Unisys Exits Hardware Assembly

Following days of damage control, Unisys Corp. CEO Joe McGrath last week had something to be optimistic about: a deal with NEC Corp. that promises to reduce Unisys' manufacturing and research-and-development costs.

Unisys and NEC revealed plans to co-develop Intel-based servers that will be manufactured by NEC and sold by both companies. They'll jointly develop middleware for self-managing systems. And they'll collaborate on biometric security, telecommunications systems, and service and support. It's all subject to a memorandum of understanding, with a final pact due in January.

The deal gives Unisys an exit strategy from manufacturing computer hardware. In 2007, NEC will begin manufacturing Windows and Linux servers based on their joint design, which will replace Unisys' ES7000 line. Sometime later, NEC will take over the manufacturing of Unisys' ClearPath mainframes.

The moves should slash about $50 million from Unisys' costs by 2008, McGrath says. On Oct. 18, the company reported a preliminary loss of $54.3 million for the third quarter, on a 4% decline in revenue to $1.39 billion. The company plans to reduce head count by 10% and divest some businesses.

Separately, Unisys officials downplayed a government probe into whether the company overbilled the Transportation Security Administration for work involving IT security at U.S. airports.