MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Despite a decline in revenue, the company reported significantly improved profitability and cash flow for the first six months of 2009 as its results benefited from ongoing actions to concentrate its resources more effectively and reduce its cost base.

Revenue in the first half of 2009 compared with the year-ago period was impacted by weakness in global economic conditions as well as negative foreign currency translation. The company reported first-half 2009 revenue of $2.23 billion, down 16% compared with first-half 2008 revenue of $2.64 billion. Foreign currency exchange rates had an approximately 9 percentage-point negative impact on revenue in the first half of 2009. On a constant currency basis, revenue declined 7% in the first six months of 2009 compared to the prior-year period.

For the six months ended June 30, 2009, operating income increased to $97.4 million compared with $50.6 million in the first six months of 2008. Operating profit percent increased to 4.4% for the first six months of 2009 compared with 1.9% in the year-ago period. After a tax provision of $32.2 million, the company reported net income attributable to Unisys Corporation of $13.7 million, or $.04 per share, for the first six months of 2009. This compared with a year-ago net loss attributable to Unisys Corporation of $37.4 million, or $.10 per share, which included a tax provision of $27.4 million.

Cash from operating activities increased to $87.7 million in the first half of 2009 compared with $2.3 million in the same period of 2008.

RESULTS OF OPERATIONS
COMPANY RESULTS

Revenue for the quarter ended June 30, 2009 was $1.13 billion compared with $1.34 billion for the second quarter of 2008, a decrease of 16% from the prior year. Foreign currency fluctuations had an 8-percentage-point negative impact on revenue in the second quarter compared with the year-ago period. Services revenue declined 14% and Technology revenue declined 31% in the second quarter compared with the year-ago period. U.S. revenue was down 5% in the second quarter compared with the year-ago period, principally driven by declines in commercial revenue which were partially offset by increases in Federal government revenue. International revenue decreased 24% in the three months ended June 30, 2009 due to declines in all major regions. On a constant currency basis, international revenue declined 10% in the three months ended June 30, 2009 compared with the three months ended June 30, 2008.

Total gross profit margin was 23.9% in the three months ended June 30, 2009 compared with 22.7% in the three months ended June 30, 2008. The increase in gross profit margin reflects the benefits from cost reduction actions.

Selling, general and administrative expense in the three months ended June 30, 2009 was $169.2 million (15.0% of revenue) compared with $251.0 million (18.7% of revenue) in the year-ago period. The decrease in selling, general and administrative expense reflects the benefits from cost reduction actions as well as foreign currency exchange fluctuations. Included in selling, general and administrative expense for the three months ended June 30, 2008 was a charge of $5.5 million related to a lease guarantee.

17 Research and development (R&D) expenses in the second quarter of 2009 were $25.1 million compared with $30.2 million in the second quarter of 2008. The decrease in R&D expenses in 2009 compared with 2008 principally reflects changes in the company's development model as the company has focused its investments on software development versus hardware design.

For the second quarter of 2009, the company reported an operating income of $75.4 million compared with operating income of $22.6 million in the second quarter of 2008.

For the three months ended June 30, 2009 pension income was $8.9 million compared with pension income of $8.8 million for the three months ended June 30, 2008. The expense related to the company's match to the U.S. 401(k) plan for the three months ended June 30, 2009 and 2008 was zero and $14.6 million, respectively. Effective January 1, 2009, the company match was suspended. The company records pension income or expense, as well as other employee-related costs such as 401(k) match, payroll taxes and medical insurance costs, in operating income in the following income statement categories: cost of revenue; selling, general and administrative expenses; and research and development expenses. The amount allocated to each category is based on where the salaries of active employees are charged.

Due to changes in estimates related to cost reduction charges, during the three months ended June 30, 2009, $7.0 million was recorded as income compared with $2.5 million recorded as expense in the year-ago period. In addition, during the three months ended June 30, 2009, the company recorded a benefit of $11.2 million (a $5.4 million benefit in other income, a $6.1 million benefit in cost of revenue and an expense of $.3 million in selling, general and administrative expense related to legal fees) relating to a change in Brazilian law involving a gross receipt tax.

Interest expense for the three months ended June 30, 2009 was $21.2 million compared with $21.2 million for the three months ended June 30, 2008.

Other income (expense), net was income of $3.0 million in the second quarter of 2009, compared with expense of $6.4 million in 2008. The decrease in expense was principally due to foreign exchange gains of $1.4 million in the three months ended June 30, 2009 compared with losses of $2.5 million in the three months ended June 30, 2008 and the income of $5.4 million in the second quarter of 2009 related to the Brazilian law change discussed above.

The company reported income before income taxes for the three months ended June 30, 2009 of $57.2 million compared with a loss before income taxes of $5.0 million in 2008. The provision for income taxes was $16.6 million in the second quarter compared with a provision of $3.5 million in the year-ago period. Included in the tax provision for the three months ended June 30, 2009 was a U.S. refundable credit of $4.0 million and included in the tax provision for the three months ended June 30, 2008 was a $5.1 million benefit related to prior years' intercompany royalties. The company evaluates quarterly the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The company will record a tax provision or benefit for those international subsidiaries that do not have a full valuation allowance against their deferred tax assets. Any profit or loss recorded for the company's U.S. operations will have no provision or benefit associated with it. As a result, the company's provision or benefit for taxes will vary significantly quarter to quarter depending on the geographic distribution of income.

The net income attributable to Unisys Corporation for the three months ended June 30, 2009 was $38.1 million, or $.10 per share, compared with a net loss attributable to Unisys Corporation of $14.0 million, or $.04 per share, for the three months ended June 30, 2008.

Revenue for the six months ended June 30, 2009 was $2.23 billion compared with $2.64 billion for the six months ended June 30, 2008, a decrease of 16% from the prior year. Foreign currency fluctuations had a 9-percentage-point negative impact on revenue in the current period compared with the year-ago period. Services revenue declined 14% and Technology revenue declined 30% for the six months ended June 30, 2009 compared with the year-ago period. U.S. revenue was down 3% in the first half of 2009 compared with the year-ago period, principally driven by declines in commercial revenue which were partially offset by increases in Federal government revenue. International revenue decreased 25% in the first half of 2009 due to declines in all major regions. On a constant currency basis, international revenue declined 10% in the six months ended June 30, 2009 compared with the six months ended June 30, 2008.

18 Total gross profit margin was 22.1% in the six months ended June 30, 2009 compared with 22.6% in the six months ended June 30, 2008. The decrease in gross profit margin principally reflects the decline in revenue which more than offset the benefits from cost reduction actions.

Selling, general and administrative expense in the six months ended June 30, 2009 was $342.8 million (15.4% of revenue) compared with $483.5 million (18.3% of revenue) in the year-ago period. The decrease in selling, general and administrative expense reflects the benefits from cost reduction actions as well as foreign currency exchange fluctuations.

Research and development (R&D) expenses in the first half of 2009 were $52.5 million compared with $62.9 million in the first half of 2008. The decrease in R&D expenses in 2009 compared with 2008 principally reflects changes in the company's development model as the company has focused its investments on software development versus hardware design.

For the six months ended June 30, 2009, the company reported operating income of $97.4 million compared with operating income of $50.6 million for the six months ended June 30, 2008.

For the six months ended June 30, 2009 pension income was $11.8 million compared with pension income of $20.3 million for the six months ended June 30, 2008. The decrease in pension income in 2009 from 2008 was principally due to lower returns on plan assets worldwide. The expense related to the company's match to the U.S. 401(k) plan for the six months ended June 30, 2009 and 2008 was zero and $26.7 million, respectively.

Due to changes in estimates related to cost reduction charges, during the six months ended June 30, 2009, $9.4 million was recorded as income compared with $.8 million recorded as income in the year-ago period. In addition, during the six months ended June 30, 2009, the company recorded a benefit of $11.2 million (a $5.4 million benefit in other income, a $6.1 million benefit in cost of revenue and an expense of $.3 million in selling, general and administrative expense related to legal fees) relating to a change in Brazilian law involving a gross receipt tax.

Interest expense for the six months ended June 30, 2009 was $43.0 million compared with $42.8 million for the six months ended June 30, 2008.

Other income (expense), net was an expense of $3.7 million for the six months ended June 30, 2009, compared with expense of $7.5 million for the six months ended June 30, 2008. The decrease in expense was principally due to foreign exchange losses of $5.6 million in the six months ended June 30, 2009 compared with foreign exchange losses of $2.8 million in the six months ended June 30, 2008 and the income of $5.4 million in the first half of 2009 related to the Brazilian law change discussed above.

The company reported income before income taxes for the six months ended June 30, 2009 of $50.7 million compared with income of $.3 million in 2008. The provision for income taxes was $32.2 million in the first half of 2009 compared with a provision of $27.4 million in the year-ago period. Included in the tax provision for the six months ended June 30, 2009 was a U.S. refundable credit of $6.0 million and a foreign tax refund of $2.7 million related to a 2008 refund claim. Included in the tax provision for the six months ended June 30, 2008 was a $5.1 million benefit related to prior years' intercompany royalties.

The net income attributable to Unisys Corporation for the six months ended June 30, 2009 was $13.7 million, or $.04 per share, compared with a net loss attributable to Unisys Corporation of $37.4 million, or $.10 per share, for the six months ended June 30, 2008.

SEGMENT RESULTS

The company has two business segments: Services and Technology. Revenue classifications by segment are as follows: Services - systems integration and consulting, outsourcing, infrastructure services and core maintenance; Technology - enterprise-class servers and specialized technologies. The accounting policies of each business segment are the same as those followed by the company as a whole. Intersegment sales and transfers are priced as if the sales or transfers were to third parties. Accordingly, the Technology segment recognizes intersegment revenue and manufacturing profit on hardware and software shipments to customers under Services contracts. The Services segment, in turn, recognizes customer revenue and marketing profit on such shipments of company hardware and software to customers. The Services segment also includes the sale of hardware and software products sourced from third parties that are sold to customers through the company's Services channels. In the company's consolidated statements of income, the manufacturing costs of products sourced from the Technology segment and sold to Services customers are reported in cost of revenue for Services.

19 Also included in the Technology segment's sales and operating profit are sales of hardware and software sold to the Services segment for internal use in Services engagements. The amount of such profit included in operating income of the Technology segment for the three months ended June 30, 2009 and 2008 was $9.1 million and $5.7 million, respectively. The amount for the six months ended June 30, 2009 and 2008 was $10.6 million and $11.2 million, respectively. The profit on these transactions is eliminated in Corporate.

The company evaluates business segment performance on operating profit exclusive of cost reduction charges and unusual and nonrecurring items, which are included in Corporate. All other corporate and centrally incurred costs are allocated to the business segments, based principally on revenue, employees, square footage or usage.

Information by business segment is presented below (in millions of dollars):

                                       Elimi-
                            Total      nations      Services    Technology
                           -------     -------      --------    ----------
Three Months Ended
June 30, 2009
------------------
Customer revenue          $1,128.7                 $1,030.0     $  98.7
Intersegment                  -        $ (47.3)         1.6        45.7
                          --------     -------      -------      ------
Total revenue             $1,128.7     $ (47.3)    $1,031.6     $ 144.4
                          ========    ========     ========     =======
Gross profit percent          23.9%                    21.0%       40.4%
                          ========                  =======      ======
Operating income
  (loss) percent               6.7%                     7.9%       (5.4)%
                          ========                  =======      ======

Three Months Ended
June 30, 2008
------------------
Customer revenue          $1,340.0                 $1,197.0     $ 143.0
Intersegment                  -        $ (51.0)         2.7        48.3
                          --------     -------      -------      ------
Total revenue             $1,340.0     $ (51.0)    $1,199.7     $ 191.3
                          ========     ========     =======      ======
Gross profit percent          22.7%                    19.2%       39.2%
                          ========                  =======      ======
Operating income
   (loss) percent              1.7%                     3.3%      (3.7)%
                          ========                  =======      ======

Gross profit percent and operating income (loss) percent are as a percent of total revenue.

20 Customer revenue by classes of similar products or services, by segment, is presented below (in millions of dollars):

                                    Three Months
                                   Ended June 30
                                 ------------------      Percent
                                   2009       2008        Change
                                   ----       ----       --------
    Services
     Systems integration
       and consulting            $  351.7    $ 389.4       (9.7)%
     Outsourcing                    457.9      520.2      (12.0)%
     Infrastructure services        143.8      191.9      (25.1)%
     Core maintenance                76.6       95.5      (19.8)%
                                 --------   --------
                                  1,030.0    1,197.0      (14.0)%
    Technology
     Enterprise-class servers        77.1      114.6      (32.7)%
     Specialized technologies        21.6       28.4      (23.9)%
                                 --------   --------
                                     98.7      143.0      (31.0)%
                                 --------   --------
    Total                        $1,128.7   $1,340.0      (15.8)%
                                 ========   ========

In the Services segment, customer revenue was $1,030.0 million for the three months ended June 30, 2009 down 14.0% from the three months ended June 30, 2008. Services revenue in the second quarter of 2009 when compared with the year-ago period was impacted by continued world wide weak demand and foreign currency exchange rates. Foreign currency translation had an 8-percentage-point negative impact on Services revenue in the current quarter compared with the year-ago period.

Revenue from systems integration and consulting decreased 9.7% from $389.4 million in the June 2008 quarter to $351.7 million in the June 2009 quarter.

Outsourcing revenue decreased 12.0% for the three months June 30, 2009, as both information technology outsourcing (ITO) and business processing outsourcing (BPO) declined.

Infrastructure services revenue declined 25.1% for the three months ended June 30, 2009. The decline was due to weakness in demand for network design and consulting projects, as well as the shift of project-based infrastructure work to managed outsourcing contracts.

Core maintenance revenue declined 19.8% in the second quarter compared with the prior-year quarter. The company expects the secular decline of core maintenance to continue.

Services gross profit was 21.0% in the second quarter of 2009 compared with 19.2% in the year-ago period. Services operating income percent was 7.9% in the three months ended June 30, 2009 compared with 3.3% in the three months ended June 30, 2008. Contributing to the increase in Services operating profit margin was benefits from cost reduction actions.

In the Technology segment, customer revenue was $98.7 million in the June 2009 quarter compared with $143.0 million in the year-ago period for a decrease of 31.0%. Foreign currency translation had a negative impact of approximately 5- percentage points on Technology revenue in the June 2009 quarter compared with the prior-year period. The decline in Technology revenue in 2009 reflects lower sales of high-end mainframe systems, primarily in Europe and Japan, as clients deferred planned purchases in a weak economic environment.

Revenue from the company's enterprise-class servers, which includes the company's ClearPath and ES7000 product families, decreased 32.7% for the three months ended June 30, 2009 compared with the three months ended June 30, 2008. As mentioned above, technology sales during the quarter slowed as clients tightened spending on information technology projects due to economic concerns. Also contributing to the decrease in revenue was the secular decline in the enterprise-class server market, which the company expects to continue.

Revenue from specialized technologies, which includes third-party technology products and the company's payment systems products, decreased 23.9% for the three months ended June 30, 2009 compared with the prior year period.

Technology gross profit was 40.4% in the current quarter compared with 39.2% in the year-ago quarter. Technology operating income (loss) percent was (5.4)% in the three months ended June 30, 2009 compared with (3.7)% in the three months ended June 30, 2008. The decline in operating profit margin in 2009 compared with 2008 reflects the lower levels of mainframe sales.

21 Information by business segment is presented below (in millions of dollars):

                                       Elimi-
                            Total      nations      Services    Technology
                           -------     -------      --------    ----------
Six Months Ended
June 30, 2009
------------------
Customer revenue          $2,228.6                 $2,013.8     $ 214.8
Intersegment                  -        $ (85.2)         3.3        81.9
                          --------     -------      -------      ------
Total revenue             $2,228.6     $ (85.2)    $2,017.1     $ 296.7
                          ========    ========     ========     =======
Gross profit percent          22.1%                    18.7%       36.7%
                          ========                  =======      ======
Operating income
  (loss) percent               4.4%                     5.4%       (8.6)%
                          ========                  =======      ======

Six Months Ended
June 30, 2008
------------------
Customer revenue          $2,641.3                 $2,334.1     $ 307.2
Intersegment                  -        $ (94.7)         5.4        89.3
                          --------     -------      -------      ------
Total revenue             $2,641.3     $ (94.7)    $2,339.5     $ 396.5
                          ========     ========    ========      ======
Gross profit percent          22.6%                    18.8%       41.1%
                          ========                  =======      ======
Operating income
   (loss) percent              1.9%                     2.8%      (1.4)%
                          ========                  =======      ======

Gross profit percent and operating income (loss) percent are as a percent of total revenue.

Customer revenue by classes of similar products or services, by segment, is presented below (in millions of dollars):

                                    Six Months
                                   Ended June 30
                                 ------------------      Percent
                                   2009       2008        Change
                                   ----       ----       --------
    Services
     Systems integration
       and consulting            $  691.2   $  733.5       (5.8)%
     Outsourcing                    883.3    1,014.7      (12.9)%
     Infrastructure services        286.0      393.6      (27.3)%
     Core maintenance               153.3      192.3      (20.3)%
                                 --------   --------
                                  2,013.8    2,334.1      (13.7)%
    Technology
     Enterprise-class servers       156.7      243.4      (35.6)%
     Specialized technologies        58.1       63.8       (8.9)%
                                 --------   --------
                                    214.8      307.2      (30.1)%
                                 --------   --------
    Total                        $2,228.6   $2,641.3      (15.6)%
                                 ========   ========

In the Services segment, customer revenue was $2,013.8 million for the six months ended June 30, 2009 down 13.7% from the six months ended June 30, 2008. Services revenue in the first half of 2009 when compared with the year-ago period was impacted by continued world wide weak demand and foreign currency exchange rates. Foreign currency translation had a 10-percentage-point negative impact on Services revenue in the first half of 2009 compared with the year-ago period.

Revenue from systems integration and consulting decreased 5.8% from $733.5 million for the six months ended June 30, 2008 to $691.2 million for the six months ended June 30, 2009.

22 Outsourcing revenue decreased 12.9% for the six months June 30, 2009, as both information technology outsourcing (ITO) and business processing outsourcing (BPO) declined.

Infrastructure services revenue declined 27.3% for the six months ended June 30, 2009. The decline was due to weakness in demand for network design and consulting projects, as well as the shift of project-based infrastructure work to managed outsourcing contracts.

Core maintenance revenue declined 20.3% in the six months ended June 30, 2009 compared with the prior-year period. The company expects the secular decline of core maintenance to continue.

Services gross profit was 18.7% for the six months ended June 30, 2009 compared with 18.8% in the year-ago period. Services operating income percent was 5.4% for the six months ended June 30, 2009 compared with 2.8% for the six months ended June 30, 2008. Contributing to the increase in Services operating profit margin was benefits from cost reduction actions.

In the Technology segment, customer revenue was $214.8 million in the six months ended June 30, 2009 compared with $307.2 million in the year-ago period for a decrease of 30.1%. Foreign currency translation had a negative impact of approximately 5-percentage points on Technology revenue in the first half of 2009 compared with the prior-year period. The decline in Technology revenue in 2009 reflects lower sales of high-end mainframe systems, primarily in Europe and Japan, as clients deferred planned purchases in a weak economic environment, as well as the expiration of a royalty from Nihon Unisys Limited (NUL). The company had recognized revenue of $18.8 million per quarter ($8.5 million in enterprise-class servers and $10.3 million in specialized technologies) under this royalty agreement over the three-year period ended March 31, 2008. The expiration of this royalty from NUL contributed about 6 percentage points of the technology segment's 30% decline in revenue.

Revenue from the company's enterprise-class servers, which includes the company's ClearPath and ES7000 product families, decreased 35.6% for the six months ended June 30, 2009 compared with the six months ended June 30, 2008. As mentioned above, technology sales during the period slowed as clients tightened spending on information technology projects due to economic concerns. Also contributing to the decrease in revenue was the secular decline in the enterprise-class server market, which the company expects to continue.

Revenue from specialized technologies, which includes third-party technology products and the company's payment systems products, decreased 8.9% for the six months ended June 30, 2009 compared with the six months ended June 30, 2008.

Technology gross profit was 36.7% in the first half of 2009 compared with 41.1% in the year-ago period. Technology operating income (loss) percent was (8.6)% for the six months ended June 30, 2009 compared with (1.4)% for the six months ended June 30, 2008. The declines in gross profit and operating profit margin in 2009 compared with 2008 reflect the lower levels of mainframe sales, primarily in Europe and Japan, and loss of the NUL royalty.

NEW ACCOUNTING PRONOUNCEMENTS

See note (j) of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition.

FINANCIAL CONDITION

Cash and cash equivalents at June 30, 2009 were $475.0 million compared with $544.0 million at December 31, 2008.

The company's principal sources of liquidity are cash on hand, cash from operations and its U.S. trade accounts receivable facility, which is discussed below. The company's revolving credit facility, which provided for loans and letters of credit up to an aggregate of $275 million, expired on May 31, 2009. As discussed below, on July 31, 2009 the company closed private offers to exchange its outstanding senior notes, for new senior secured notes due in 2014, new senior secured notes due in 2015, common stock and $30 million of cash. As a result of these exchange offers, $205.1 million of 2010 Notes which would have been classified as a current liability as of June 30, 2009 has been reclassified as long-term debt. The company also utilizes surety bonds, . . .