Unisys to Form Three Distinct Businesses and Dismatle Matrix Management Structure
BLUE BELL, PA, October 6, 1995 -- In a move expected to significantly step-up profit and revenue growth next year, James A. Unruh, chairman and chief executive officer of Unisys Corporation, said today that Unisys will form three distinct businesses, each with its own sales force, and will dismantle its highly interdependent matrix management structure. He said these actions "were a defining transition point" in the company's transformation. They will allow the businesses to compete more effectively and react more quickly and more fully to the growth opportunities available to each. At the same time, he said this greater focus in each business will strengthen the company's ability to provide a coordinated services and product approach to a client's information management needs.
Unruh said, "We have progressed in a transformation started in 1991 from a mature traditional mainframe company to where approximately 40% of our business is growing in double digits annually. We have reached a stage where our growth segments have a critical mass and momentum. This is a time to unleash the full potential of the company -- and a strategy that is working -- by focusing our businesses in ways not possible before to gain significant market penetration and cost benefits."
Unruh said the current Unisys matrix structure will be replaced with the streamlined decision processes, accountability and dedicated resources characteristic of stand-alone businesses. "We will be faster and more aggressive in executing our strategy of providing technology, applying technology and servicing technology in focused markets."
Unruh said the three businesses are "computer systems;" "information consulting and integration services;" and "global support services." The first is a hardware/software products business and the other two are services driven. Each has unique characteristics and must organize and operate to be competitive with its peers in its market segments. Based on total 1994 revenue of approximately $6 billion, products and services each accounted for approximately $3 billion.
The new "information consulting and integration services" business has been growing at more than 20% annually. Unruh said that starting in 1992, a world-class consulting, vertical solutions, systems integration and outsourcing business has been put in place in record time. Its charter has been to help clients apply information technology to gain a competitive edge and better serve their clients. "We have passed through the start-up phase which involved considerable effort in putting people and processes in place while growing the business," Unruh said. "We now will fine tune operations, significantly increase our vertical industry solutions expertise, and focus very aggressively in competing with the best of our peers." A president for the business, which is now run by Unruh, is expected to be named before the end of the year.
Global Support Services
Unruh said the "global support services" business will be headed by Unisys corporate vice president G. A. Gagliardi. "We will significantly expand on what has been a major accomplishment in this area over the past five years," Unruh said. At a time when traditional maintenance revenue is declining because of increased reliability, Unisys has leveraged its worldwide support infrastructure to address new growth opportunities in desktop services, network integration and multivendor support. Total revenue for "global support services" has begun to increase from a low in 1993. The traditional maintenance piece of this business has dropped from more than 80% of revenue in 1990 to approximately 65% in 1994, and is expected to be less than 30% in 1998. Desktop services, network integration and related services have been growing at more than 20% annually since 1993. "We see continued opportunities in these areas," Unruh said.
Unruh said Unisys executive vice president Alan Lutz will head the "computer systems" business. It will combine development and manufacturing operations with a full-fledged hardware and software marketing and sales organization. "Our traditional computer business provided much of the resource and stability that allowed our service initiatives to develop and grow," Unruh said. "These businesses no longer need the considerable overhead and infrastructure that the computer systems business carried on their behalf. Eliminating these costs will enhance the performance of our traditional business. We will unleash the potential of our technology resources by pursuing new opportunities that we will develop in the Unisys base and among new customers."
Unruh said today's announcement follows an extensive top-to-bottom review of operations and has the full support of the company's Board of Directors.
Unruh said he is chairing an implementation committee and that a transition team of senior executives will finalize the new structure by year end. The company said its Federal Systems division selling computer systems and services to the U.S. federal government is not affected by the change. It continues to run as a stand-alone unit reporting to the CEO.
Cost Reduction Goal
Unruh said that in an industry that will continue to require aggressive cost reduction, the company's goal from realignment of Unisys businesses is to trim at least $400 million from the company's current cost structure by the end of 1996. Savings will come from reducing the infrastructure overhead and administrative costs associated with the previous highly interdependent matrix structure, facility consolidation, personnel reductions and the elimination of low-return programs.
While the company expects that in achieving this goal its worldwide workforce will be reduced by a number yet to be determined, reduction activities will be partially offset by an increase in investment in its growth businesses. A significant charge against earnings will be taken in fourth quarter 1995 in connection with this initiative.
Unruh said that with greater organizational flexibility comes significant new options to redeploy assets and maximize the potential of the core businesses. Those options might include complementary acquisitions, selective divestitures, new partnerships and other alliances that can enhance revenue growth and strengthen core competencies.
"It is clear there is no let-up in the fundamental change in our industry, nor do I expect one," Unruh said. "We firmly believe the transformation we have undertaken remains achievable over time without a shift in strategy. That implementation has not been without some tough but instructive lessons and we recognize that actions must be taken decisively and adjusted where necessary. We are determined to restore strict cost discipline and change the necessary skill sets needed to achieve our goals.
"But I believe today's announcement is the end of one phase of our transformation and the beginning of a breakthrough that will drive profitable revenue growth. Our mission has not changed. We will help business and government use information as an asset to achieve competitive advantage and better serve their clients. As we do, our principal businesses -- providing, applying and servicing technology -- will be better positioned to help our clients. We expect to see visible operational and financial progress in 1996," Unruh said.
Unisys -- The information management company
As an information management company, Unisys acts as a solutions and systems integrator for business and government, complementing those integration skills with a full range of consulting and implementation services, information technology and vertical industry expertise. The company's perspective extends beyond supplying technology to delivering comprehensive information management solutions.
Release #: 1095/5895
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