Services Produce Different Results for IBM, Unisys

By John Moore  |  Posted 2005-10-18 Email Print this article Print
 
 
 
 
 
 
 

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Opinion: While IBM benefited in its third-quarter results from its services business, it was a different story for rival Unisys.

IT services played a role in third-quarter results for both IBM and Unisys Corp., with the impact generally favorable for the former and less so for the latter.

IBM on Monday cited double-digit growth in service signings among the highlights in its September quarter earnings announcement. IBM Global Services' strategic outsourcing business experienced an 18 percent surge in signings. The largest signing: a $1.7 billion deal with ABN AMRO. IBM was one of five companies to win a slice of that bank's outsourcing program.

IBM Global Services generated revenue of $11.7 billion in the third quarter, a 3 percent increase over the year-ago quarter.

The business unit's profit rose 16 percent year-to-year. In his earnings presentation, Mark Loughridge, IBM's chief financial officer, said IBM Global Services signed nine deals larger than $100 million during the quarter.

Companywide, IBM reported an 8 percent decline in third-quarter revenue to $21.5 billion from $23.3 billion last year. Revenue would have increased 4 percent without the impact of IBM's divested PC business.

Net income dropped 2.5 percent to $1.52 billion from $1.55 billion. The company reported diluted earnings per share of $0.94, a 2.2 percent increase compared with $0.92 for last year's third quarter.

The services story was different at Unisys, where difficulties with outsourcing contracts and a decline in the company's integration business contributed to an earnings shortfall.

Unisys on Tuesday reported preliminary third-quarter results showing a loss of $54.3 million, or $0.16 per share.

The company's September quarter revenue of $1.39 billion represented a 4 percent decline.

In July, the company predicted third-quarter earnings per share of 4 cents to 6 cents and mid-single-digit revenue growth over the year-earlier quarter.

Weaker-than-expected revenue from enterprise servers was the cause of the shortfall.

But Unisys' services business contributed as well.

Joseph McGrath, Unisys' president and chief executive officer, cited the costs of renegotiating a large outsourcing contract as contributing 20 percent of the earnings miss.

In addition, revenue derived from project-based work in systems integration and consulting declined 3 percent in the quarter "against our expectations of growth in the business," McGrath said.

The decline in project work contributed 20 percent to the shortfall.

In response, Unisys will focus on four areas within the services field.

Those areas are outsourcing, enterprise security, open source and Linux services, and Microsoft services and solutions.

Companywide, Unisys will reduce its workforce by 10 percent over the next year, the company said.

Agami taps Arrow, Bell.

Agami Taps Arrow, Bell for NAS Distribution

Agami Systems Inc., a start-up vendor in the NAS (network-attached storage) space, on Tuesday unveiled channel partnerships with Arrow Electronics Inc. and Bell Microproducts Inc.

The company's AIS 3000 NAS line began shipping Oct. 11.

Product fulfillment will be entirely through its two-tier distribution arrangements with Arrow's MOCA Division and Bell Microproducts.

MOCA Division covers the middle and upper levels of the customer pyramid, while Bell focuses on small and medium business, noted Craig Stevens, vice president of sales at Agami.

At this point, the distributors have recruited 47 resellers to sell Agami's products.

Agami and its distributors have devised a training and certification program for both sales and technical personnel.

Stevens said the company is holding off on a formal deal registration program for the time being.

Exceptions to the channel sales model may eventually occur if a major customer demanded to deal directly with the company, Stevens noted. But he said that situation is probably two years away.

Agami positions its product against NAS wares from EMC Corp. and Network Appliance Inc.

The company said its AIS 3000 series provides aggregate read throughput performance of more than 500 M per second for a single NAS module. Pricing starts at less than $25,000.

Markets for the AIS 3000 include medical imaging, media and other industries with high streaming requirements and engineering applications.

Stevens also cited considerable momentum in the "market for consolidating your Windows storage onto a single [box] or multiple boxes."

Workbrain taps software vendor.

Workbrain Taps Software Vendor for Distribution

Workbrain Inc. aims to crack the middle market for workforce software through a distribution arrangement with another human resources software vendor.

The company on Monday said that Ultimate Software, a developer of human resources and payroll applications, will distribute its Workbrain Express product.

Workbrain, which has traditionally targeted large enterprises, developed Workbrain Express for midsize customers, which the company defines as those having between 1,000 and 5,000 employees.

Matt Chapman, Workbrain's chief financial officer, said the company spent about a year field testing Workbrain Express and an associated deployment methodology.

The product is essentially a midmarket version of the company's enterprise time and attendance and labor scheduling solutions.

"We're at the point now where we are comfortable saying we will move out of direct field trial sales and move into the partner-driven way of distributing the product," Chapman said.

In seeking a channel partner, Workbrain chose Ultimate Software, which aims its products toward the middle market.

Ultimate Software will market Workbrain Express as part of its UltiPro Workforce Management solution.

Chapman said the company's distribution-focused strategic partnership with Ultimate Software is the first of its kind at the company. For a number of years, the company has worked with systems integrators who implement its enterprise workforce products. The company's alliance with Accenture dates to 2001.

Click here to read more about human resources applications.

Chapman said Accenture and IBM rank among its top integration partners.

The distribution pact with Ultimate Software differs from earlier channel arrangements in that the software vendor will "really own the primary relationship" with customers, Chapman said.

With its integrator alliances, Workbrain maintains responsibility for sales and support, with the integrator working along side to provide implementation services.

Outsourcing Deals Shrink

TPI Inc. on Monday said that third-quarter results point to a 10 percent to 15 percent decrease in the total dollar value of outsourcing contracts awarded in 2005.

The sourcing advisory firm attributed the decline to factors including offshore service delivery and shorter-term IT outsourcing contracts. TPI earlier this year noted slowing growth rates in the outsourcing business.

To read more about outsourcing providers, click here.

TPI projected that total contract value will decline to $60 billion to $65 billion for 2005, from an average of $72 billion awarded in recent years.

"We see the U.S.-based outsourcing service providers working hard to be competitive in a market that is less robust than in past years," noted Jack Benton, vice president of marketing at TPI.

"They are taking back some of the market share lost last year, with IBM being a leader in this area."

U.S. providers also aim to renew deals before rivals can snatch them.

"They are also focusing on renewing relationships that are coming to term relatively early on in an attempt to avoid a competitive situation," Benton said.

 
 
 
 
John writes the Contract Watch column and his own column for the Channel Insider.

John has covered the information-technology industry for 15 years, focusing on government issues, systems integrators, resellers and channel activities. Prior to working with Channel Insider, he was an editor at Smart Partner, and a department editor at Federal Computer Week, a newspaper covering federal information technology. At Federal Computer Week, John covered federal contractors and compiled the publication's annual ranking of the market's top 25 integrators. John also was a senior editor in the Washington, D.C., bureau of Computer Systems News.

 
 
 
 
 
























 
 
 
 
 
 

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