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July 23, 1990

POOR PERFORMANCE AT UNISYS SUGGESTS IT MUST DOWNSIZE BEFORE IT CAN GROW

By CBR Staff Writer

The news that Standard & Poor’s Corp is reviewing the ratings on Unisys Corp’s debt with negative implications – see Credit Ratings – a full three years after the merger of Burroughs and Sperry that created the company underline what a disastrous move it was to merge two old-line mainframers with disparate product lines. This is the point after the merger when all the benefits claimed for it should be feeding through to the bottom line, but Unisys has IBM’s problems in spades – every year it has to take more drastic measures just to prevent its situation getting any worse as growth and profitability drain away from the mainframe business faster than loss making open systems can grow to fill the gap. And the total market growth in open systems will never be there to keep fat and happy all the traditional computer companies hoping to revive their fortunes with the gallop into Unix. It was always the case that Burroughs and Sperry needed mergers to secure their futures, but each should have merged with a complementary company instead of coming together to create a company that doubled its problems by putting together those of its two constituents – a situation only aggravated by the absurd acquisition of Convergent Inc – the Digital Research of workstations to Sun’s Microsoft. The sad truth for Unisys is that it can only start growing again – it hasn’t grown at all since the merger – by getting smaller: after Fujitsu eats ICL, perhaps a Japanese company can be found ready to take one of its mainframe lines off its hands.

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