James A. Unruh Unisys Corporation PO Box 500
Chairman and Chief Executive Officer Blue Bell, PA 19424-0001
April 2, 1996
To: Our Stockholders
The realignment of Unisys operations put in place on January 2, 1996
to increase competitiveness, profitability and shareholder value is on
schedule.
The purpose of this letter is to brief you on several important
actions taken in the first quarter to support that realignment and drive
the profitable transformation of Unisys forward.
On March 29, 1996, we completed the second of two financial offerings
totaling $724 million. The success of the first offering for $299 million
of Convertible Notes due 2006 led to the private placement of $425 million
of Senior Notes due 2003.
We took these actions at this time to take advantage of a favorable
opportunity in the financing market. The combination of cash -- $1.1
billion at the end of December, 1995 -- and the proceeds of the
offerings positions us to successfully deal with $400 million in
restructuring charges in 1996, and debt maturities of $345 million in
1996 and $430 million in 1997. In the near term, debt will increase.
However, over the longer-term our goal is for meaningful debt
reduction.
In another important action in the first quarter, we held our annual
meeting with financial analysts and institutional investors in New
York. Joining me in reviewing our new business structure and our
short- and long-term operations and financial goals were the
presidents of our information services, computer hardware and
software, and global customer support business units; and our chief
financial officer.
What we call the "three businesses/one company" structure reaffirms
our strategic transformation from a traditional computer hardware
company to an information management company helping clients change
the way they use information. While the strategy has not changed, the
new structure is a sweeping change in the way we run the business.
We told the analysts that our goals are to improve execution; make
Unisys more competitive with "best of class" competitors; open new
revenue opportunities in our customer base, and particularly among
new customers; reduce our costs $500 million on an annualized basis by
the end of this year and $600 million by year end 1997; and return to
profitability in 1996.
We said a key change in our structure is that our complex matrix
management system has been eliminated. Each of our three business
units will have its own marketing and sales force. Each
will run its business according to its own economic and business
model. Each will have the responsibility, the resources and the
accountability to get the job done.
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This is not the AT&T model of a company split into independent stock
companies suggested by some press reports. In looking at all of our
options to improve our business, it is very clear that the three
business units will immediately benefit from the accountability,
responsibility and resources given to each unit. But it is equally
clear that their success will also depend on being able to continue to
work together seamlessly to serve our large client base, and on having
the cost and operational benefits of shared services, sales channels and
other interrelated assets.
The three businesses have a mandate to work together in serving the
existing customer base where 80 percent of customer revenue comes from
clients working with two Unisys units...and more than 50 percent from
those working with all three. At the same time, there is an equal mandate
to expand the customer base by aggressively pursuing new clients.
Senior management and the Board of Directors believe that the three
businesses/one company structure addresses these needs in the most
effective way. That is why, in the annual meeting proxy statement just
mailed to you, the Board has recommended against a stockholder
proposal to create three publicly traded companies from the three
business units. Please check the proxy statement for more details on
why the Board has concluded that the interrelationship of these units
and other serious business risks argue against three publicly-held
companies. For your convenience, enclosed is an additional proxy card
and return envelope. I strongly urge you to return the card today with
a vote against Item 3, the Stockholder Proposal.
One financial analyst said the realignment was "one of the most
thorough reorganizations we have witnessed for a public company and we
applaud the move." The analysts' consensus supported the
restructuring, while pointing out that success will depend on strong
implementation.
We accept that challenge and believe that focus, simplicity and the
new responsibility, resources and accountability given each of the
three businesses will drive success. As we have said in earlier
announcements, realignment may have a negative impact in first quarter
performance as organizational changes are absorbed. Over the course of
the year, our plan is for benefits to build and for the company to be
profitable in 1996. And our capital structure is being shaped to meet
all of our financial obligations. I look forward to reporting our
further progress as the year unfolds.
Sincerely,
James A. Unruh