Financial Update: Unisys Expects Lower Revenue. VA Linux Invests In MySQL. Computer Associates Cuts Growth Prospects.

July 7, 2000

SHORT TAKES

UNISYS EXPECTS LOWER-THAN-ANTICIPATED REVENUE

Blue Bell, PA. — Unisys Corporation said that it expects to report lower-than-anticipated revenue and earnings per share for the second quarter of 2000. Unisys indicated that the slower than expected recovery was caused by deferral to later in the year of several large technology contracts and continued weakness in its Federal government and financial services businesses. Also, the company said that based on current rates, it expects currency translations, particularly in Europe, to have a 3-4 percentage point negative impact on its revenue in the second quarter and for the year. Revenue for the second quarter of 2000 is expected to be $1.62 – $1.65 billion, a decrease of 13% to 15% compared to a strong quarter a year ago. The company expects second-quarter 2000 diluted earnings per share, before the previously announced after-tax extraordinary charge of approximately $20 million for the retirement of debt, to approximate $.18 – $.20 per share compared to $.37 reported in the second quarter of 1999. Unisys will release its actual second-quarter results on Tuesday, July 18, before the opening of trading on the New York Stock Exchange.

The company expects its second-quarter services revenue and orders to show low double-digit percentage declines compared to the year-ago period but to be up sequentially from the first quarter of 2000. Unisys said that it expects its technology revenue in the second quarter of 2000 to decline by a high single-digit percentage against very strong levels a year ago. Technology orders are expected to increase over the year-ago period. The market acceptance of the Unisys [email protected] ES7000 line of Intel-based, mainframe-class servers, based on the Unisys Cellular MultiProcessing (CMP) architecture, is strong. The company said it has begun limited shipments of the ES7000, with shipments expected to ramp up in the fourth quarter and into 2001. Unisys also announced today the finalization of its original equipment manufacturer contract with Compaq Computer Corporation under which Compaq will deliver Unisys CMP-based systems. Unisys said it expects sequentially improving revenue trends over the remainder of the year. On a year-over-year basis, because of weak orders in the first half, the company now expects revenue in the second half of the year to show a single-digit increase over the second half of 1999. Overall, the company now expects a mid single-digit percentage decline in full-year 2000 revenue and earnings per share, excluding the second-quarter extraordinary charge, compared to 1999 revenue levels. Visit http://www.unisys.com for more information.

VA LINUX SUPPORTS OPEN-SOURCE DATABASE SOFTWARE

San Diego, CA — VA Linux Systems has put its name behind the MySQL database software, an open-source alternative to proprietary software from the likes of Oracle, Microsoft and IBM and a competitor to another open-source initiative. VA, the fifth-largest seller of Linux computers, has invested an undisclosed sum in MySQL and will help MySQL with service and support programs designed to make the software more appealing to corporate customers, MySQL said. In addition, Internet software maker Progress Software invested $2.5 million in MySQL, the database company said. The backing sharpens the difference between MySQL and open-source competitor PostgreSQL, which is being funded by start-up Great Bridge and its parent company, Landmark Communications.

With open-source software, programmers freely share programming instructions instead of keeping it a closely guarded secret. The most successful open-source product is Linux, an operating system that has made inroads not only against Unix, of which it is a clone, but also against Windows. And in a significant shift for the database company, MySQL now is released under the General Public License, the best-understood open-source license and the one that covers Linux. The MySQL development effort now is hosted at VA’s SourceForge site. GPL allows anyone to use or modify the underlying source code for a software package, provided that any changes are published publicly if a person distributes a modified version. The previous license for MySQL was more prohibitive, MySQL said. MySQL is used to run SourceForge, download site Tucows, open-source software download site Freshmeat, “news for nerds” site Slashdot and Linux.com. VA also announced it has released a new low-end server, the one-processor, 1.75-inch thick 1150. The machine, with prices starting at $2,400, is designed to be bolted to racks and is best suited to delivering Web pages to Internet browsers. The 1150 design is based on the product line VA acquired when it bought TruSolutions in March, VA said.

COMPUTER ASSOCIATES CUTS GROWTH PROSPECTS

New York, N.Y. — The president of leading business software maker Computer Associates told analysts the company expects to earn 11 cents to 16 cents, excluding gains, charges and amortization, in its fiscal first quarter, far below Wall Street estimates of 55 cents a share. The company warned earnings would be below Wall Street expectations due to weak European sales and softness in its mainframe business. It said fiscal first quarter revenue would be between $1.25 billion to $1.3 billion, below the $1.6 billion many analysts had expected.

President and Chief Operation Officer Sanjay Kumar told analysts in a conference call that with the items and excluding the amortization charge, the company expects earnings per share for the fiscal quarter ended June 30 will in the range of 26 cents to 31 cents a share. Kumar also said the Islandia, N.Y.-based company lowered its preliminary revenue growth target for the fiscal second quarter to 20 percent from 25 percent.

BROCADE CEO EXPECTS CONTINUED RAPID GROWTH

Palo Alto, CA — Brocade Communications Systems Inc. Chief Executive Greg Reyes said he is comfortable with analysts’ estimates that see the company posting 550% year-to-year growth in earnings and 300% growth in revenue. The consensus estimate compiled by First Call/Thomson Financial sees Brocade posting $80 million in sales and net income of 13 cents a share for its third fiscal quarter, which runs through July. A year ago the company posted net income of 2 cents a share on revenue of $20.1 million. Brocade’s sales rose to $68.7 million in fiscal 1999 from $24.2 million in 1998. Analysts expect sales to reach $300 million this year, Reyes said, noting that he ” wouldn’t be surprised to see (sales) more than double again” in fiscal 2001.

Brocade, of San Jose, Calif., has a commanding 55% share of the market for fibre channel switches, which are used in networks that link large server computers to data storage devices. Fibre channel is a protocol, or set of rules, that allow data to be transferred between different electronic devices. Compared with switches used in other types of computer networks, those that use the fibre channel protocol can handle bigger data packets, keep those packets in the right order and use up less computing power from high-speed microprocessors. Brocade’s stock closed Friday, June 30 at 183 31/64, near its 52-week high of 185 reached March 31. Shares had been as low as 21 3/4 on Aug. 5. Investors paid nearly 800 times trailing 12 months earnings for the stock. Brocade, with 400 employees and sales of $155 million in the past 12 months, was valued by the market at $17.6 billion – more than Apple Computer Co. (AAPL), with 7,000 employees and $7.2 billion in sales. That high valuation doesn’t bother Reyes, who thinks that investors see the increase in fibre channel switch demand far outstripping the current projections of market analysts. “Brocade is going to be one of these growth stories that people will want to participate in,” he said.

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