Unisys struggles to grow services revenue

Elitsa Bakalova, senior analyst at TBR, says that Unisys services revenues decline again in Q2 2016, while margins improve as cost reductions take hold.

Unisys reported a services revenue decline of 7.2 percent  in Q2 2016, driven by weakness in Cloud & Infrastructure Services. At the corporate level, revenues declined only 2.1 percent as technology turned in growth of 30.8 percent. Reductions in both delivery as well as SG&A costs began to show significant improvement for both products and services. Gross margin for services improved 230 basis points, while operating margin improved 780 basis points. The company is building the foundation for success in services, which continues to account for 82 percent of total corporate revenues. A series of deal wins were announced during the quarter that yet have to begin generating revenues; however TBR believes the prospects are bright.

Approval of Unisys Stealth from the U.S. National Security Agency’s (NSA) Commercial Solutions in the U.S., and by the National Information Assurance Partnership (NIAP), should create revenue generating opportunities for Unisys in more than 20 countries for both products and services as governments deal with security issues. Financial services accounted for 26 percent of Unisys revenues in Q2 2016 and the recently announced Sandstone and PCT (USP) digital banking platform offers another opportunity for revenue growth.

Unisys’ emphasis on security comes at an opportune time as cyber security reemerges as a critical component of digital transformation, IoT, and cloud engagements. The APAC region also showed growth for Unisys in both products and services, 10 percent  at the corporate level and 13 percent at constant currency levels, as new offerings, as well as new management in marketing and operations, are beginning to demonstrate success.

Unisys integrates analytics, cloud and security into digital solutions for the banking segment

The advent of digital pushes vendors, including Unisys, to develop industry-specific solutions that address clients’ business transformation needs. Unisys is approaching the financial services industry, specifically the banking segment with digital solutions that improve customer experience and address key concerns in the segment, such as security and fraud.

In May, Unisys partnered with Sandstone Technology and Payment Card Technologies (PCT) to launch the Unisys, Sandstone and PCT digital banking platform. The solution enables banks to address the changing needs of their customers and deliver omni-channel digital banking services via multiple platforms including mobile devices, tablets and internet browsers.

The platform, which can be delivered from a private or public cloud or on premise, utilizes adaptive biometric and data analytics to identify customers and verify transactions and is secured by the Unisys Stealth security solution. While financial services ranks third in revenue size at nearly 26 percent of revenue in 2015 after the government at 42 percent and commercial sector at 32 percent, TBR expects Unisys to leverage its IP-rich solutions and its footprint in the U.S. to capture opportunities with clients in North America.

Unisys pursues outsourcing and digital transformation opportunities in Asia Pacific to expand its foothold in the region

Unisys is taking steps to expand its footprint in Asia Pacific, which was the third largest geography following U.S. & Canada and EMEA and accounted for 11.8 percent of services revenue in 2015 in TBR estimates. Unisys’ revenue in Asia Pacific is driven by infrastructure outsourcing, application services and BPO services in countries, such as Malaysia, China, Australia, New Zealand and Taiwan and across verticals, such as the public sector, travel and transportation and financial services.

While traditional outsourcing services make up the majority of Unisys’ activities in Asia Pacific, the company is also competing for digital transformation opportunities, such as the implementation of the Unisys’ cloud-based Logistics Management System for MaSkargo in Malaysia. Unisys is pushing sales of the Unisys Stealth security solution indicated by the deal in April with Angkatan Koperasi Kebangsaan Malaysia for Unisys Stealth(core).

The company adds value through industry-specialized solutions, such as the Unisys Retail Core Banking System, which has an omni-channel retail delivery system capability and has customized versions for banks in Taiwan and China. Solidified Asia Pacific leadership in sales and marketing and planning and operations will enable Unisys to grow its revenues in the region and improve its profitability through process improvements and efficiency.