Unisys

To the tune of Yesterday:

Unisys, stock’s problems may not persist

The StockPawnshop’s going to assist

Cuz, we believe in Unisys

Suddenly, pension isn’t what it used to be

Removes shadow over equity

Oh, Unisys came suddenly

Why it had to go

No free cash flow, was like a cyst

I did nothing wrong

Now I long for Unisys

Unisys, mainframe computing is being kissed

By artificial intelligence

Oh, I believe in Unisys

Why it had to go

No free cash flow, was like a cyst

I did nothing wrong

Now I long for Unisys

Ahh, nothing like The Beatles to soothe ones mind when analyzing a troubled equity, like UIS. Your stock pawnstars intially began working on this idea last year when the stock was trading at $4 per share. Today, the share price is below four bucks, but the opportunity is starting to appear.

First, “Da Pension Situation” is slowly getting cleaned up. As the end of 2024 there was roughly $500 million of net pension deficit. This summer the company issued $700 million of senior secured notes. Dr. Rhesus wanted in on that action. Management used the proceeds to refinance $485 million and contribute $250 million to the pension plan. The goal is to eventually execute annuity purchases to reduce the cost of US qualified defined benefit plans along with increasing the capacity to fund them. We believed this would be a catalyst for the stock, but not so much.

Second, the ClearPath not so secret asset. but not so much. is definately a catalyst for current shareholders. There was a recent conference call about this segment of the company. It only represents about 20% of revenue, but there it provides mucho value to the equity. ClearPath provide mission-critical, high transaction services that are secure, very stable (like years), and can deliver to different technologies like mobile computing. Government entities, large financial service firms, and higher education institutions are classic Unisys markets. Naysayers believe that this very profitable segment of the company is a “melting icecube”. Given the long term contracts and high switching costs, we believe it’s more like a glacier than an ice cube. Even better, the company is on track to win additional new logos, aka deals. That may be enough to flip the script. Investors can start viewing Unisys as a real franchise with high margins and low capital intensity. The market loves recurring revenue, thus UIS is gold dressed as beige. When we put 4x multiple on ClearPaths $400 millionish revenue, the fair value of the company gravitates to $10 per share. Perhaps, the board should hire us to get the word out. We would take stock.

One cannot forget about the hard-working employees that work in the Digital Workplace as well as the Cloud, Applications and Infrastructure solutions groups. Although these divisions are much less profitable than ClearPath, those workers morale would be lifted with a higher stock price. Again, we would accept restricted stock units.

Lastly, your Stockpawn stars are always looking for a cheap way to play the upcoming wave of quantum computing. These computers will be game-changing for a multitude of industries by solving complex problems in a record amount of time. We made a bunch of dough on D-Wave (a Unisys partner) and IONQ this year and last. Quantum computational power is also a threat because of its ability to crack algorithms in a matter of seconds, putting protected data at risk. The cybersecurity team at UIS is prepared to help organizations from this type of technology hack.

Listen to the upcoming 3rd quarter conference call in order to measure progress on the pension as well as the margin profile of the divisions.

Note: the stock trades under $4 “Oh, we believe in Unisys”

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