.

Unruh claimed in the companys 1991 annual report that the settlementextending through 1997would have minimal impact on the companys performance. His statement accorded with newfound optimism within and outside the corporation that the beleaguered giant would return to profitability. Successive net losses of $639 million in 1989, $436 million in 1990, and $1.39 billion in 1991 were offset by the news of year-end 1991 and initial 1992 quarterly gains of $80.5 and $48.3 million, respectively. Analysts [were] estimating the company could earn about $285 million for the full 1992 fiscal year, according to Electronic News.

In order to achieve this apparent turnabout amid a depressed global economy, Unisys exacted more drastic employee reductions, eliminating some 23,000 people from 1989 through 1991. At the end of 1991 the remaining Unisys workforce was roughly half the size of that at the time of the merger. Other major restructuring costs in 1991 led Unisys to take massive second quarter charges of $1.2 billion, directly contributing to overall unprofitability for the year. However, these measures were expected to reduce costs on an annual basis by approximately $800 million.

Also contributing to Unisyss reinvigoration was the 1991 sale of the Timeplex subsidiary, responsible for only a small fraction of overall revenues, as well as the decision to withdraw from the public offering of Paramax, which despite a declining defense market, remained healthy and generated more than 20 percent of Unisyss annual gross revenues.

Unisyss stock became a top performer on the New York Stock Exchange from mid-1991 through mid-1992bolstered by factors including the company reorganization and streamlining, concentration on high-volume markets, reduced inventories and operating expenses, and leading position in check-processing systems for financial institutions. The We Make It Happen company, known for high customer-service ratings, seemed as determined as ever to restore equally high financial rankings, regardless of the short-term sacrifices to be endured.

Principal Subsidiaries

Convergent, Inc.; Unisys Australia Limited; Unisys Belgium; Unisys Canada, Inc.; Unisys Deutschland GmbH (Germany); Unisys Electronica Ltda. (Brazil); Unisys Espana S.A. (Spain); Unisys Finance Corp.; Unisys France; Unisys Italia S.p.A. (Italy); Unisys Limited (U.K.); Unisys Nederland N.V. (Netherlands); Unisys (Schweiz) A.G. (Switzerland).

Further Reading

Uttal, Bro, How Ray Macdonalds Growth Theory Created IBMs Toughest Competitor, Fortune, January 1977; Unisys Profile, Blue Bell, Pennsylvania, Unisys Corporation, 1989; Mann, Paul, Unisys Admits Bribery and Fraud, Will Pay Record $190 Million Fine, Aviation Week & Space Technology, September 16, 1991; Unisys Posts $48M Net, Electronic News, April 27, 1992; Weber, Joseph, Unisys: Out of the Bleak and into the Black, Business Week, June 8, 1992.

Douglas Sun

update by Jay P. Pederson

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Unisys Corporation

Unisys Corporation

Post Office Box 500
Blue Bell, Pennsylvania 19424
U.S.A.
(215)986-4011
Fax: (215) 986-2312

Public Company
Incorporated: 1886 as American Arithmometer Company
Employees: 80,000
Sales: $10.10 billion
Stock Exchanges: New York Midwest Pacific Cincinnati Amsterdam Antwerp Basel Brussels Geneva Lausanne London Zurich

Unisys Corporation, which was known as Burroughs Corporation until it merged with Sperry Corporation in 1986, is the second-largest computer company in the United States. Mainframe computers constitute the core of its product line, and in recent years it has begun to make smaller computers as well. Unisys is also the nations 15th-largest defense contractor, running a sizable military-electronics business. The company has all but phased out the accounting machines which were its mainstay until the computer age.

Unisys can trace its origin to 1885, when William Seward Burroughs invented the first recording adding machine. Burroughs called his device an arithmometer, and the next year he and three partners founded the American Arithmometer Company in Saint Louis, Missouri, to market it. Creating a commercially viable version proved difficult, and it was not until 1892 that Burroughs was able to patent a salable model. Once on the market, the adding machine became a success, and in 1897 Burroughs was awarded the Franklin Institutes John Scott Medal in honor of his invention. He died of tuberculosis the next year, before realizing much profit from his invention.

The company was renamed the Burroughs Adding Machine Company in his memory in 1905 and moved its headquarters to Detroit, Michigan. During the early years of the new century, Burroughs consolidated its position in the adding machine business. It acquired Universal Adding Machine and Pike Adding Machine in 1908 and Moon-Hopkins Billing Machine in 1921. By 1914 the company offered 90 different types of data-processing machines which, with the help of interchangeable parts, could be modified into 600 different configurations. The core of its customer base was accountants, and in 1917 Burroughs stepped up its courtship of those customers with the debut of a magazine devoted to accountancy called Burroughs Clearing House.

By the 1920s Burroughs had established itself as a mainstay of the office-machine industry. It remained so for the next three decades, with adding machines still at the heart of its product line. All of that changed as a result of J. Presper Eckert and John W. Mauchlys invention of ENIAC, the first electronic computer in 1946. At first the market for computers appeared to be limited to a handful of government agencies that used them for large-scale number crunching. The only companies to commit themselves to computer research and development were large electronics and office-machine firms, for whom the computer was a natural extension. When the Defense Department awarded the design contract for its new SAGE early-warning computer system in 1952, it had Burroughs, IBM, RCA, Remington Rand, and Sylvania to choose from. It picked IBM, giving that company an advantage that its competitors have yet to overcome.

Burroughs did not plunge wholeheartedly into computer technology at first, although it, with Sperry Rands UNIVAC unit, NCR, Control Data, and Honeywell strove to keep up with IBM during the 1950s. At the end of the decade its reputation was still, in the words of a Time magazine correspondant, that of a stodgy old-line adding machine maker. Even so, in 1952 it developed an add-on memory for Eckert and Mauchlys ENIAC. In 1953 the company shortened its name to Burroughs Corporation, in recognition of its diversification. In 1956 Burroughs introduced its first commercial electronic computer and acquired ElectroData Corporation, a leading maker of high-speed computers. It also entered the field of automated office machines, introducing its Sensitronic electronic bank bookkeeping machine in 1958.

Burroughs entered the computer field during the tenure of President John Coleman, whose last major act as president was to negotiate a partnership agreement between his companys computer operations and those of RCA, which was also looking for a way to catch up to IBM through a pooling of financial resources. RCA approved the agreement in 1959, but Coleman died before he could sway Burroughss board of directors, and the plan was never realized. Business historian Robert Sobel has written that the Burroughs-RCA partnership might have produced the best possible challenger for IBM.

Coleman was succeeded by Executive Vice President Ray Eppert. Under Eppert, Burroughs expanded its place in the rapidly growing bank-automation market in 1960 when it began selling magnetic inks and automatic check-sorting equipment. In 1961 the company introduced its B5000 computer, which it said was less expensive and simpler to operate than other commercial mainframes. Expansion and diversification during early years of the computer age led to a fourfold increase in sales between 1948 and 1960, from $94 million to $389 million. At the same time, however, increased research-and-development costs cut profit margins, a problem the company struggled with until the late 1960s.

Despite this surge in earnings, Burroughs remained among the smallest of IBMs main competitors in the early 1960s. Despite the fact that the B5000 had won a following with its distinctive design, Burroughss computer product line remained narrow and the company was still too dependent on accounting machines. Research-and-development costs still hacked away at profit margins, and the companys future was clouded.

In 1964 Ray Macdonald became executive vice president and began to oversee the companys day-to-day operations. With the help of several like-minded executives, he took control of Burroughs from Eppert and committed it to a course of steady profit growth through cost cutting. Macdonald succeeded Eppert as CEO in 1967. Burroughss financial performance continued to improve and the company became a Wall Street favorite before the decade was out.

Burroughs scored a major coup in 1967 when the Defense Department awarded it the contract to build the Illiac IV supercomputer, which had been designed by a team at the University of Illinois. The Illiac IV was 10 to 20 times faster than any existing supercomputer and was delivered to NASAs Ames Research Center in California in 1972. The sudden lag in research and development created by Macdonalds policy of cutting costs also contributed to two significant technical failures at about this time. The B8500 mainframe, which had been scheduled for delivery in 1967, had to be scrapped altogether in 1968 after Burroughs engineers realized they could not produce reliable components at a reasonable price. The B6500 was plagued by breakdowns because the development team, in order to bring the project in on time and under budget, had cut corners in designing its high-speed circuits and had not tested the completed machines properly before delivery.

An interesting aspect of Macdonalds stewardship was his re-emphasis of accounting machines as an integral part of Burroughss product line. Foremost among his talents was a genius for salesmanship, and the companys efforts to market its high-speed accounting machines won a considerable chunk of the market from rival NCR. In 1974 Burroughs entered the facsimile-equipment business when it acquired Graphic Services for $30 million. The next year the company paid $8.8 million for Redactron, a maker of automatic typewriters and computer-related equipment.

Ray Macdonald retired in 1977 and was replaced by Paul Mirabito, his hand-picked successor. It was during Mirabitos brief tenure that the consequences of Macdonalds fiscal policies began to manifest themselves in earnest. In 1979 IBM announced a powerful new generation of computer systems. Burroughs countered by announcing its own new series of systems. Unfortunately, although its design ideas were good, the company did not have the development or manufacturing resources to translate them into actual computers. Its inability to deliver finished products resulted in an embarrassing stream of canceled orders. Years of salary cuts and other forms of budget-tightening had also engendered low morale among field engineers and a reputation for poor service. Customer complaints came to a head in 1981, when 129 Burroughs users sued the company over product unreliability and difficulty in getting their machines fixed.

Mirabito retired in 1979 and was replaced by W. Michael Blumenthal, the former chairman of Bendix and treasury secretary in the Carter administration. The move came as a surprise to industry observers. Blumenthal took over a company that was deceptively profitable, chalking up record sales of $2.8 billion in 1979. He immediately set about shaking up Burroughss corporate culture, firing veteran executives and replacing them with his own appointees, phasing out the adding machine and calculator businesses, implementing a plan to improve repair service, and discontinuing accounting practices that tended to inflate earnings. Blumenthals reforms did not come without cost, however; in July 1980 the company reported its first drop in quarterly profits in 17 years.

Blumenthal concentrated on Burroughss computer business in an effort to secure the position of the largest of IBMs U.S. competitors. In 1981 the company covered one of its weak spots when it acquired System Development Corporation, a software-development firm, for $9.6 million. Burroughs also acquired Memorex, a maker of disc drives and other data-storage equipment, that year for $85.2 million, despite Memorexs shaky financial condition. These moves added $1 billion to the companys annual sales.

Blumenthal eventually decided that economies of scale were necessary to compete with IBM. In 1985 Burroughs launched a $65-per-share takeover bid, worth $3.7 billion, for Sperry. Sperry had been a takeover candidate since holding unsuccessful merger talks with ITT in March 1984. Its board of directors and investors, from whom Burroughs hoped to acquire shares, balked at the offer and the deal fell through. Burroughs came back with a $70-per-share bid, worth $4.1 billion, in May 1986, and a four-week battle ensued. Sperry executives, anxious to preserve the companys independence, argued against selling out and the board put up a defense that included an $80-per-share stock buyback offer and casting about for a white knight. Sperry eventually agreed to a $76.50-per-share deal worth $4.8 billion. It was by far the largest merger in the history of the computer industry and one of the largest in U.S. corporate history. Combined, the new company was the second-largest computer firm in the nation, leapfrogging over Digital Equipment Corporation.

Sperry, which was founded in 1933, originally made aircraft instruments. In 1955 it jumped into the computer business when it merged with Remington Rand, which had in its turn acquired Eckert-Mauchly Corporation, the company founded by the developers of the ENIAC and the UNIVAC, in 1950. Sperry Rand quickly became one of the industrys leading companies due to its technical prowess. By the 1960s it had acquired a reputation for wonderful products but dreadful management and marketing, a legacy it inherited from Remington Rand. At the time of its acquisition by Burroughs, Sperry had profitable defense-electronics operations but a struggling computer business.

Six months after the acquisition, the combined company announced that it would adopt the name Unisys. It was selected from suggestions submitted by Burroughs and Sperry employees, and was conceived as a condensation of the words United Information Systems. But the work of rationalizing the two companies still remained. Over the next two years Unisys cut its work force by 20%, shedding 24,000 of its 121,000 employees, and sold unwanted and redundant businesses to generate cash. In December 1986 it sold Sperry Aerospace to Honeywell, and it later sold off Memorexs marketing arm.

At the same time, Unisys diversified its product line. In 1987 it acquired Timeplex, a high-tech communications-equipment company, for $300 million and Convergent Technologies, a maker of office workstations, for $351 million. By 1989 the company had begun to move into the small-and-mid-sized computer market and had adopted AT&Ts popular Unix operating system as the standard configuration for its machines. In 1989 Unisys began manufacturing its own personal computers for the first time in its history.

In the late 1980s Unisys was not entirely successful, however. Despite strong earnings growth from the time of the Sperry deal through 1988, the company posted a loss of nearly $100 million in the first quarter of 1989. Management shake-ups in 1987 had resulted in the departure of two key executivesVice Chairman Joseph Kroger, the former president of Sperry who commanded intense loyalty from former Sperry employees, and Paul G. Stern, a physicist whom Blumenthal had brought into the company from IBM and made president and chief operating officer in 1982. Sluggish sales, manufacturing cost overruns, and fierce price competition among the many companies using the Unix system all cut into revenues.

Unisys also found itself caught up in the Pentagon procurement scandal of 1989 when federal prosecutors charged former Vice President Charles Gaines, who headed the Washington, D.C., office of one of the companys defense units, and other executives with fraud, bribing Defense Department officials into giving them classified procurement documents, and making illegal campaign contributions to members of Congress. Unisys had already begun its own internal investigation when the government made its accusations public. The company spent the next 12 months working with prosecutors to hammer out an agreement under which it pleaded guilty and paid a fine.

Excessive inventory and slow responses to changes in the defense and information technology industries caused Unisys to lose money in 1989. When President James A. Unruh became CEO in April 1990, he stated that Unisyss products and strategy would not change, but that its execution would.

Principal Subsidiaries

Unisys Canada Inc.; Convergent, Inc.; Timeplex, Inc.; Unisys International Company; Unisys Finance Corporation; Unisys Australia Limited; Unisys Espana S.A. (Spain); Unisys (Schweiz); A.G. (Switzerland); Unisys Belgium; Unisys Deutschland G.m.b.H. (Germany); Unisys Eletronica Ltda. (Brazil); Unisys France; Unisys Italia S.p.A. (Italy); Unisys Limited (U.K.); Unisys Nederland N.V. (Netherlands).

Further Reading

Uttal, Bro, How Ray Macdonalds Growth Theory Created I.B.M.s Toughest Competitor, Fortune, January 1977; Unisys Profile, Blue Bell, Pennsylvania, Unisys Corporation, 1989.

Douglas Sun

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Unisys Corp

UNISYS CORP.

Blue Bell, Pennsylvania-based Unisys Corp. provides systems integration, network management, technology support, outsourcing, and consulting services to clients in communications, financial services, publishing and transportation industries, as well as to government agencies. Major competitors include IBM Corp. and Computer Sciences Corp. In the late 1990s, the firm shifted its focus away from commodity hardware operations and created the e@ctions Solutions division, which offers, among other things, Web-based services. With sales of $6.9 billion and 37,000 employees, Unisys is working toward of goal of deriving half of its revenues from e-business by the year 2002.

EARLY HISTORY

The foundation for Unisys Corp. was first laid in 1885 when William S. Burroughs invented the arithmometer, an adding machine that records numbers. The following year, Burroughs incorporated his business as American Arithmometer Co. He obtained a patent for his adding machine in 1892, and five years later, the Franklin Institute awarded him the John Scott Medal. The inventor and businessman succumbed to tuberculosis in 1898; however, his business remained operational, being reincorporated as Burroughs Adding Machine Co. in 1905. The company completed its first two purchasesUniversal Adding Machine and Pike Adding Machinethree years later. A machine able to both add and subtract was unveiled in 1911. By 1915, Burroughs Adding sold more than 90 different data processing machines, mainly to accountants. Interchangeable parts allowed clients to customize the machines to suit their needs.

Growth continued in 1921 with the acquisition of Moon-Hopkins Billing Machine. Burroughs Adding Machine launched a direct multiplication billing machine and a portable adding machine mid-decade. By 1945, sales had neared the $100 million mark. To better reflect its broadening product line, the firm changed its name to Burroughs Corp. in 1953. Three years later, Burroughs unveiled its first commercial electronic computer and purchased high-speed computer manufacturer ElectroData Corp. The firm diversified into automated office machines in 1958, developing an electronic bank bookkeeping machine known as the Sensitronic. One year later, the firm's president, John Coleman, reached an agreement with RCA to pool financial resources in an effort to better compete with industry leader IBM Corp. However, Coleman died before his plan was implemented. By the end of the decade, the firm had diversified into magnetic ink and automated check-sorting machinery. Sales neared $400 million.

Burroughs launched the B5000 mainframe computer, which used dual processors and virtual memory, in 1961. Six years later, the firm landed a U.S. Department of Defense contract to build the Illiac IV supercomputer. Cost cutting measures implemented in the mid-1960s were blamed for reliability problems with the B6500 computer. As a result, plans for the B8500 computer were shelved until engineers figured out how to fix the glitches. Burroughs completed the Illiac IV supercomputer in 1972. The $30 million purchase of Graphic Services in 1974 gave the firm entrance to the facsimile industry. The following year, Burroughs paid $8.8 million for automatic typewriters and computer equipment manufacturer Redactron. W. Michael Blumenthal, former Bendix chairman, joined Burroughs as executive vice president in 1979. He hired a new management team, discontinued adding machine and calculator operations, and funneled more resources into the firm's repair services. By the end of the decade, sales had reached nearly $3 billion. Blumenthal eventually took over as CEO.

Burroughs unveiled its A Series line in 1981; the technology would prove to be integral in the firm's future development of the ClearPath HMP System. To bolster its effectiveness against rival IBM in the mainframe industry, the company paid $85.2 million for Memorex and $9.6 million for System Development Corp. The purchases boosted sales by roughly $1 billion. In 1985, Burroughs and Sperry Corp. began merger negotiations. Sperry had been founded by Elmer Sperry in 1910 as Sperry Gyroscope Co., a manufacturer of navigational equipment. In 1955, Sperry merged with Remington Rand, maker of ENIAC, "the world's first large-scale, general-purpose computer" and UNIVAC, the ldquo;world's first business computer." Sperry's product launches in the 1960s included the 1100 computer series and the first multiprocessor computer, the 1108. In the 1970s, Sperry acquired RCA's computer operations and developed a cache memory disk subsystem. Its 2200 Series, shipped in 1986, would also play an instrumental role in the development of the ClearPath HMP system.

Both Burroughs and Sperry believed a merger would allow them to reduce costs and fund increased research and development, both of which were necessary to compete with IBM, which boasted revenues ten times those of both firms. Burroughs borrowed $2.5 billion to finance the merger, and the $4.8 billion deal was completed in 1986 when Burroughs and Sperry formed Unisys Corp., the second-largest computer firm in the U.S. Employees from both companies had agreed upon the name, which was essentially an acronym for "United Information Systems."

AFTER THE MERGER

Blumenthal was named CEO of the new firm. He closed several plants and laid off 24,000 employees. Earnings totaled $578 million in 1987. That year, Unisys sold off Sperry's marine operations and Burroughs's Memorex unit. Data Resources bought the firm's computer equipment and services arm. Integration continued as Unisys divested its South African marketing and sales unit for $28 million to Mercedes Information Technologies. The firm also paid $300 million for communications equipment maker Time-plex Inc. and $351 million for office workstations manufacturer Convergent Technologies.

In 1989, Unisys purchased File-Tek, Inc. to gain access to the company's Unix-based storage systems for the financial industry. Unisys also entered the small and mid-sized computer market, using AT&T Corp.'s new Unix operating system for its mainframe machines. The company posted a $639 million loss that year, which was due in large part to the increasing popularity of personal computers, which undercut mainframe computer sales. Unisys began manufacturing its own personal computers as a result. However, financial troubles continued in 1990 as mainframe computer demand took a sharp downturn. After the company posted losses of $436 million and suspended shareholder dividends, Blumenthal resigned. Unisys divested Timeplex for $207 million in 1991. The firm also slashed its workforce by 50 percent, which reduced losses for the year to $1.4 million. Public relations suffered when a federal judge found Unisys guilty of landing U.S. defense contracts via bribery and fined it roughly $190 million.

Hoping it legal and financial woes were a thing of the past, Unisys diversified into information technology (IT) services in 1992. Although it had worked to reduce its reliance on the mainframe industry, the firm did continue to make advances in that arena, including a mainframe machine using CMOS (complementary metal oxide semiconductor) technology, unveiled in 1993. The following year, Unisys landed a $127 million contract from one of the world's leading banks, the Savings Bank of the Russian Federal. Divestitures during 1995 included computer-aided design operations to Cadence Designs and aerospace and defense operations to Loral for $862 million. The company also purchased European software vendor Topsystems International, folding it into a new software unit known as Usoft. A restructuring of operations into three business units allowed the firm to focus on its services arm. One unit, Information Services Group, offered consulting, outsourcing, and enterprise systems integration.

Layoffs continued in 1996 when the firm reduced its workforce by 20 percent. On a more positive note, Unisys launched its ClearPath 61000, a multiprocessing system for Pentium processors that allowed clients to integrate Unisys applications with UnixWare and Microsoft Corp.'s Windows NT. Despite several restructuring efforts, the firm remained burdened by $2.3 billion in debt, partly the result of its 1986 merger. In 1997, the firm named Robert Brusk its new chief financial officer and appointed former Arthur Anderson CEO Larry Wienbach as CEO. By then, services accounted for more than 60 percent of sales.

Cellular multiprocessing technology, which boosted the capabilities of Windows NT, was unveiled in 1998. In effort to reduce debt, Wienbach decided Unisys should take a one-time charge of $1.1 billionrelated to the 1986 mergerwhich resulted in a fourth-quarter loss of $947 million. He also contracted Hewlett-Packard Co. to handle the firm's personal computer production, wanting to focus efforts on services. In May, Unisys secured a $600 million contract from Dell Computer Co. to provide IT services to Dell's corporate and government clients. Wienbach's efforts appeared to pay off according to a November 1999 InformationWeek article that described Unisys as "a $7 billion former mainframe manufacturer whose big moneymaker has become sales and service of hardware with Intel processors running Windows NT."

The firm established its e-business unit, known as e-@action Solutions, in 1999. By November, e-business sales accounted for 18 percent of total revenues, and Weinbach announced his goal of tripling that percentage over the next three years. In 2000, the firm distanced itself further from low-end hardware manufacturing via outsourcing and divestitures. In 2001, Unisys launched a new version of its ClearPath server, known as e-@ction Clear Path, which increased compatibility between applications running on Intel Corp. processors and those using proprietary Unisys platforms. Throughout the year, the firm continued to focus on its e-business services.

FURTHER READING:

Gerber, Cheryl. "Unisys Does a Service 180." Computerworld. July 28, 1997.

Markowitz, Elliot. "Even Behemoths Can Bend." Computer Reseller News. January 10, 2000, 14.

Ricadela, Aaron. "Unisys Seeks to Turn Servers Into Mainframes." InformationWeek. November 1, 1999.

Royal, Weld. "Unisys Serves up Services." Industry Week. August 17, 1998.

Schaff, William. "The Prince of Unisys." InformationWeek. October 13, 1997.

"Unisys Corp." In Notable Corporate Chronologies. Farmington Hills, MI: Gale Research, 1999.

Unisys Corp. "Unisys: A History of Excellence." Blue Bell, PA: Unisys Corp., 2001. Available from www.unisys.com.

Vijayan, Jaikumar. "Unisys Pins Hopes On New Servers." Computerworld. April 23, 2001.

SEE ALSO: E-commerce Consultants; E-commerce Solutions; Integration

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Unisys

Unisys A US corporation formed from Sperry and Burroughs in 1987. It is second only to IBM in revenue among suppliers of mainframes and is also an important supplier of software and services; like many similar companies, it is trying to project itself as a solution provider rather than simply a supplier of hardware. It is number 12 in the list of the world's largest IT companies (1993 figures).

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