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Unisys Is Bailing Faster

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James A. Unruh vowed to "transform" ailing Unisys Corp. when he took over as chief executive 15 months ago. He shook up top management, scrapped the expansionist visions of predecessor W. Michael Blumenthal, and began cutting jobs and selling assets. But with sales diving all across the computer industry, drastic steps haven't been enough.

In fact, transfusion, not transformation, may soon be the order of the day at Unisys. On July 23, Unruh unveiled plans to cut 10,000 jobs by mid-1992, shrinking the Blue Bell (Pa.) computer maker to 60,000 staffers, fewer than half the head count when Sperry Corp. and Burroughs Corp. merged to form Unisys in 1986. He'll also trim the number of products Unisys sells, and he'll market them to fewer industries. The cost of the changes: a dizzying $1.2 billion write-off, resulting in a $1.3 billion loss for the second quarter. Says the genial North Dakotan: "This is not a fun time, certainly."

For all their impact, the cuts don't represent a strategic shift so much as a play for time. They will help Unruh keep the bankers at bay while buyers--possibly including Japan's Toshiba Corp.--look over various divisions. Because of persistent losses, Unisys in June grew perilously close to violating the net-worth covenants attached to a vital $1.25 billion credit line. The pruning has persuaded the company's bankers to cut their net-worth requirement from $3.5 billion to $2 billion through January, 1993. Staying ahead of the lower target will keep Unisys out of more renegotiations or bankruptcy court. Unruh says they should even be enough to produce a profit by yearend.

Now, Unruh can work harder on paring $3.8 billion in long-term merger debt. He has been hard-pressed to sell enough business units and real estate to work the bill down. Buyers are bargaining hard for such assets as the Timeplex Inc. computer-networking company, which a Swiss buyer picked up in June for $207 million in cash, down from the $320 million in stock that Unisys paid in 1988. Unruh shaved about $300 million in debt in the second quarter, half the amount slated for the full year. Unruh says there's plenty more real estate that Unisys can sell.

OFF LIMITS. If the moves do deliver profitability, they could also make Unisys more attractive to a foreign investor or buyer. A deep-pocketed partner, such as Toshiba, is what Unisys needs to take care of its "killing" debt, says George E. Lindamood, an analyst with Gartner Group Inc. in Stamford, Conn. Such a buyer, he says, would get a big U. S. base of computer users and a foothold in Europe, along with Unisys' highly regarded mainframe technology.

Unisys has close ties to Japan already. Mitsui & Co. in June, 1990, invested $150 million to acquire a special issue of Unisys preferred stock, effectively giving it 4.7% of the company's equity. And Mitsui and Unisys each hold one-third ownership in Nihon Unisys Ltd., a $2 billion-a-year Japanese computer marketer. Mitsui would gain from a Unisys tie-up with Toshiba, Lindamood argues, since the Japanese companies are often business partners. What's more, recently elevated Unisys President Reto Braun, former head of the company's Pacific-Asia division, has a Rolodex full of Japanese contacts.

There's one big roadblock to foreign capital: Unisys' $2 billion defense unit, which is legally off limits to non-U. S. companies. But the defense business recently became profitable, making it more salable to a U. S. buyer. One candidate: Martin Marietta Corp. Unruh declines comment on any potential sales.

Unruh insists Unisys is not simply fading away. "We think we are a long ways from any such thing," he says. But the continuing computer slump and stagnation in defense spending increase the odds of Unruh getting more transformation than he bargained for.Joseph Weber Philadelphia

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