Unisys Corp shares lost another 23% of their value, tumbling $1.625 to $5.375 after the directors voted to suspend the 25 cent quarterly dividend on its common shares – a move which will save the debt-ridden company $160m a year but was instantly proclaimed by analysts as sending the worst possible message to customers about the company’s state of health. President James Unruh tried to justify the move by saying that many computer companies do not pay dividends, but there is a world of difference between suspending the divided and never having paid one. The shares now stand at a little over 25% of their 12-month high of $20.25 – they were as high as $17.125 as recently as March, and up at $33.375 two years ago. The current share price values the company – which has annual sales of $10,000m – at a dismal $800m, and there is no talk of a bid even at that price: despite its size, Unisys’ problems are seen as so severe that few would want to take them on. The company stressed that the action does not affect preferred stock dividends – companies that stop paying those are usually headed for the final curtain. The dividend action, said Unruh, reflects the judgement of the board and management that the best way to maximise value to shareholders is to accelerate the improvement of our overall financial structure, particularly by reducing our debt as a percentage of total capital – a statement calculated to raise a very hollow laugh among long-suffering holders in light of the reaction of the share price. Funds that would normally be used for the common dividend will be reinvested in the company to reduce debt. In addition to a desire to cut debt sooner – it started the year with $4,000m, has repaid $325m so far and looks to cut $600m to $800m this year and the same next year – Unisys said its decision was also based on such external factors as the significant structural change in the computer industry and the defence sector, the probability of cyclically weak economic conditions in many major markets and the impact of the Iraq crisis on the global financial picture. Unisys also said it expects to report a loss in the quarter that ended yesterday and a profit in the fourth quarter, but is now less confident that it will show full-year profit.
