Unisys offers four-days, slashes contract rates

Customers seek cost reductions

Unisys is offering its New Zealand staff a four-day working week as one measure to curtail costs in the current economic climate. So far one person has taken up the offer.

Managing director Brett Hodgson says he expects more to opt for the four-day week and that there has been a positive response by staff.

At the same time, contractors to the company in Australia and New Zealand are being asked to cut their rates by 15% to 20%.

Asia Pacific general manager Andrew Barkla, in New Zealand to meet with Hodgson, says Unisys has gone to its contracting community and asked for the cuts. “It was very quickly agreed to in Australia,” he says.

Hodgson confirms a similar rate cut is being sought in New Zealand.

“The contract market will never come back onshore the way it was,” says Barkla. “It’s an issue for the onshore contracting community because of different methodologies.”

Customers were seeking reductions in costs.

On the corporate front, Unisys has announced it is restructuring company debt. Bloomberg recently reported that the company’s multi-bank US$275 million credit line, due to expire on May 31, may not be renewed. Unisys has US$300 million of notes that mature in 2010.

On April 30, the company announced private debt exchange and concurrent notes offerings with longer maturity dates.

Unisys has racked up more than US$2 billion in losses over the past four years. Its 2009 Q1 results, just announced, show sales fell 15.5% to $1.1 billion. There was a net loss of $24.4 million. Services revenue — services being the company’s main focus these days — was down 13.5%, and hardware and software sales by 29.3%.

CEO Ed Coleman in the US, who took up the role in October with a brief to turn the company around, has focused on reducing expenses, including major staff cuts.

“A lot of that is coming from areas not related to delivery or sales,” says Barkla. “We’ve had to scale to change in the current economic climate.”

In Australasia, the company is running at 84% chargeability across consulting. “There’s nowhere to cut,” he says.

Unisys is now focusing on fewer areas of business. For example, it has closed down its SAP and retail point-of-sale practices in Australia.

Barkla says both New Zealand and Australia are rated as prime countries by Unisys. “The two markets can stand in their own right.”

China, by comparison, has high barriers to entry, and local competition. “We have to leverage other markets to deliver there,” he says. “New Zealand, for example, is a low-cost labour market for some services.”

Hodgson says Unisys’ focus locally is similar to that of a year ago. “We’re structurally similar and there has been very limited shuffling. Internally, it’s business as usual.” (The company recently indicated around 5% in staff cuts.)

He says the Kapiti datacentre has attracted “four or five” new customers, such as the Ministry of Health, the Alliance Group, a re-signing by Inland Revenue and the PSIS.

“We have got other new customers, but I can’t name them because we’re in contract negotiations. They’re for the datacentres with application development possibilities.”

Barkla says Unisys is no longer playing with a lot of the smaller “rack and stack” things of the past.

Hodgson is positive about the government’s review of expenditure, despite the slow-down – particularly in Wellington – which he says is hurting everyone’s business.

“I think the government will bounce back very well. This [review] will position departments much more strongly.”

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