MMI Pushes Another (UIS, BCO)

Shares of Unisys Corp. (NYSE: UIS) are trading up 8% today after capitulating to activist investor MMI Investments, LLP, which is one of the largest shareholders of Unisys.  Unisys has delayed its annual meeting to July 24 to allow it more time to “explore certain portfolio rationalization and other actions that may enhance shareholder value” with its investment banker Bear Stearns.

If this sounds familiar at, it is because this was listed as one of “turnarounds that hasn’t turned around” recently.  In the we noted: “When you backdate the news and look at the history of the company you’d think that the turn may have already started.  But shares are barely above 52-week lows and are barely off of multi-year lows too.”

MMI was one of the reasons we named Brinks (NYSE: BCO) to our Special Situations newsletter, and is also part of the reason we have not wanted to close out that position to lock in would-be profits.   You can look at their last proxy filing to see how involved MMI can get.

MMI sent a shareholder letter in early January to urge its review of alternatives, and part of that encouragement included its government services business.  We are not actually under the belief that a mega-premium buyout is in the cards for Unisys.  We are not overly encouraged by an already-leveraged balance sheet that is too heavy in goodwill and intangible assets.  But we do believe that the company can continue to make cuts as needed and can streamline certain operations that are not contributing to the bottom line.  The company is still underperforming compared to analyst estimates, but it has at least come back to ‘quarterly profitability’ and that is at least a start.

Those of you who trade turnarounds will want to keep this one on your watch lists.  It may be a long slow road, but it looks like the car is at least out of the shop even if it isn’t on the road yet.

Jon C. Ogg
February 19, 2008

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