Good day everyone and welcome to the Unisys second quarter 2009 financial results conference call. Now I’d like to turn the conference over to Mr. Jack McHale, Vice President of Investor Relations at Unisys Corporation, please go ahead sir.

Thank you, operator. Good morning everyone and thank you for joining us today. About an hour ago, Unisys released its second quarter 2009 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-and-A session are being webcast via the Unisys investor website. Second, you can find on our investor website the earnings release and the presentation slides that we will be using this morning to guide our discussions. These materials are available for viewing, as well as downloading and printing. Finally, I’d like to remind you that all forward-looking statements made in 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 website. Now let me turn today’s call over to Ed.

Thanks Jack. Hello everyone. Thank you for joining us today to discuss our second quarter financial results. As we begin our call, please turn to slide one of the presentations. In our last two calls, I’ve outlined a turnaround program that we’re driving at Unisys to enhance our profitability, strengthen our balance sheet and improve our competitive position in the IT marketplace. We saw some encouraging signs in the second quarter that our efforts are working and beginning to show results. Driven by our actions to focus our resources, simplify our organization and reduce expenses, we more than tripled our operating profit in the quarter from a year ago and we delivered net income. We also reduced our free cash usage to almost breakeven levels. Also during the quarter, we took steps to address our debt by conducting a private debt exchange. The exchange process isn’t complete yet, the offers will expire at midnight tonight. As of yesterday, about $230 million of the $300 million of March 2010 notes have been tendered for exchange. Janet will comment more on this later. As we implement our turnaround program, our primary focus is on driving profitability and cash flow. So I’m pleased by our results in the quarter and the progress we’re making in turning around the financial profile of the company. At the same time, we recognize that this is only a first step. Our objective is to build a company that is consistently and predictably profitable and that generates free cash flow. While we were profitable in the quarter, we must continue the progress. Although we came close to generating free cash flow in the quarter, we have to turn that corner and begin to generate free cash flow on a consistent basis. So we have a lot of work…

Thanks Ed and hello everyone. We made good progress in the second quarter in making Unisys a leaner, more cost efficient and profitable company. I was pleased with our cost and cash management as we work through what continues to be a difficult economic environment. This morning I will take you through our financial results for the quarter. I will also review our cash flow in the quarter and provide an update on expectations for capital expenditures. In addition, I will provide a brief update on the debt exchange process. Starting with orders, please turn to slide seven for an overview of order trends in the quarter. Our services orders showed substantial declines from the year ago quarter, primarily reflecting order declines for outsourcing and systems integration projects. However, our services orders increased sequentially from the first quarter of 2009. Geographically, we saw year-over-year order declines in the U.S. and Europe, partially offset by order gains in Latin America and Asia-Pacific. We closed the second quarter with $5.9 billion in services backlog, which was up 4% from services backlog at March 31, 2009. The increase in services backlog was driven by foreign currency exchange. On a constant currency basis, services backlog was down about 3% from March 31, backlog. Slide eight summarizes our financial results in the second quarter. At the top line, we reported revenue of $1.13 billion, a decline of 16% year-over-year. Foreign currency exchange had an eight point negative impact on revenue this quarter. On a constant currency basis, revenue was down 8%. Based on today’s rates, we anticipate four to five percentage point negative impact on revenue in the third quarter of 2009 and a two to three percentage point positive impact on revenue in the fourth quarter of 2009. Total gross profit dollars declined due…

Thank you, Janet and thank you, Ed for those comments. Operator, we’d now like to open the call to see if there are any questions.

(Operator Instructions) Your first question comes from Arun Seshadri - Credit Suisse.

Just wanted to get a sense for SG&A and R&D over the back half of the year; is it fair to say that these comps are generally sequential now, i.e., should drift lower versus your 2Q numbers for the rest of the year?

The only anomaly that we may have, although the management team is continuing to work in reducing SG&A on a sequential basis, is that sometimes we do see a pickup in SG&A expenses in the fourth quarter, predominantly due to the amount of technology transactions that happen in the quarter and increased commissions in that area. Obviously, the other impact on this, as we’ve talked through the comments, is we do expect a negative impact of currency. For SG&A that’s a positive impact and reducing SG&A expenses in the third quarter, but currency will flip in the fourth quarter, as I mentioned in my comments. So that may sequentially, just because of the impact of currency as we see it right now cause the number to go up.

Just to clarify, I think you said before in the quarter that roughly $11 million in the quarter could be considered one-time flowing through your operating income line?

That’s correct. Let me clarify, $11 million is going through the P&L, $6 million of that is going through operating income and the remaining goes in other income and expenses, as I said in my comments. So if you’re looking at the pretax line, $11 million is a one-time benefit, not all of that is in operating income.

One more question; I just noticed when you talked about the 6 7/8 notes, retiring the remainder of those. You said that you would pursue a variety of options to take care of that maturity. You did not mention balance sheet cash; was that intentional?

In my comments, I mentioned that we are working to deal with the 2010 maturity with the same three actions that we have said all the way through 2009 and that is the cash that is generated from the business through asset sales and through potential refinancing or a combination of those. Clearly cash on hand is part of the overall company’s balance sheet, but we have a focus on improving the free cash flow, as Ed said in his comments and as I did, we were almost at breakeven. So we want to continue improving the free cash flow performance of the business and that’s our goal to use the portions of that to reduce the remaining debt maturity.

Have you talked about any specific asset sales that you’re looking at all?

No, we have not.

Your next question comes from John Moore - KDP.

Just two ones; the first, just if you could tell us where you are on the offshore or where you think there’s a goal of where you’d like to be for the workforce by the end of the year? Then just on the federal growth in the quarter, just how broad based that was? Are there any particular departments or agencies in there for that?

John, let me take the first piece of it. On the offshore piece, if you combine our low cost labor pools in terms of both offshore and onshore, about 19% of our employee population would be in low cost labor pools and that’s up three percentage points from last fall, but still significantly behind our competition, which I think is often in the 35% to 40% range. So that represents an area of improvement for us, but it also represents an opportunity for us to continue to work on our gross margins.

On the federal revenue growth, we did see increase in our civilian. As you know, we have three groupings of agencies, of Civilian agencies, the Homeland Security agencies and the Defense agencies. In particular, we did see revenue growth in our Civilian agencies this quarter.

So that was the Homeland Security?

No, the three groupings as we look at our federal business are the Civilian agencies such as Justice, Health and Human Services, etc. Homeland Security agencies is our second grouping and then the third is our Defense agencies and of those three, the Civilian agencies were our strongest this quarter.

Your next question comes from Jeff Harlib - Barclays Capital.

Just wondering if you can clarify on the cost savings; I think last call you said you were taking actions to reduce your annualized cost by $310 million. In your slide four you said $150 million of gross margin actions, $250 million of SG&A. Does that mean you have $400 million in process? I’m just trying to get to where you might be on Q2 on a run rate basis, as far as where you expect to be and the timing of that.

The way we’ve looked at this is from an overhead standpoint in terms of SG&A. We’ve set ourselves a goal of reducing that by $250 million. Against that goal, we’ve initiated and taken action that address about $200 million annual reduction. We’ve also set a goal for ourselves to improve our gross margins by four or five points, which again equates to about another $250 million. Against that, we’ve initiated actions that would yield $150 million improvement. So when you put those two together, we’ve now sort of upped our activities to $350 million of reduction against a total goal, combining both overhead and gross margin of $500 million.

What was the total gross margin number again?

About $250 million.

What’s the timing of completing the announced actions?

As quickly as we can. We’re working hard at it. I think we’ve taken some pretty good strides so far.

I mean by year end or early?

I’m not going to project that, but we’re working. I think you can see that we’re working hard and effectively to bring those numbers down and we’re going to continue to do so.

Just, the remaining cash restructuring costs relating to those actions?

Yes, there’s about $40 million left to go. We spent $20 million in the quarter and then they start to tail down in the third and fourth quarter with very minimum amount remaining in 2010.

What was your pension expense income, as well as total funding, talking international, and other plans in the quarter?

The pension expense in the quarter was an income of roughly $9 million in the quarter and the year-to-date cash contributions into the pension plans is $31 million.

$31 million against the $100 million or so you mentioned?

That’s correct.

Just generally if you can talk about any change you’re seeing from your customers domestically or internationally on their spending plans or pipeline of business? Have you seen some stabilization or any color on that?

Well, I think one thing we were pleased to see was that the orders grew sequentially in our services business from Q1 to Q2, which we took as a positive sign. I think from an economic standpoint, customers are still being very wary of spending money until they absolutely have to, which I think across the industry you’ve seen the impact of that on the enterprise server and enterprise computing marketplace. So again, we think our task at hand right now is to make sure that we get our business model as sharp as we can, so that we can take advantage of improving economic conditions as they occur.

As I said in the comments, we continue particularly in the technology business to see customers being very judicious about where they spend cash and where they make investments and continue to be holding, to try to make the capital expenditures, particularly in the tech business, just in time when they need it.

I would characterize the second quarter as an encouraging quarter, perhaps an indicative quarter in terms of that we’re on the right path. I think we’re better prepared to take advantage of the improving economy as it occurs.

Free cash flow wise, given you’re decently ahead of last year, are you expecting positive free cash flow for the year?

We’ve said all throughout 2009 that our goal was for positive free cash flow. We continue to drive that quarter-by-quarter as we go through the year. We are very pleased with the year-over-year improvement on the first six months of 2009 versus 2008 and we will continue to strive for the goal of positive free cash flow.

Just lastly, what do you consider your base cash, given the movement of all your contracts? I always assumed around $200 million to $300 million. Is that kind of a base cash balance you need to run the business?

We’ve not really commented on a theoretical assumption of what is the base cash. It’s the function of how many geographies we do business in currency constraints in given countries. We do believe that at the current balance sheet amount we have more cash than what we would need for a base case, but we have never given a base case level because that can vary from year-to-year, mix of business, etc.

Can you say how much of your cash is fairly available to move operations from location-to-location, and how much might be tied up?

We’ve said that our mix of cash generally follows the mix of our international versus domestic revenue. We do as any multinational company, have some currency that is locked up based upon governmental constraints, but the vast majority of our cash is available for us to move without consequence.

Your final question comes from Dan Chandra - BW Investment Management.

Could you talk about the period in which your backlog is generally recognized? Is it over two quarters, a year or two years?

The $5.9 billion of backlog that we have is a multiyear backlog. We generally disclose the aging of that only at the year end. You can see that in our 10-K filing, how it ages out overtime, but given that we are in the outsourcing business, that makes up the bulk of the services backlog that is multiyear.

Then you touched upon the 290 of the 2012 notes have tendered. Is that as of yesterday or is that as of the early tender date on July 14?

That is as of yesterday.

Can you provide like an update on like how much of the 2015s and 2016s have tenders as well.

The debt exchange expires at midnight tonight and so we expect to make a release on the final details later this week.

Could you update us on where it stands as of yesterday?

Given that the exchange expires at midnight tonight, we will disclose those final details when we issue a release later this week. The 2010 and 2012 are essentially the same as what was in our early tender offer released earlier this week and I’d point you to that for the 15 and 16’s as well.

I’d like to turn the conference back over to our speakers for any closing or additional remarks.

Well, thank you everyone for joining us today. As we’ve said during the course of this call, it was an encouraging quarter, but we still have a great deal of work to do and in closing, I would like to thank all the colleagues with Unisys that are listening to this call for your hard work and contributions in the quarter and let’s keep making the progress. Thanks everyone.

That does conclude our conference for today. Thank you all for your participation.