Good day, everyone and welcome to the Unisys First Quarter 2010 Results Conference Call. At this time, I'd turn the conference over to Niels Christensen, Vice President of Investor Relations at Unisys Corporation. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us. About an hour ago, Unisys released its first quarter 2010 financial results. With us this morning to discuss our results are Ed Coleman, our CEO; and Janet Haugen, our CFO. Before we begin, I want to cover just a few housekeeping details. First, today's conference call and the Q&A session are being webcast via the Unisys Investor Web site. Second, you can find the earnings press release and the presentation slides that we will be using this morning to guide our discussion on our Investor Web site. These materials are available for viewing, as well as downloading and printing. Third, today's presentation, which is complementary to the earnings press release, includes some non-GAAP financial measures. Certain comparisons made in this call will be between periods on a constant currency basis. We're excluding the impact of foreign exchange. In the presentation, we have provided an explanation of the basis for the constant currency calculations. Finally, I'd like to remind you that all forward-looking statements made during this conference call are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. These factors are discussed more fully in the earnings release and in the company's SEC filings. Copies of these SEC reports are available from the SEC and from the Unisys Investor Web site. Now here's Ed.

Thanks, Niels. Hello, everyone, and thank you for joining us today to discuss our first quarter 2010 results. We continued to make good progress in the quarter in our ongoing turnaround program at Unisys. If you've been following our progress, you know that we're focused on four priorities in our turnaround program. Those priorities, which you can see on Slide 1, are to drive profitable revenue by better focusing our resources and enhancing our portfolio and to drive cost efficiency and margin expansion by enhancing our service delivery model and simplifying the organization. In 2009, we succeeded in improving the profitability and cash flow of the business while addressing our debt situation in a very challenging economic environment. In 2010, our goal is to continue to deliver improved profitability and cash flow and do so consistently and predictably. While we continue this work, we're also focused in 2010 on stabilizing our revenue, which has been impacted by the economic downturn last year, and our own work to better focus our resources. Our first quarter performance had a number of positive indicators of progress against our goals for 2010. I'd like to highlight three in particular, which you can see on Slide 2. First, our year-over-year operating results improved in the quarter despite lower revenue as we continue to simplify, reduce expenses and improve the cost efficiency across the business. While we reported a net loss in the quarter driven by foreign currency losses, our operating profit nearly quadrupled over the year-ago period to $59 million. In our Services business, we more than doubled our operating profit margin to 4.6%. Our goal is to get our Services business to a consistent 8% to 10% operating margin, but we still have a lot of work to do, but we are moving in…

Thanks, Ed, and hello, everyone. The company showed continued good cost discipline in the first quarter and we made further progress in enhancing our operating profitability. However, our quarterly results were significantly impacted by foreign currency losses and we reported a first quarter net loss. This morning, I will provide more details on our first quarter 2010 financial results, expenses and margin trends. I will also provide detail around our cash flow performance and update you on our continuing progress in reducing debt. Lastly, please note that our results include the Health Information Management business as a discontinued operation, reflecting our decision to sell this business in a transaction that is expected to close this quarter. To start the financial review, please turn to Slide 4 for an overview of order trends in the quarter. After a very difficult business environment in 2009, we saw positive indicators of improved demand in the first quarter. Our service orders showed double-digit growth in the quarter, reflecting order gains across all areas of our Services portfolio with the exception of infrastructure services. Information Technology Outsourcing, or ITO orders, showed double-digit gains and this was our third consecutive quarter of double-digit outsourcing order growth. We recognized mid single-digit order growth within our systems integration and consulting project. Orders for infrastructure services declined double digits as we continued to de-emphasize lower margin areas and shift business towards longer-term outsourcing engagements. Geographically, Services orders growth was driven by our international businesses, where we saw substantial order gains in Europe and Latin America. Order gains in these regions were partially offset by order declines in Asia Pacific. Excluding the impact of our divested specialized technology, check sorter equipment and related U.S. Maintenance business, U.S. orders were up slightly. We closed the quarter with $5.9 billion in Services…

Thanks, Janet, very much. Operator, we'd like to open the call up to questions at this time.

[Operator Instructions] And we'll take our first question from Joseph Vafi from Jefferies and Company. Joseph Vafi - Jefferies & Company, Inc.: I was wondering if we could focus a little bit on the top line and dig down into it a little bit. Obviously, we've seen continued declines on the top line and in the Services business, and I was wondering if you could maybe give us a little more detail within kind of ongoing customers and ongoing accounts, what's continuing to drive the kind of contraction in volumes that you're seeing within the account base so we can kind of understand a little bit better how we might stem that moving forward?

I think there are a number of things going on there. Let me start by saying -- repeating what we've said earlier, is we certainly see the importance of stabilizing that top line revenue number. In terms of what's going on, I'd start with something that we talked a fair amount about last year, that with the debt situation we had during the first seven months of the year, I think we lost a fair amount of momentum in selling and winning new outsourcing business through the first couple of quarters of last year. But as you've seen since the debt restructuring occurred, we now have three consecutive quarters of new order growth in the IT Outsourcing business, which is very exciting to us. So most recently, the Microsoft win going back a few months, we've got Unilever as a big win, Henkel is a big win, Siemens, a number of really significant wins for us since we got the debt situation resolved. So we think taking that debt issue off the table has allowed us to start gaining traction again in our selling effort, so that's a good thing for us. The second thing we commented on earlier today was the shift within our Outsourcing business from BPO to ITO. And that certainly puts a drag as we emphasize ITO versus our BPO business. It puts a drag on the top line, but as you can see in the bottom line results and the operating margin results, it's improving our profitability. So those are two significant issues that are going on, that are in process. We're pleased by the orders growth that we're seeing, but we do recognize that orders aren't necessarily revenue until we make them revenue. So we need to accelerate the transitions, make sure the transitions go smoothly so we begin to capture that new win order growth as revenue for the business. I think we're getting there, but I think it takes some time. And I think we've put a little bit of a delay in our growth in the first seven months of last year. Does that help at all? Joseph Vafi - Jefferies & Company, Inc.: That's helpful, Ed. Maybe just a little more follow-up on, are you happy with the volumes that you're seeing within your existing customers in your areas that you continue to be focused on versus maybe the areas that are de-emphasized or excluding the kind of new order growth that helps drive volumes? Just trying to get to a view of the stability of the accounts in the areas that I think are going to remain your core areas of service delivery?

I feel very good about that. I think we're making good progress in improving the quality of the services that we're providing to our existing clients. I think you're seeing the benefits of the new portfolio in the expanded portfolio, particularly in the outsourcing world, as well as in Data Center Transformation Services and Security Services, that are allowing us to expand relationships with existing clients. I think we're also, if I look at our sales pipeline within those four areas of strength over the first quarter of this year, we're seeing substantial growth in that pipeline, which again is also encouraging. But again, pipeline is good, but it's not revenue until you make it revenue. Orders is good, but it's not revenue until we make it revenue. So we're still a bit behind on that side of things in terms of turning it into revenue, but I think we're beginning to build momentum there. And then on the technology side, we're real pleased by the year-over-year growth that we're seeing in ClearPath. Technology continues to be an important part of our business. I think the year-over-year growth there is really a reflection, one of enhanced offerings, making ClearPath more of an open environment. At the same time, reminding our customers that it's an important part of our business. So happy with the technology growth, happy with the orders growth on the services side, but we need to turn these orders into revenue. Joseph Vafi - Jefferies & Company, Inc.: And then maybe just one quick, one more on the orders. Obviously, it's great we got some double-digit order growth here in the quarter, but probably coming off a pretty really easy compare in Q1 of '09. Does double-digit order growth overall for the year, would that get you to a place sometime in the next few quarters where you believe you could have maybe some constant currency stability in the top line? Or what's kind of the metric we should be kind of thinking about in order growth combined with ongoing volumes at existing accounts and maybe some decline in de-emphasized areas that would get us to -- or when you think we might get to some top line stabilization?

Joe, it's Janet. And you're right that in the order areas that tends to vary. That's why we're looking at not the absolute number, but more the trend, the fact that the services were up double digits within that, that the ITO orders and outsourcing orders were double digits for three consecutive quarters and we saw a mid-single-digit growth in systems integration portion which reflects some pickup in the Project business. We think that that's all encouraging for us as we move forward in our goal for 2010 to stabilize the revenue. We're going to look at the pipeline, as Ed mentioned. We're encouraged by what we see in the pipeline. We look at what we saw convert into orders in the quarter. We're encouraged by that as the step towards getting to the stabilization of the revenue. And we now have to convert those orders into revenue and then continue the work that we're doing in the non-areas of focus. We've got the HIM transaction that's expected to close in the second quarter as we said. That's going to be a change for us in the BPO area. And we're going to move through quarter-by-quarter so that by the time we exit 2010, we're seeing some stability in that revenue line.

And I think the operative word there is stability. I don't want to give anybody the impression that we're viewing top line as more important than bottom line. We're still in an environment where our number one priority is to drive bottom line performance. But we recognize that in order for the cost savings that we've achieved -- to get maximum benefit from those savings, we need to stabilize the top line.

Moving on, we'll take our next question from Jeff Harlib, Barclays Capital.

You talked about meeting your $500 million cost savings target, but there'll be additional actions, offshoring, et cetera. Can you quantify the additional savings in the key areas and the time frame?

At this point, we haven't set a new goal out there. But if you step back to what we were originally trying to achieve when we put the goals of a $250 million improvement in cost-of-service delivery and a $250 million improvement for reduction in SG&A, the purpose of that was to drive our SG&A as a percent of revenue improvement by five points and to improve our cost-of-service delivery by five points. So we've made progress against both of those, but in a declining revenue environment, we've yet to achieve the full 5% on each side of that. So we're going to continue to work and look for opportunities in a number of areas across the business to keep moving towards what we consider to be the right benchmark for us in terms of SG&A as a percent of revenue and cost of service delivery.

And can you comment on just corporate IT, corporate and government spending trends, as you look at where your customers are out in terms of maybe loosening up and catching up on some IT spending? U.S. and international? This segment edited by chris86ATG

I think we're seeing some improvement in the economic environment, some willingness to take on new projects, that wasn't there a year ago. Equally important for us is our improved financials, our giving customers greater confidence in us as a company, which is helping our selling effort. But between a better economy and, I think, better confidence, greater confidence in us as a company; to us, it's a better demand environment than it was a year ago. But it's still a tricky environment. It's not a straight path to glory. I think you have to scrap for everything that you win. And I don't think what we're seeing is customers just opening their wallets, really, for new work. I think they're being very discreet about where they spend, but certainly better than a year ago.

Janet, the $9 million of charges you mentioned -- where are they on the income statement, and what was the country exit you referred to?

The $9 million is between the cost of revenue and SG&A. It's roughly split half and half. The country exit is our exit of Korea, where we are moving from having a subsidiary with feet on the street in Korea to more of a model where we service our multinational customers through distributor agreements and service support agreements with local Korean vendors.

Just update on cash pension funding for the quarter and if you're still looking at $115 million for the year?

Yes, there's no change to our estimate on cash fundings.

And what was it in Q1?

In Q1, roughly $20 million of the $115 million went out; we still expect that to be skewed towards the second half of the year.

And now, we'll take our next question from John Moore, KDP Investment Advisors.

Checked on the orders versus revenue trends here -- for outsourcing and systems integration, just refresh my memory -- for the last couple of quarters, it seems like there've been some order, less order growth and perhaps some order declines, at least maybe in SI, and so that's, I guess, what's supporting your hope here now for having the top line stabilize a little bit?

John, that cut off a little bit, and what I heard you say is that -- and if I don't have this question correct, please correct me before we answer--that in the systems integration business, we talked about the growth in orders which is an improvement over what we were seeing in 2009. And so we need to get the orders first, before that translates into revenue growth in the systems integration business. And in the outsourcing area, we've had three consecutive quarters of good growth in outsourcing, but yet it does take time from when you sign those orders to work through the transition to get them up into revenue contributing to the base. Does that answer your question or is there further you'd like us to comment on, John?

Well, it does -- I guess, in terms of order cancellations, what trend are you seeing, particularly within SI, on cancellation rates?

In the systems integration business, we've not had any type of major cancellation in the SI business. That's been more a reflection of the project-based IT services business being really soft as it's a -- as people can make that discretionary decision to delay the project, make the project to be shorter as people work through the current economic environment and work through their own institutional issues, whether they be in the commercial sector and public sector. In the outsourcing side we've had a few cancellations that have been related to either M&A, or, in institution issues, have not been anything that is systemic across the base, have not been anything that's been related to customer satisfaction -- more institutional issues.

And then, just on the appointment of Ron Frankenfield, what is his background? What in particular does he bring to outsourcing as a new president there?

Ron brings a great background. In his many years with Unisys, he's led lots of different organizations, including a one-time in our Asia-Pacific region where he had full responsibility for all of our offerings in that region, including our outsourcing business. Most recently, prior to his employment as president of our outsourcing business, he was head of worldwide sales for outsourcing and has brought a lot of the renewed energy discipline and focus to that function, which has yielded the wins over the recent months that I just mentioned: Unilever, Henkel, Siemens and, most recently, Microsoft, that we won a significant deal there in conjunction with Infosys. So he brings a broad background of the outsourcing business, a strong general management background, as well as a very strong sales background. So we're delighted that Ron was able to step up into that role, and expect big things.

And we'll take our final question from Sundar Varadarajan from Citadel Securities.

Janet, when you talked about the potential use of proceeds from asset disposition, you said strengthening the capital structure would be one of your priorities. Could you kind of elaborate on that a little bit more? You have a lot of high-coupon debt, but none of that's fairly callable anytime in the near future. What exactly did you mean by that? Is there a target level you have or kind of total debt? Any color you can provide into what exactly you meant by strengthening the capital structure would be helpful.

Sure, Sundar. As Ed has stated in his goals when he first joined the company, we have been on a path to deleverage our balance sheet. Based upon the business and the capital structure, we do think we are carrying more debt than what we would like to carry from a long-term perspective. I'm not going to speculate on how we do that, but I think you would expect to see us use those proceeds from those divestitures to reduce our debt. And we will look at the environment, the market at the time we have the proceeds and we will do what is the most economically advantageous to the company to reach the goal of reducing the debt and deleveraging the balance sheet, but I don't have any specifics to comment on right now.

I can understand you don't want to talk about specifics off the house, but could you talk about what would be the right kind of leverage that you are targeting, whether it's a total debt number or a debt-to-EBITDA number -- how are you looking at it and where would you like to be seen [ph] longer-term?

Longer-term, we have talked about our goal of getting to 25% to 30% debt-to-capital ratio. Now our capital GAAP accounting has a couple of unusual items in there with pension and debt. But we think that, that 25% to 30% debt-to-capital ratio is something that we can operate in longer term, but -- Ed would prefer a debt-free balance sheet, but as we all know, the most efficient use of our capital is a capital structure as a combination of both debt and equity. And we think a 25% to 30% debt-to-capital ratio is more in line with what we would like to do over the long term. Obviously, we look at the efficiency of that capital; you're right in pointing out the high coupon debt, particularly what came out of the debt exchange last year in a very difficult time to do refinancing. We know we've got some time to deal with it after the $68 million of maturities in 2012. We don't have that maturities occurring until 2014, so we do have a nice window to accomplish an improved capital structure.

And at this time, I'd like to turn the conference back over to Ed Coleman for any additional or closing remarks.

Well, thank you very much to everyone for participating on the call today. For all the Unisys folks that are listening in on the call, I'd like to thank you for all your hard work and for your commitment to our continued progress. Thanks everyone.

Thank you. That will conclude today's call. We thank you for your participation. At this time, the phone lines may now disconnect.