MMI Investments blasts Unisys 'missteps' and 'failures' surrounding restructuring

By Lisa Kerner

Charlotte, N.C., Jan. 8 - Unisys Corp. shareholder MMI Investments, LP expressed "tremendous frustration" with what it called the company's "continuous stream of management, operational and financial missteps" related to Unisys' restructuring.

MMI, with a 9.9% stake in the company, made its comments in a Jan. 7 letter to Unisys chairman Henry C. Duques. The letter was included in a schedule 13D filing with the Securities and Exchange Commission.

"Moreover we are mystified by management and the board's inaction in the face of Unisys' ruinous stock price performance over the past year," the letter stated.

"We believe Wall Street's utter rejection of Unisys stock is indicative that the restructuring benefits are not enough to correct Unisys' dramatic undervaluation."

Unisys acknowledged receipt of the letter and is evaluating it as it takes investors' viewpoints seriously, a company news release stated.

"Unisys is executing a major, multi-year repositioning plan and has made significant progress in enhancing its profitability by refocusing its business, reducing costs, and divesting non-core assets," Unisys added.

MMI urged Unisys to immediately engage an independent investment bank to review all the strategic alternatives available to the company.

The review should focus on the potential realization of the U.S. government business through a sale, tax-free spinoff or subsidiary initial public offering, according to the SEC filing. MMI believes the best alternative would be an IPO of 19% of the shares of a Unisys subsidiary comprising all of its U.S. government services business.

The investor accused Unisys' board and management of ignoring its recommendations on how to improve Wall Street's perception of the company. The recommendations included guidance issuance, increased segment transparency and a reverse stock-split.

MMI also criticized Unisys management's "cavalcade of small failures" that have "dampened investor enthusiasm," including the use of contract labor and the "recently botched refinance."

The company's slip-ups have "effectively decimated any investor enthusiasm for a restructuring" that drove EBITDA from about $212 million (including retirement plan expenses) in 2005 to an estimated $523 million in 2007, MMI said in its letter.

In closing, MMI said the time for "patient observation of the restructuring plan" has passed and it is time for some significant action from the Unisys board.

"Your inaction is threatening to cause permanent value destruction at Unisys," MMI said. The investor requested that the company respond by Jan. 23 or MMI "will be compelled to consider all possible alternatives" including action at Unisys' upcoming annual meeting.

Unisys is a Blue Bell, Pa., technology services company.

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