BW Online | February 26, 2001 | Uniting with Unisys?

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FEBRUARY 26, 2001

INSIDE WALL STREET

Uniting with Unisys?

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Chart: A Tech Survivor

INSIDE WALL STREET

Uniting with Unisys?

Why Nautica Is Zipping Right Up

Recovery May Be in Maxygen's Genes

Few technology stocks have escaped the brutal tech wreck, which continues apace. One that emerged unscathed: Unisys (UIS), a provider of information services and computer technology. Instead of crashing, Unisys stock has risen--from 9 in late July to 18 now. Nonetheless, its business, which includes systems integration, outsourcing, and network servicing, has been no cakewalk: Unisys had to guide analysts' 2001 estimates lower because of the softening economy. And despite the stock's ascent, its price-earnings ratio is a modest 12.

Some investment pros argue that takeover talk is buoying the stock. Rumors have swirled in Germany that both IBM and Deutsche Telecom are eyeing Unisys. One New York investment banker says he's "sure there have been talks between IBM and Unisys, although they seem to be inconclusive so far." But in Germany, he adds, the rumors are not specific on whether Deutsche Telekom has held talks.

One Street strategist says that buying Unisys would make sense for IBM--to expand its presence in fast-growing services, which account for 70% of Unisys sales. Unisys also provides enterprise-class servers, software, and storage. At IBM, 25% of revenues come from services, software, and maintenance. John Jones of Salomon Smith Barney figures IBM's services and maintenance will generate revenues of $37.5 billion in 2001 and $42.1 billion in 2002. With Unisys in the fold, those figures could grow more rapidly. In a buyout, one banker says Unisys is worth $9.5 billion, or 30 a share. Unisys and IBM declined comment.

By Gene G. Marcial

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