The Unisys board of directors lived to fight another day on Thursday, when it defeated a motion by the company?s largest institutional shareholder to break it up and spin off business divisions.
New York-based Greenway Partners - the single largest holder of Unisys stock - had proposed either selling or spinning off Unisys' hardware business from its information services and customer support operations. The three operational areas were created as a result of a corporate restructuring in January last year.
But the Greenway proposal was rejected by around 60 per cent of shareholders at the company?s annual meeting in Philadelphia on Thursday. A second motion to withhold support from four directors seeking re-election to the board was also dismissed by 79 per cent of the shareholders voting.
This was the second time the company had been defeated in an attempt to break up Unisys. Last April, a plan to spin off divisions to create three separate public companies, owned by existing stockholders, was defeated by a two-thirds majority at the 1996 shareholder meeting.
After the vote, James Unruh, Unisys chief executive, condemned Greenway?s actions as an unnecessary distraction from restoring Unisys to long term profitability. "Much of the discussion here today has not been about improving our business," he said. "Virtually every knowledgeable person who has considered the merits of the Greenway proposals, this year and last, to break up the company, believes that they are without merit."
He also hit out at Greenway?s attempt to block the re-election of members of the current board. "Greenway has also urged shareholders to withhold votes from the directors, ostensibly to ?send a message'," he said. "Well, if the message is that the stock price is too low, then all of us - management and the board - have the message. This is not news."
The proposed split-up had divided shareholders. One anti-split investor said: "These short term opportunists trying to hack Unisys up are only out for a fast buck. If they get their way, the stock may have a short lived upsurge, but probably be near worthless soon after."
But another investor demanded: "How do you expect a bunch of old guys who have hung in there since Burroughs and Sperry, counting the days to retirement, to turn Unisys around?"
The board was backed by Institutional Shareholder Service (ISS), a proxy advisory firm that recommended rejection of the Greenway proposal. ISS also played a major role in defeating the Greenway plans last year.
Earlier in the week, Unisys reported first quarter results that exceeded Wall Street expectations. Net income for the quarter ended 31 March was $19 million on revenue of $1.53 billion, against a loss of $13.4 million on revenue of $1.42 billion in the comparable quarter in 1996. But earnings per share were still in the red at a net loss of six cents, although this was an improvement on last year?s 25 cents per share loss.
Unruh told shareholders at the annual meeting that there are clear signs that the company is benefiting from the January 1996 overhaul and the shift to a three business/one company structure. The services business now accounts for 62 per cent of total revenue, a 15 per cent increase over five years, he said. He remains confident that the company will report a full year profit for 1997.
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