Update: Unisys Sees Earnings at About Half of Consensus

Updated from 8:51 a.m. EDT

Investors slammed Unisys (UIS Quote), an information technology company geared toward business customers, in early trading Thursday after the firm said its second-quarter earnings will only be about half of what Wall Street analysts had expected.

Shares closed at 14 9/16, down 8 9/16 or 37%, after reaching a 52-week low of 15 1/4.

The company said it expects earnings per share for the second quarter to fall to between 18 cents and 20 cents, a 51% to 46% drop from the 37-cent First Call/Thomson Financial analyst consensus.

Revenue for the second quarter is expected to be between $1.62 billion and $1.65 billion, a decrease of 13% to 15% compared to the same quarter last year. Unisys is expected to release its second-quarter earnings July 18 before the start of trading on the New York Stock Exchange.

In a statement the company blamed its earnings shortfall on several factors, including the deferral of several large technology contracts and weakness in its sales to the federal government and financial services businesses.

Unisys, based in Blue Bell, Pa., said it expects technology revenue to decline by a high-single-digit percentage compared to a year ago.

James Corridore, an analyst at Standard & Poors Equity Group who covers Unisys, immediately downgraded his rating from accumulate to hold, and his year-end earnings-per-share estimate from $1.80 to $1.30. He was particularly disappointed by the company's indication that revenues for the second half will be in the single digits -- compared to the low double digit growth it previously estimated -- and now year-end revenues to fall short of last year. Standard & Poors does not perform underwriting.

"They should be able to forecast revenues better than this," he said.

The company reorganized its sales force late last year, Corridore pointed out, a move that has been slow to pay off. Sales agents for Unisys now cover individual sectors rather than a certain geographical area. Long term, he expects the change to be positive, but short term it has caused disruptions in relationships with clients.

Also weighing on revenue was post-Y2K confusion, he said. After focusing on possible computer chaos following the calendar change, many companies have been slow to purchase new service contracts. "As soon as Y2K was over, [Unisys] thought that businesses would get right back on track," he said.

The company has also been hurt by the collapse in value of the euro, which has resulted in its European sales worth less in dollar terms, Corridore added.