<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                                   FORM 10-K

(Mark One)

          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X]       SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

                                      OR

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
[_]       OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________.

                        Commission file number:  1-8729

                              UNISYS CORPORATION

            (Exact name of registrant as specified in its charter)

            Delaware                             38-0387840
(State or other jurisdiction of               (I.R.S. Employer
incorporation or organization)               Identification No.)

               Unisys Way
        Blue Bell, Pennsylvania                      19424
(Address of principal executive offices)          (Zip Code)

              Registrant's telephone number, including area code:
                                (215) 986-4011

          Securities registered pursuant to Section 12(b) of the Act:

                                       Name of each exchange on
    Title of each class                    which registered
    -------------------                ------------------------

Common Stock, par value $.01           New York Stock Exchange
Preferred Share Purchase Rights        New York Stock Exchange

<PAGE>
 
Securities registered pursuant to Section 12(g) of the Act:

                                     None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES  X    NO ____
                                       ----           

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of the voting stock held by non-affiliates: approximately
$4,605,482,000 as of December 29, 2000. The amount shown is based on the closing
price of Unisys Common Stock as reported on the New York Stock Exchange
composite tape on that date. Voting stock beneficially held by officers and
directors is not included in the computation. However, Unisys Corporation has
not determined that such individuals are "affiliates" within the meaning of Rule
405 under the Securities Act of 1933.

Number of shares of Unisys Common Stock, par value $.01, outstanding as of
December 31, 2000: 315,379,164.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Unisys Corporation 2000 Annual Report to Stockholders -- Part I,

Part II and Part IV.

Portions of the Unisys Corporation Proxy Statement for the 2001 Annual Meeting
of Stockholders -- Part III.

                                       2

<PAGE>
 

                                    PART I



ITEM 1.  BUSINESS
-----------------

     Unisys Corporation ("Unisys" or the "Company") is a worldwide information
services and technology company.  It provides services, systems and solutions,
its Unisys e-@ction Solutions, that help customers apply information technology
to seize the opportunities and overcome the challenges of the internet economy.

     Unisys has two business segments -- Services and Technology.  Financial
information concerning the two segments is set forth in Note 15, "Segment
information", of the Notes to Consolidated Financial Statements appearing in the
Unisys 2000 Annual Report to Stockholders, and such information is incorporated
herein by reference.

     The principal executive offices of Unisys are located at Unisys Way, Blue
Bell, Pennsylvania 19424.

Principal Products and Services
-------------------------------

     Unisys provides services and technology to commercial businesses and
governments throughout most of the world.

     In the Services segment, Unisys integrates and delivers the solutions,
services and network infrastructure required by business and government to
transform their organizations for the internet economy. Unisys offers a
portfolio of solutions targeted at key vertical industries: financial services,
communications, transportation, publishing, commercial, and public sector.
Offerings in the Services segment include vertical industry and custom
solutions, systems integration, outsourcing, network services and multi-vendor
information systems management and support.

     In the Technology segment, Unisys develops servers and related products
which operate in high-volume, mission-critical environments. Major offerings
include enterprise-class servers such as the ClearPath Enterprise server, which
integrates proprietary and "open" platforms; Windows 2000 servers with
enterprise-class attributes, such as the ES7000 server line based on the
Cellular MultiProcessing architecture; system middleware to power high-end
servers; storage products; payment systems; and specialized technologies.

     Products and services are marketed primarily through a direct sales force.
In certain foreign countries, Unisys markets primarily through distributors.
Unisys manufactures a significant portion of its product lines. Some products,
including certain commodity and small servers, peripheral products, and software
products, are manufactured for Unisys to its design or specifications by other
business equipment manufacturers or software suppliers.

                                       3

<PAGE>
 
Raw Materials
-------------

     Raw materials essential to the conduct of the business are generally
readily available at competitive prices in reasonable proximity to those plants
utilizing such materials.

Patents, Trademarks and Licenses
--------------------------------

     Unisys owns many domestic and foreign patents relating to the design and
manufacture of its products, has granted licenses under certain of its patents
to others and is licensed under the patents of others.  Unisys does not believe
that its business is materially dependent upon any single patent or license or
related group thereof.  Trademarks and service marks used on or in connection
with Unisys products and services are considered to be valuable assets of
Unisys.

Backlog
-------

     In the Services segment, firm order backlog at December 31, 2000 was $5.8
billion, compared to $4.6 billion at December 31, 1999.  Approximately $2.3
billion (40%) of 2000 backlog is expected to be filled in 2001.  Although the
Company believes that this backlog is firm, the Company may, for commercial
reasons, allow the orders to be cancelled, with or without penalty.  In
addition, funded U.S. Government contracts included in this backlog are
generally subject to termination, in whole or part, at the convenience of the
government or if funding becomes unavailable.  In such cases, the Company is
generally entitled to receive payment for work completed plus allowable
termination or cancellation costs.

     At the end of 2000, the Company also had $2.1 billion of potential future
Services order value which it may receive under certain multi-year U.S.
government contracts for which funding is appropriated annually. The comparable
value of unfunded multi-year U.S. government contracts for 1999 was $2.3
billion.

     Because of the relatively short cycle between order and shipment in its
Technology segment, the Company believes that backlog information for this
segment is not material to the understanding of its business.

Customers
---------

     No single customer accounts for more than 10% of Unisys revenue.  Sales of
commercial products to various agencies of the U.S. government represented 10%
of total consolidated revenue in 2000.

Competition
-----------

     Unisys business is affected by rapid change in technology in the
information services and technology field and aggressive competition from many
domestic and foreign companies, including computer hardware

                                       4

<PAGE>
 
manufacturers, software providers and information services companies. Unisys
competes primarily on the basis of service, product performance, technological
innovation, and price. Unisys believes that its continued investment in
engineering and research and development, coupled with its marketing
capabilities, will have a favorable impact on its competitive position.

Research and Development
------------------------

     Unisys-sponsored research and development costs were $333.6 million in
2000, $339.4 million in 1999, and $308.3 million in 1998.

Environmental Matters
---------------------

     Capital expenditures, earnings and the competitive position of Unisys have
not been materially affected by compliance with federal, state and local laws
regulating the protection of the environment. Capital expenditures for
environmental control facilities are not expected to be material in 2001 and
2002.

Employees
---------

     As of December 31, 2000, Unisys had approximately 36,900 employees.

International and Domestic Operations
-------------------------------------

     Financial information by geographic area is set forth in Note 15, "Segment
information", of the Notes to Consolidated Financial Statements appearing in the
Unisys 2000 Annual Report to Stockholders, and such information is incorporated
herein by reference.


I
TEM 2.  PROPERTIES
-------------------

     As of December 31, 2000, Unisys had 25 major facilities in the United
States with an aggregate floor space of approximately 5.5 million square feet,
located primarily in California, Georgia, Illinois, Michigan, Minnesota,
Pennsylvania, Utah and Virginia. Three of these facilities, with aggregate floor
space of approximately 1.5 million square feet, were owned by Unisys and 22,
with approximately 4.0 million square feet of floor space, were leased to
Unisys. Approximately 4.7 million square feet of the U.S. facilities were in
current operation, approximately .7 million square feet were subleased to
others, and approximately .1 million square feet were being held in reserve or
were declared surplus with disposition efforts in progress.

     As of December 31, 2000, Unisys had 26 major facilities outside the United
States with an aggregate floor space of approximately 2.5 million square feet,
located primarily in Brazil, Canada, France, South Africa, Switzerland and the
United Kingdom.  Seven of these facilities, with approximately .9 million square
feet of floor space, were owned by Unisys and 19, with approximately 1.6 million
square feet of floor 

                                       5

<PAGE>
 
space, were leased to Unisys. Approximately 1.7 million square feet were in
current operation, approximately .4 million square feet were subleased to
others, and approximately .4 million square feet were being held in reserve or
were declared surplus with disposition efforts in progress.

     Unisys major facilities include offices, laboratories, centers of
excellence, manufacturing plants, warehouses, and distribution and sales
centers. Unisys believes that its facilities are suitable and adequate for
current and presently projected needs. Unisys continuously reviews its
anticipated requirements for facilities and will from time to time acquire
additional facilities, expand existing facilities, and dispose of existing
facilities or parts thereof, as necessary.


ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     As previously reported, most recently in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2000, a number of
purported class action lawsuits seeking unspecified compensatory damages have
been filed against Unisys and various current and former officers in the U.S.
District Court for the Eastern District of Pennsylvania by persons who acquired
Unisys common stock during the period May 4, 1999 through October 14, 1999.  On
February 16, 2000, these actions, which are in the early stages, were
consolidated under the caption In re: Unisys Corporation Securities Litigation.
                               -----------------------------------------------  
The plaintiffs allege violations of the Federal securities laws in connection
with statements made by the Company concerning certain of its services
contracts.  The Company believes it has meritorious defenses and intends to
defend this action vigorously.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

     No matters were submitted to a vote of security holders of Unisys during
the fourth quarter of 2000.

                                       6

<PAGE>
 

ITEM 10.  EXECUTIVE OFFICERS OF THE REGISTRANT
----------------------------------------------

     Information concerning the executive officers of Unisys is set forth below.


        Name                       Age       Position with Unisys
        ----                       ---       ---------------------
 
Lawrence A. Weinbach                61       Chairman of the Board,
                                             President and Chief
                                             Executive Officer
 
Harold S. Barron                    64       Vice Chairman
 
Jack A. Blaine                      56       Executive Vice President;
                                             President, Worldwide Sales
                                             and Services
 
George R. Gazerwitz                 60       Executive Vice President;
                                             President, Systems &
                                             Technology
 
Joseph W. McGrath                   48       Executive Vice President;
                                             President, Global Industries
 
David O. Aker                       54       Senior Vice President,
                                             Worldwide Human Resources
 
Janet Brutschea Haugen              42       Senior Vice President and
                                             Chief Financial Officer
 
James F. McGuirk II                 57       Senior Vice President
 
Nancy Straus Sundheim               49       Senior Vice President,
                                             General Counsel and Secretary
 
Janet B. Wallace                    49       Senior Vice President;
                                             President, Global Network
                                             Services
 
Leigh Alexander                     43       Vice President and Chief
                                             Marketing Officer
 
Barbara A. Babcock                  52       Vice President; President,
                                             e-Business Services
 
Richard D. Badler                   50       Vice President, Corporate
                                             Communications
 
Scott A. Battersby                  42       Vice President and Treasurer
 
Leo C. Daiuto                       55       Vice President, Product
                                             Development and Technology
 
Robert D. Evans                     53       Vice President; President,
                                             Global Outsourcing
 

                                       7

<PAGE>
 
Jack F. McHale                      51       Vice President,
                                             Investor Relations
 
Alastair M. Taylor                  52       Vice President, Worldwide
                                             Financial Services


     There is no family relationship among any of the above-named executive
officers. The Bylaws provide that the officers of Unisys shall be elected
annually by the Board of Directors and that each officer shall hold office for a
term of one year and until a successor is elected and qualified, or until the
officer's earlier resignation or removal.

     Mr. Weinbach, Chairman of the Board, President and Chief Executive Officer
since 1997. Prior to that time, he held the position of Managing Partner-Chief
Executive of Andersen Worldwide (Arthur Andersen and Andersen Consulting), a
global professional services organization. He had been with Andersen Worldwide
since 1961.

     Mr. Barron, Vice Chairman of the Company since January 2001. He was Senior
Vice President and General Counsel from 1993 to 2001. From 1994 to 1999, he also
served as Secretary. Mr. Barron has been an officer since 1991, when he joined
the Company as Vice President and General Counsel.

     Mr. Blaine, Executive Vice President and President, Worldwide Sales and
Services since January 2000. Prior to that time, he served as Senior Vice
President and President of the Pacific Asia Americas Group (1996-1999); and Vice
President and President of the Latin America and Caribbean Division (1995-1996).
Mr. Blaine has been an officer since 1988.

     Mr. Gazerwitz, Executive Vice President and President, Systems and
Technology since January 2000. Prior to that time, he served as Executive Vice
President and President of the Computer Systems Group (1996-1999); and Vice
President and Executive Vice President of Nihon Unisys Limited (1994-1996). Mr.
Gazerwitz has been an officer since 1984.

     Mr. McGrath, Executive Vice President and President, Global Industries
since January 2000. During 1999, he served as Senior Vice President of Major
Accounts Sales and Chief Marketing Officer. Prior to joining Unisys in 1999, he
was with Xerox Corporation from 1988 until 1998, serving as vice president and
general manager of its Production Color Systems unit and as vice president of
strategy and integration for the Production Systems division. Before that, Mr.
McGrath was vice president and service director at Gartner Group. Mr. McGrath
has been an officer since 1999.

     Mr. Aker, Senior Vice President, Worldwide Human Resources since 1997.
Prior to that time, he served as Vice President, Worldwide Human Resources 
(1995-1997); and vice president of human resources for the information services
and systems group (1994-1995). Mr. Aker has been an officer since 1995.

                                       8

<PAGE>
 
     Ms. Haugen, Senior Vice President and Chief Financial Officer since July
2000. Prior to that time, she served as Vice President and Controller and Acting
Chief Financial Officer (1999-2000) and Vice President and Controller (1996-
1999). Before joining Unisys, she held the position of audit partner at Ernst &
Young LLP. Ms. Haugen has been an officer since 1996.

     Mr. McGuirk, Senior Vice President since 1998. He also currently serves as
general manager of North America sales and services. During 2000, he had
responsibility for the public sector business worldwide. From 1992 to 1999, he
served as President of the Federal Systems business. Mr. McGuirk has been an
officer since 1996.

     Ms. Sundheim, Senior Vice President, General Counsel and Secretary since
January 2001. From 1999 to 2001, she was Vice President, Deputy General Counsel
and Secretary. She had been Deputy General Counsel since 1990. Ms. Sundheim has
been an officer since 1999.

     Ms. Wallace, Senior Vice President and President, Global Network Services
since January 2000. Ms. Wallace joined Unisys in 1999 as Vice President and
President, Global Network Services. Prior to that, she was Vice President of
Services Marketing and Sales, Compaq Computer Corporation (1998-1999); and Vice
President of Marketing and Services, Digital Equipment Corporation (1993-1998).
Ms. Wallace has been an officer since 2000.

     Ms. Alexander, Vice President and Chief Marketing Officer since September
2000. Prior to joining Unisys in 2000, she was with Comdial Corporation from
1998 serving as president, Comdial Enterprise Solutions and as Senior Vice
President, Marketing. Before that, Ms. Alexander was Senior Vice President,
Marketing and Strategic Planning at PageNet (1996-1997) and Senior Vice
President, Marketing and Sales at Philips Media (1995-1996). Ms. Alexander has
been an officer since 2000.

     Ms. Babcock, Vice President and President, e-Business Services since
January 2000. Prior to that time, she was the virtual general manager for
electronic business (1999); and vice president of marketing and strategy for the
information services group (1995-1999). Ms. Babcock has been an officer since
2000.

     Mr. Badler, Vice President, Corporate Communications since 1998. Prior to
joining Unisys, he was Vice President, Corporate Communications for General
Instrument Corporation (1996-1998); and an executive vice president and account
director for Golin/Harris Communications in Chicago (1994-1996). Mr. Badler has
been an officer since 1998.

     Mr. Battersby, Vice President and Treasurer since October 2000. Prior to
that time, he served as vice president of corporate strategy and development
(1998-2000); vice president and Assistant Treasurer (1996-1998); and director of
corporate finance (1992-1996). Mr. Battersby has been an officer since 2000.

     Mr. Daiuto, Vice President, Product Development and Technology since July
2000.  Prior to that time, he had held a variety of business 

                                       9

<PAGE>
 
and engineering management positions with Unisys since he joined the Company in
1970. Mr. Daiuto has been an officer since 2000.

     Mr. Evans, Vice President and President, Global Outsourcing since January
2000. Prior to that time, he served as vice president and general manager for
outsourcing in North America (1996-1999); and vice president for information
processing services and outsourcing (1995-1996). Mr. Evans has been an officer
since 2000.

     Mr. McHale, Vice President, Investor Relations since 1997. From 1989 to
1997, he was Vice President, Investor and Corporate Communications. Mr. McHale
has been an officer since 1986.

     Mr. Taylor, Vice President, Worldwide Financial Services since January
2000. Prior to that time, he served as chief executive of the information
services group in Europe (1998-1999); vice president and general manager of the
financial market sector of the information services group (1996-1998); and vice
president of operations and planning for the information services and solutions
group(1995-1996). Mr. Taylor has been an officer since 2000.



                                    PART II


ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
          MATTERS             
--------------------------------------------------------------------------

     Unisys Common Stock (trading symbol "UIS") is listed for trading on the New
York Stock Exchange, on exchanges in Amsterdam, Brussels, and London and on the
USB AG in Switzerland.  Information on the high and low sales prices for Unisys
Common Stock is set forth under the heading "Quarterly financial information",
in the Unisys 2000 Annual Report to Stockholders and is incorporated herein by
reference.  At December 31, 2000, there were 315.4 million shares outstanding
and approximately 29,700 stockholders of record.  Unisys has not declared or
paid any cash dividends on its Common Stock since 1990.

                                       10

<PAGE>
 

ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

     A summary of selected financial data for Unisys is set forth under the
heading "Ten-year summary of selected financial data" in the Unisys 2000 Annual
Report to Stockholders and is incorporated herein by reference.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
--------------------------------------------------------------------------------

     Management's discussion and analysis of financial condition and results of
operations is set forth under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Unisys 2000 Annual
Report to Stockholders and is incorporated herein by reference.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

     Information concerning market risk is set forth under the heading "Market
risk" in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Unisys 2000 Annual Report to Stockholders and is
incorporated herein by reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

     The financial statements of Unisys, consisting of the consolidated balance
sheets at December 31, 2000 and 1999 and the related consolidated statements of
income, cash flows and stockholders' equity for each of the three years in the
period ended December 31, 2000, appearing in the Unisys 2000 Annual Report to
Stockholders, together with the report of Ernst & Young LLP, independent
auditors, on the financial statements at December 31, 2000 and 1999 and for each
of the three years in the period ended December 31, 2000, appearing in the
Unisys 2000 Annual Report to Stockholders, are incorporated herein by reference.
Supplementary financial data, consisting of information appearing under the
heading "Quarterly financial information" in the Unisys 2000 Annual Report to
Stockholders, is incorporated herein by reference.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
------------------------------------------------------------------------


     Not applicable.

                                       11

<PAGE>
 

                                   PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------

     (a) Identification of Directors. Information concerning the directors of
Unisys is set forth under the headings "Nominees for Election to the Board of
Directors", "Members of the Board of Directors Continuing in Office -- Term
Expiring in 2002" and "Members of the Board of Directors Continuing in Office --
Term Expiring in 2003" in the Unisys Proxy Statement for the 2001 Annual Meeting
of Stockholders and is incorporated herein by reference.

     (b) Identification of Executive Officers. Information concerning executive
officers of Unisys is set forth under the caption "EXECUTIVE OFFICERS OF THE
REGISTRANT" in Part I, Item 10, of this report.


ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

     Information concerning executive compensation is set forth under the
headings "EXECUTIVE COMPENSATION", "REPORT OF THE CORPORATE GOVERNANCE AND
COMPENSATION COMMITTEE" and "STOCK PERFORMANCE GRAPH" in the Unisys Proxy
Statement for the 2001 Annual Meeting of Stockholders and is incorporated herein
by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
         OWNERS AND MANAGEMENT
-------------------------------------------------

     Information concerning shares of Unisys equity securities beneficially
owned by certain beneficial owners and by management is set forth under the
heading "SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the
Unisys Proxy Statement for the 2001 Annual Meeting of Stockholders and is
incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

     None.

                                       12

<PAGE>
 

                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------

(a) The following documents are filed as part of this report:

1.   Financial Statements from the Unisys 2000 Annual Report to Stockholders
which are incorporated herein by reference:

                                                      Annual Report
                                                         Page No.
                                                      -------------
     Consolidated Balance Sheet at
      December 31, 2000 and December 31, 1999                37

     Consolidated Statement of Income for each of the
      three years in the period ended December 31, 2000      36

     Consolidated Statement of Cash Flows for each of the
      three years in the period ended December 31, 2000      38

     Consolidated Statement of Stockholders' Equity for
      each of the three years in the period ended
      December 31, 2000                                      39

     Notes to Consolidated Financial Statements           40-57

     Report of Independent Auditors                          58

2.   Financial Statement Schedules filed as part of this report pursuant to Item
8 of this report:

     Schedule                                          Form 10-K
     Number                                            Page No.
     --------                                          --------- 

     II     Valuation and Qualifying Accounts                 17

       The financial statement schedule should be read in conjunction with the
     consolidated financial statements and notes thereto in the Unisys 2000
     Annual Report to Stockholders.  Financial statement schedules not included
     with this report have been omitted because they are not applicable or the
     required information is shown in the consolidated financial statements or
     notes thereto.

     Separate financial statements of subsidiaries not consolidated with Unisys
and entities in which Unisys has a fifty percent or less ownership interest have
been omitted because these operations do not meet any of the conditions set
forth in Rule 3-09 of Regulation S-X.

3.   Exhibits. Those exhibits required to be filed by Item 601 of Regulation S-K
are listed in the Exhibit Index included in this report

                                       13

<PAGE>
 
at pages 18 through 20. Management contracts and compensatory plans and
arrangements are listed as Exhibits 10.1 through 10.15.

(b) Reports on Form 8-K.

     During the quarter ended December 31, 2000, Unisys filed a Current Report
on Form 8-K, dated December 7, 2000, to report under Items 5 and 7 of such Form.

                                       14

<PAGE>
 

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                              UNISYS CORPORATION

                                                  /s/ Lawrence A. Weinbach
                                              By: --------------------------
                                                      Lawrence A. Weinbach   
                                                      Chairman of the Board,
                                                      President and Chief    
Date: February 2, 2001                                Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on February 2, 2001.


/s/ Lawrence A. Weinbach           *James J. Duderstadt
-------------------------           --------------------
Lawrence A. Weinbach                James J. Duderstadt
Chairman of the Board,              Director
President and Chief Executive
Officer (principal                 *Henry C. Duques
executive officer) and              ---------------------
Director                            Henry C. Duques
                                    Director

/s/ Janet Brutschea Haugen         *Gail D. Fosler
---------------------------         -------------------
Janet Brutschea Haugen              Gail D. Fosler
Senior Vice President               Director
and Chief Financial Officer
(principal financial and           *Melvin R. Goodes
accounting officer)                 ----------------
                                    Melvin R. Goodes
                                    Director
*J. P. Bolduc
-----------------------            *Rajiv L. Gupta
 J. P. Bolduc                       ----------------
 Director                           Rajiv L. Gupta
                                    Director
*Kenneth A. Macke
---------------------              *Edwin A. Huston
 Kenneth A. Macke                   ----------------
 Director                           Edwin A. Huston
                                    Director
*Theodore E. Martin
----------------------
 Theodore E. Martin
 Director

                                       15

<PAGE>
 
                                   *By:/s/ Lawrence A. Weinbach
                                       ---------------------------
                                           Lawrence A. Weinbach
                                           Attorney-in-Fact

                                       16

<PAGE>
 
                              UNISYS CORPORATION
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                                  (Millions)
 
                                        Additions                              
                            Balance at  Charged                        Balance  
                            Beginning   to Costs                       at End   
Description                 of Period   and Expenses   Deductions (1)  of Period
--------------------------------------------------------------------------------


Allowance for Doubtful 
Accounts (deducted from
accounts and
notes receivable):

 
Year Ended
  December 31, 1998          $70.0        $ 4.0          $(22.8)         $51.2
 
Year Ended
  December 31, 1999          $51.2        $13.6          $(13.0)         $51.8
 
Year Ended
  December 31, 2000          $51.8        $ 8.2          $(11.7)         $48.3
 
(1) Write-off of bad debts less recoveries.

                                       17

<PAGE>
 

                                 EXHIBIT INDEX
Exhibit
Number                   Description
-------                  -----------

3.1        Restated Certificate of Incorporation of Unisys Corporation
           (incorporated by reference to Exhibit 3.1 to the registrant's
           Quarterly Report on Form 10-Q for the quarterly period ended
           September 30, 1999)

3.3        By-Laws of Unisys Corporation (incorporated by reference to Exhibit 3
           to the registrant's Quarterly Report on Form 10-Q for the quarterly
           period ended June 30, 1995)

4.1        Agreement to furnish to the Commission on request a copy of any
           instrument defining the rights of the holders of long-term debt which
           authorizes a total amount of debt not exceeding 10% of the total
           assets of the registrant (incorporated by reference to Exhibit 4 to
           the registrant's Annual Report on Form 10-K for the year ended
           December 31, 1982 (File No. 1-145))

4.2        Form of Rights Agreement dated as of March 7, 1986, which includes as
           Exhibit A, the Certificate of Designations for the Junior
           Participating Preferred Stock, and as Exhibit B, the Form of Rights
           Certificate (incorporated by reference to Exhibit 1 to the
           registrant's Registration Statement on Form 8-A, dated March 11,
           1986)

4.3        Amendment No. 1, dated as of February 22, 1996, to Rights Agreement
           (incorporated by reference to Exhibit 4 to the registrant's Current
           Report on Form 8-K dated February 22, 1996)

4.4        Amendment No. 2, dated as of December 7, 2000, to Rights Agreement
           (incorporated by reference to Exhibit 4 to the registrant's Current
           Report on Form 8-K dated December 7, 2000)

10.1       Unisys Corporation Deferred Compensation Plan as amended and restated
           effective September 22, 2000 (incorporated by reference to Exhibit
           10.3 to the registrant's Quarterly Report on Form 10-Q for the
           quarterly period ended September 30, 2000)

10.2       Deferred Compensation Plan for Directors of Unisys Corporation, as
           amended and restated effective September 22, 2000(incorporated by
           reference to Exhibit 10.4 to the registrant's Quarterly Report on
           Form 10-Q for the quarterly period ended September 30, 2000)

10.3       Unisys Corporation Director Stock Unit Plan, as amended and restated,
           effective September 22, 2000 (incorporated by reference to Exhibit
           10.5 to the registrant's Quarterly Report on Form 10-Q for the
           quarterly period ended

                                       18

<PAGE>
 
           September 30, 2000)

10.4       Unisys Directors Stock Option Plan, as amended and restated effective
           September 22, 2000 (incorporated by reference to Exhibit 10.2 to the
           registrant's Quarterly Report on Form 10-Q for the quarterly period
           ended September 30, 2000)

10.5       Summary of supplemental executive benefits provided to officers of
           Unisys Corporation (incorporated by reference to Exhibit 10(k) of the
           registrant's Annual Report on Form 10-K for the year ended December
           31, 1992)

10.6       Unisys Executive Annual Variable Compensation Plan (incorporated by
           reference to Exhibit A to the registrant's Proxy Statement, dated
           March 23, 1993, for its 1993 Annual Meeting of Stockholders)

10.7       1990 Unisys Long-Term Incentive Plan, as amended and restated
           effective September 22, 2000 (incorporated by reference to Exhibit
           10.1 to the registrant's Quarterly Report on Form 10-Q for the
           quarterly period ended September 30, 2000)

10.8       Unisys Corporation Officers' Car Allowance Program, effective as of
           July 1, 1991 (incorporated by reference to Exhibit 10(hh) to the
           registrant's Annual Report on Form 10-K for the year ended December
           31, 1991)

10.9       Unisys Corporation Elected Officer Pension Plan, as amended through
           May 22, 1997 (incorporated by reference to Exhibit 10.2 to the
           registrant's Quarterly Report on Form 10-Q for the quarterly period
           ended June 30, 1997)

10.10      Unisys Corporation Supplemental Executive Retirement Income Plan, as
           amended through May 22, 1997 (incorporated by reference to Exhibit
           10.3 to the registrant's Quarterly Report on Form 10-Q for the
           quarterly period ended June 30, 1997)

10.11      Unisys Corporation Executive Life Insurance Program (incorporated by
           reference to Exhibit 10.1 to the registrant's Quarterly Report on
           Form 10-Q for the quarterly period ended June 30, 1999)

10.12      Form of Indemnification Agreement between Unisys Corporation and each
           of its Directors (incorporated by reference to Exhibit B to the
           registrant's Proxy Statement, dated March 22, 1988, for the 1988
           Annual Meeting of Stockholders)

10.13      Form of Executive Employment Agreement (incorporated by reference to
           Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q for
           the quarterly period

                                       19

<PAGE>
 
           ended June 30, 1995)

10.14      Employment Agreement, dated September 23, 1997, between the
           registrant and Lawrence A. Weinbach (incorporated by reference to
           Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q for
           the quarterly period ended September 30, 1997)

10.15      Employment Agreement, dated as of November 19, 1999, by and between
           Unisys Corporation and Joseph W. McGrath (incorporated by reference
           to Exhibit 10.24 to the registrant's Annual Report on Form 10-K for
           the year ended December 31, 1999)
 
12         Computation of Ratio of Earnings to Fixed Charges
           
13         Portions of the Annual Report to Stockholders of the
           Registrant for the year ended December 31, 2000
           
21         Subsidiaries of the Registrant
           
23         Consent of Independent Auditors
           
24         Power of Attorney

                                       20





<PAGE>
 
                                  Exhibit 12

                              UNISYS CORPORATION
         COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED)
                                ($ in millions)



                                              Years Ended December 31
                                    -------------------------------------------
                                     2000     1999     1998     1997    1996
                                     ----     ----     ----     ----    ----   
Fixed charges
Interest expense                    $ 79.8   $127.8   $171.7   $ 233.2   $249.7
Interest capitalized during
 the period                           11.4      3.6        -         -        -
Amortization of debt issuance
 expenses                              3.2      4.1      4.6       6.7      6.3
Portion of rental expense
 representative of interest           42.2     46.3     49.1      51.8     59.8
                                    ------   ------   ------   -------   ------
  Total Fixed Charges                136.6    181.8    225.4     291.7    315.8
                                    ------   ------   ------   -------   ------
Earnings
Income (loss) from continuing
operations before income taxes       379.0    770.3    594.2    (748.1)    80.2
Add (deduct) the following:
Share of loss (income) of
 associated companies                (20.5)     8.9      (.3)      5.9     (4.9)
Amortization of capitalized
 interest                              2.2        -        -         -        -
                                    ------   ------   ------   -------   ------
  Subtotal                           360.7    779.2    593.9    (742.2)    75.3
                                    ------   ------   ------   -------   ------
 
Fixed charges per above              136.6    181.8    225.4     291.7    315.8
Less interest capitalized during
 the period                          (11.4)    (3.6)       -         -        -
                                    ------   ------   ------   -------   ------
Total earnings (loss)               $485.9   $957.4   $819.3   $(450.5)  $391.1
                                    ======   ======   ======   =======   ======
 
Ratio of earnings to fixed
 charges                              3.56     5.27     3.63         *     1.24
                                    ======   ======   ======   =======   ======

* Earnings for the year ended December 31, 1997 was inadequate to cover fixed
 charges by approximately $742.2 million.





<PAGE>

                                  EXHIBIT 13
 
UNISYS CORPORATION


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

                         OVERVIEW

                         During 2000, Unisys implemented a major transition of
                         its business to meet the new requirements of the
                         e-business marketplace. The company took actions during
                         the year to focus its resources on new high-growth
                         markets; de-emphasize non-strategic, low-growth and
                         low-margin businesses and products; and reduce its cost
                         structure in line with its new, more focused business
                         model. In particular, the company:

                              . Streamlined and repositioned its portfolio of
                                industry-specific repeatable solutions to focus
                                on high-growth market segments including
                                customer relationship management (CRM),
                                e-commerce, e-procurement and mobile commerce;

                              . Drove growth in its outsourcing business by
                                pursuing joint ventures and other new business
                                models; 

                              . Focused its networking business on high value-
                                added services, such as managed network
                                outsourcing services, network consulting, and an
                                expanded network security management practice;
                                and

                              . Continued to focus its technology business on
                                high-end, enterprise-class servers and to de-
                                emphasize low-margin commodity products.


                              As a result of these actions,
 in the fourth
                         quarter of 2000, the company recorded a pretax
                         restructuring charge of $127.6 million, or $.29 per
                         diluted share, primarily for a work-force reduction.
                         See Note 5 of the Notes to Consolidated Financial
                         Statements.
                              In addition, the company has engaged an investment
                         banking firm to explore strategic alternatives for its
                         Federal government business, including a potential
                         sale. The company estimates that revenue in 2000
                         related to the Federal government business and the
                         businesses exited or de-emphasized as a result of the
                         actions taken above was approximately $1.3 billion.
                         Income related to this revenue was immaterial.

28

<PAGE>
 
RESULTS OF OPERATIONS

The company's financial results for 2000 reflected the transition in its
business model. Net income in 2000 declined to $225.0 million, or $.71 per
diluted common share, from $510.7 million, or $1.59 per diluted common share, in
1999. The results for 2000 included the special charge of $127.6 million, or
$.29 per diluted common share, as well as an extraordinary charge of $19.8
million, or $.06 per diluted share, for the early extinguishment of debt.
Excluding these items, diluted earnings per share in 2000 was $1.06. The results
for 1999 included a one-time tax benefit of $22.0 million, or $.07 per diluted
common share, related to a U.S. Treasury income tax regulation, as well as an
extraordinary charge of $12.1 million, or $.04 per diluted share, for the early
extinguishment of debt. Excluding those items, diluted earnings per share in
1999 was $1.56.

     THE FOLLOWING COMPARISONS OF INCOME STATEMENT CATEGORIES EXCLUDE THE
ONE-TIME ITEMS IN 2000 AND 1999.

     Revenue for 2000 was $6.89 billion compared to $7.54 billion in 1999 and
$7.24 billion in 1998. Revenue in 2000 decreased 9% from the prior year, and
revenue in 1999 increased 4% from 1998. Excluding the negative impact of foreign
currency fluctuations, revenue in 2000 declined 5% and revenue in 1999 increased
7%. Revenue from international operations in 2000, 1999, and 1998 was $4.01
billion, $4.19 billion and $4.09 billion, respectively. Revenue from U.S.
operations was $2.88 billion in 2000, $3.35 billion in 1999, and $3.15 billion
in 1998.
     Total gross profit percent was 31.2% in 2000, 35.6% in 1999, and 34.1% in
1998. The decrease in 2000 from 1999 was principally due to a lower mix of
higher-margin products and services and reduced utilization of services
personnel. The increase in 1999 from 1998 was largely due to productivity
improvements and cost reduction programs in the services segment.
     Selling, general and administrative expenses were $1.28 billion in 2000
(18.5% of revenue), $1.38 billion in 1999 (18.4% of revenue), and $1.36 billion
in 1998 (18.8% of revenue).
     Research and development expenses in 2000 were $315.4 million compared to
$339.4 million in 1999 and $308.3 million in 1998.
     In 2000, the company reported operating income of $553.0 million (8.0% of
revenue) compared to $960.7 million (12.7% of revenue) in 1999 and $799.0
million (11.0% of revenue) in 1998.

                                                                              29

<PAGE>
 
Information by business segment for 2000, 1999, and 1998 is presented below:


<TABLE> 
<CAPTION> 
======================================================================================================= 
   (Millions of dollars)              Total         Eliminations        Services      Technology
------------------------------------------------------------------------------------------------
<S>                             <C>              <C>               <C>             <C> 
   2000
   ------------------------
   Customer revenue                $  6,885.0                         $  4,741.6      $ 2,143.4
   Intersegment                                      $  (437.2)             46.6          390.6
                                   ----------------------------------------------------------------
   Total revenue                   $  6,885.0        $  (437.2)       $  4,788.2      $ 2,534.0
                                   ----------------------------------------------------------------
   Gross profit percent                  31.2%                              21.6%          44.7%
   Operating income percent               8.0%                               1.7%          17.7%
   
   1999
   ------------------------
   Customer revenue                $  7,544.6                         $  5,287.0      $ 2,257.6
   Intersegment                                      $  (577.5)             65.6          511.9
                                   ----------------------------------------------------------------  
   Total revenue                   $  7,544.6        $  (577.5)       $  5,352.6      $ 2,769.5
                                   ----------------------------------------------------------------
   Gross profit percent                  35.6%                              25.6%          48.1%
   Operating income percent              12.7%                               7.9%          20.3%
   
   1998
   ------------------------
   Customer revenue                $  7,243.9                         $  4,944.8      $ 2,299.1
   Intersegment                                      $  (511.2)             73.7          437.5
                                   ----------------------------------------------------------------
   Total revenue                   $  7,243.9        $  (511.2)       $  5,018.5      $ 2,736.6
                                   ----------------------------------------------------------------
   Gross profit percent                  34.1%                              24.4%          46.9%
   Operating income percent              11.0%                               6.6%          18.7%
   ------------------------------------------------------------------------------------------------
   Gross profit percent and operating income percent are as a percent of total revenue.
======================================================================================================= 
</TABLE>
 

     In the services segment, customer revenue was $4.74 billion in 2000, $5.29
billion in 1999, and $4.94 billion in 1998. Customer revenue in 2000 decreased
10% from 1999, as an increase in networking services revenue was more than
offset by declines in systems integration and solutions, and proprietary
maintenance. The decline in proprietary maintenance revenue, which continues to
decline industry wide, reflected customers' high rates of replacement of older
equipment in 1999 with newer systems that are under warranty and require less
maintenance. Customer revenue grew 7% in 1999 led by growth in outsourcing and
systems integration and solutions revenue which more than offset the continuing
decline in proprietary maintenance revenue. Services gross profit declined to
21.6% in 2000 from 25.6% in 1999, and 24.4% in 1998. Operating profit in the
services segment was 1.7% in 2000, 7.9% in 1999, and 6.6% in 1998. The decreases
in both gross profit and operating profit in 2000 were largely due to reduced
utilization of services personnel as well as a lower mix of higher-margin
systems integration and solutions, and proprietary maintenance revenue. The
increases in both gross profit and operating profit in 1999 were largely due to
productivity improvements and cost reduction programs.

30

<PAGE>
 
     In the technology segment, customer revenue was $2.14 billion in 2000,
$2.25 billion in 1999, and $2.30 billion in 1998. Customer revenue in 2000
declined 5% from 1999 as strong initial sales of the company's Cellular
MultiProcessing servers were more than offset by a decline in ClearPath
enterprise server revenue. In 1999, revenue for ClearPath enterprise servers was
up slightly compared to 1998. The gross profit percent was 44.7% in 2000, 48.1%
in 1999, and 46.9% in 1998. The gross profit decline in 2000 was due in large
part to a lower percentage of enterprise server sales. The increase in 1999 was
due in large part to a richer mix of enterprise servers and enterprise server
software sales. Operating profit in this segment was 17.7% in 2000, 20.3% in
1999, and 18.7% in 1998. The decrease in operating profit in 2000 was
principally due to the gross profit decline. The increase in 1999 in operating
profit, above the respective increase in gross profit, was largely due to cost
reduction programs as well as stringent controls over all discretionary
expenditures.
     Interest expense declined to $79.8 million in 2000 from $127.8 million in
1999, and $171.7 million in 1998. The decline in 2000 from 1999 was principally
due to lower average interest rates as well as the effect of interest rate swaps
(discussed below). The decline in 1999 from 1998 was principally due to lower
average debt levels.
     Other income (expense), net, which can vary from year to year, was income
of $33.4 million in 2000, and an expense of $62.6 million in 1999 and $33.1
million in 1998. The difference in 2000 compared to 1999 was principally due to
higher equity and interest income in 2000 and charges in 1999 related to legal
actions. The difference in 1999 compared to 1998 was principally due to higher
charges related to legal actions and lower interest income. 
     Income before income taxes in 2000 was $506.6 million compared to $770.3
million in 1999 and $594.2 million in 1998.
     The provision for income taxes in 2000 was $172.3 million (34.0% effective
tax rate) compared to $269.5 million (35.0% effective tax rate) in 1999 and
$217.8 million (36.7% effective tax rate) in 1998. It is expected that the
effective tax rate will be 33.0% for 2001. The declines in the effective tax
rate are principally due to tax planning strategies.
     In 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements." Its adoption
had no effect on the company's consolidated financial position, consolidated
results of operations, or liquidity.
     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement, which is
effective for the company for the year beginning January 1, 2001, establishes
accounting and reporting standards for derivative instruments and hedging
activities. SFAS No. 133 requires a company to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. Changes in the fair value of derivatives will
be reported currently in earnings or other comprehensive income depending on
their effectiveness pursuant to SFAS No. 133. Adoption of SFAS No. 133 will not
have a material effect on the company's consolidated financial position,
consolidated results of operations, or liquidity.
     In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." This
statement revises the accounting standards for securitizations and other
transfers of financial assets and collateral and requires certain disclosures.
This statement is effective for transfers and servicing of financial assets
occurring after March 31, 2001. Management is evaluating what effect, if any,
this statement may have on the company's financial statements.

                                                                              31

<PAGE>
 
FINANCIAL CONDITION

Cash and cash equivalents at December 31, 2000 were $378.0 million compared to
$464.0 million at December 31, 1999. 
     During 2000, cash provided by operations was $419.9 million compared to
$517.6 million in 1999, principally reflecting a decline in profitability. The
improvement in the accounts receivable performance in 2000 reflected the sale of
approximately $230 million of receivables through a new U.S. securitization
facility. The new facility, which is renewable annually for up to three years,
allows for the sale of up to $275 million of U.S. receivables. Cash expenditures
related to both current and prior-year restructuring actions (which are included
in operating activities) in 2000, 1999, and 1998 were $26.3 million, $44.6
million, and $118.4 million, respectively, and are expected to be approximately
$70 million in 2001 and $10 million in total for all subsequent years,
principally for work-force reductions and facility costs. Personnel reductions
in 2000 related to restructuring actions were approximately 1,300 and are
expected to be approximately 700 in 2001.
     Cash used for investing activities in 2000 was $270.9 million compared to
$328.4 million for 1999. During 2000, both proceeds from investments and
purchase of investments, which represent primarily foreign exchange hedging
contract activity, declined from the prior year as a result of extending the
duration of individual contracts to more closely match the timeframe of related
underlying exposures. This change in duration of foreign currency contracts did
not significantly impact net cash flows. In addition, 2000 reflects lower cash
usage for purchases of businesses and, as described below, $18.5 million net
proceeds from the termination of the euro and yen swaps.
     Cash used for financing activities during 2000 was $217.3 million compared
to cash usage of $328.4 million in 1999. Included in 2000 were net proceeds from
short-term borrowings of $179.6 million, principally borrowings used to repay
long-term debt of $448.0 million, as described below. Included in 1999 were
payments of $197.0 million for redemptions of preferred stock, $164.4 million
related to repayment of long-term debt, and $59.4 million for preferred stock
dividends.
     At December 31, 2000, total debt was $762.6 million, a decrease of $237.4
million from December 31, 1999. At December 31, 2000, the debt-to-capital ratio
was 25.9% compared to 33.9% at December 31, 1999.
     The company has a $400 million credit agreement which expires June 2001. As
of December 31, 2000, there were no borrowings outstanding under this agreement
and the entire $400 million was available for borrowings.
     In April 2000, the company redeemed all of its $399.5 million outstanding
12% senior notes due 2003 at the stated redemption price of 106% of principal.
As a result, the company recorded an extraordinary after-tax charge of $19.8
million, or $.06 per diluted share, for the call premium and unamortized debt
expense. The redemption was funded through a combination of cash and short-term
borrowings. In March 2000, the company entered into an additional $150 million
credit agreement expiring April 2001 for the purpose of funding this redemption.
As of December 31, 2000, $127.5 million was borrowed under this agreement at a
rate of 7.56%.

32

<PAGE>
 
     The company may, from time to time, redeem, tender for, or repurchase its
debt securities in the open market or in privately negotiated transactions
depending upon availability, market conditions, and other factors.
     During 1999, all shares of the company's Series A cumulative convertible
preferred stock were either converted into the company's common stock or
redeemed for cash in response to various calls by the company. These actions
eliminated all $1.4 billion of Series A preferred stock (28.4 million shares)
and $106.5 million of annual dividend payments. Overall in 1999, of the 28.4
million shares of Series A preferred stock that were outstanding at the
beginning of the year, 24.5 million shares were converted into 40.8 million
shares of common stock and 3.9 million shares were redeemed for $197.0 million
in cash.
     In 2000, the company terminated its interest rate swaps and currency swaps
for euro and Japanese yen which were established in 1999. The currency swaps
were designated as hedges of the foreign currency exposure on the company's net
investments in foreign subsidiaries and equity investments. As a result of these
terminations, the company received net cash of $18.5 million and recognized a
pretax loss of $2.7 million. The interest expense benefit related to these swaps
amounted to approximately $16 million in 2000. 
     The company has on file with the Securities and Exchange Commission an
effective registration statement covering $700 million of debt or equity
securities, which enables the company to be prepared for future market
opportunities.     
     At December 31, 2000, the company had deferred tax assets in excess of
deferred tax liabilities of $1,299 million. For the reasons cited below,
management determined that it is more likely than not that $990 million of such
assets will be realized, therefore resulting in a valuation allowance of $309
million.
     The company evaluates quarterly the realizability of its deferred tax
assets and adjusts the amount of the related valuation allowance, if necessary.
The factors used to assess the likelihood of realization are the company's
forecast of future taxable income, and available tax planning strategies that
could be implemented to realize deferred tax assets. Approximately $3.0 billion
of future taxable income (predominantly U.S.) is needed to realize all of the
net deferred tax assets. Failure to achieve forecasted taxable income might
affect the ultimate realization of the net deferred tax assets. See "Factors
that might affect future results" below. 
     Stockholders' equity increased $232.8 million during 2000, principally
reflecting net income of $225.0 million, $69.4 million for issuance of stock
under stock option and other plans and $11.3 million of tax benefits related to
employee stock plans, offset in part by currency translation of $73.3 million.

                                                                              33

<PAGE>
 
MARKET RISK

The company has exposure to interest rate risk from its short-term and long-term
debt. In general, the company's long-term debt is fixed rate and the short-term
debt is variable rate. See Note 10 of the Notes to Consolidated Financial
Statements for components of the company's long-term debt. The company believes
that the market risk from changes in interest rates would not be material to the
fair value of these financial instruments, or the related cash flows, or future
results of operations.
     The company is also exposed to foreign currency exchange rate risks. The
company uses derivative financial instruments to reduce its exposure to market
risks from changes in foreign currency exchange rates. The derivative
instruments used are foreign exchange forward contracts and foreign exchange
options. The company does not hold or issue derivatives for speculative trading
purposes. See Note 13 of the Notes to Consolidated Financial Statements for
additional information on the company's derivative financial instruments.
     The company has performed a sensitivity analysis assuming a hypothetical
10% adverse movement in foreign currency exchange rates applied to these
derivative financial instruments described above. As of December 31, 2000 and
1999, the analysis indicated that such market movements would have reduced the
estimated fair value of these derivative financial instruments by approximately
$10 million and $70 million, respectively. Based on changes in the timing and
amount of interest rate and foreign currency exchange rate movements and the
company's actual exposures and hedges, actual gains and losses in the future may
differ from the above analysis.

CONVERSION TO THE EURO CURRENCY

On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency (the "euro"). The transition period for the introduction
of the euro began on January 1, 1999. The company is addressing the issues
involved with the introduction of the euro. The more important issues facing the
company include converting information technology systems, reassessing currency
risk, and negotiating and amending agreements.
     Based on progress to date, the company believes that the use of the euro
will not have a significant impact on the manner in which it conducts its
business. Accordingly, conversion to the euro is not expected to have a material
effect on the company's consolidated financial position, consolidated results of
operations, or liquidity.

34

<PAGE>
 
FACTORS THAT MAY AFFECT FUTURE RESULTS

From time to time, the company provides information containing "forward-looking"
statements, as defined in the Private Securities Litigation Reform Act of 1995.
All forward-looking statements rely on assumptions and are subject to risks,
uncertainties, and other factors that could cause the company's actual results
to differ materially from expectations. In addition to changes in general
economic and business conditions and natural disasters, these include, but are
not limited to, the factors discussed below.
     The company operates in an industry characterized by aggressive
competition, rapid technological change, evolving technology standards, and
short product life cycles.
     Future operating results will depend on the company's ability to design,
develop, introduce, deliver, or obtain new products and services on a timely and
cost-effective basis; the success of the actions taken to focus on higher
growth, higher-margin e-business opportunities; on its ability to effectively
manage the shift in its technology business into higher growth, standards-based
server products; on its ability to mitigate the effects of competitive pressures
and volatility in the information technology and services industry on revenues,
pricing, and margins; and on its ability to successfully attract and retain
highly skilled people. In addition, future operating results could be impacted
by market demand for and acceptance of the company's service and product
offerings.
     Certain of the company's systems integration contracts are fixed-price
contracts under which the company assumes the risk for delivery of the
contracted services at an agreed-upon price. Future results will depend on the
company's ability to profitably perform these services contracts and bid and
obtain new contracts.
     The company frequently forms alliances with third parties that have
complementary products, services, or skills. Future results will depend in part
on the continuing relationships with, and on the performance and capabilities
of, these third parties. Future results will also depend upon the ability of
external suppliers to deliver components at reasonable prices and in a timely
manner and on the financial condition of, and the company's relationship with,
distributors and other indirect channel partners.
     Approximately 58% of the company's total revenue derives from international
operations. The risks of doing business internationally include foreign currency
exchange rate fluctuations, changes in political or economic conditions, trade
protections measures, and import or export licensing requirements.

                                                                              35

<PAGE>
 
UNISYS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS


Consolidated Statement of Income


<TABLE> 
<CAPTION> 
Year Ended December 31 (Millions, except per share data)                   2000        1999        1998
=========================================================================================================
<S>                                                                      <C>         <C>         <C> 
Revenue                                                                  $6,885.0    $7,544.6    $7,243.9
                                                                         --------------------------------
Costs and expenses
Cost of revenue                                                           4,795.9     4,859.9     4,775.9
Selling, general and administrative expenses                              1,328.7     1,384.6     1,360.7
Research and development expenses                                           333.6       339.4       308.3
                                                                         --------------------------------
                                                                          6,458.2     6,583.9     6,444.9
                                                                         --------------------------------
Operating income                                                            426.8       960.7       799.0
Interest expense                                                             79.8       127.8       171.7
Other income (expense), net                                                  32.0       (62.6)      (33.1)
                                                                         --------------------------------
Income before income taxes                                                  379.0       770.3       594.2
Provision for income taxes                                                  134.2       247.5       217.8
                                                                         --------------------------------
Income before extraordinary items                                           244.8       522.8       376.4
Extraordinary items                                                         (19.8)      (12.1)
                                                                         --------------------------------
Net income                                                                  225.0       510.7       376.4
Dividends on preferred shares                                                            36.7       106.5
                                                                         --------------------------------
Earnings on common shares                                                $  225.0    $  474.0    $  269.9
                                                                         --------------------------------
Earnings (loss) per common share - basic
Before extraordinary items                                               $    .78    $   1.69    $   1.07
Extraordinary items                                                          (.06)       (.04)
                                                                         --------------------------------
Total                                                                    $    .72    $   1.65    $   1.07
                                                                         --------------------------------
Earnings (loss) per common share - diluted
Before extraordinary items                                               $    .77    $   1.63    $   1.01
Extraordinary items                                                          (.06)       (.04)
                                                                         --------------------------------
Total                                                                    $    .71    $   1.59    $   1.01
=========================================================================================================
</TABLE>
 
See notes to consolidated financial statements.

36

<PAGE>

UNISYS CORPORATION 

Consolidated Balance Sheet


<TABLE> 
<CAPTION> 
December 31 (Millions)                                                    2000        1999
============================================================================================
<S>                                                                  <C>          <C> 
Assets
Current assets
Cash and cash equivalents                                           $    378.0   $    464.0
Accounts and notes receivable, net                                     1,247.4      1,430.5
Inventories
   Parts and finished equipment                                          249.4        236.8
   Work in process and materials                                         176.1        136.1
Deferred income taxes                                                    460.6        472.7
Other current assets                                                      75.5        105.6
                                                                    -----------------------
Total                                                                  2,587.0      2,845.7
                                                                    -----------------------
Properties                                                             1,584.1      1,723.0
Less - Accumulated depreciation                                          963.9      1,102.2
                                                                    -----------------------
Properties, net                                                          620.2        620.8
                                                                    -----------------------
Investments at equity                                                    225.8        225.5
                                                                    -----------------------
Software, net of accumulated amortization                                296.7        259.8
                                                                    -----------------------
Prepaid pension cost                                                   1,063.0        975.9
                                                                    -----------------------
Deferred income taxes                                                    583.6        655.6
                                                                    -----------------------
Other assets                                                             341.4        306.4
                                                                    -----------------------
Total                                                               $  5,717.7   $  5,889.7
===========================================================================================

Liabilities and stockholders' equity
Current liabilities
Notes payable                                                       $    209.5   $     26.9

Current maturities of long-term debt                                      16.8         22.9
Accounts payable                                                         847.7        833.2
Other accrued liabilities                                              1,323.5      1,386.6
Income taxes payable                                                     288.3        348.9
                                                                    -----------------------
Total                                                                  2,685.8      2,618.5
                                                                    -----------------------
Long-term debt                                                           536.3        950.2
                                                                    -----------------------
Other liabilities                                                        309.5        367.7
                                                                    -----------------------
Stockholders' equity
Common stock, shares issued: 2000 - 317.3; 1999 - 312.5                    3.2          3.1
Accumulated deficit                                                     (829.4)    (1,054.4) 
Other capital                                                          3,656.0      3,575.0
Accumulated other comprehensive loss                                    (643.7)      (570.4) 
                                                                    -----------------------
Stockholders' equity                                                   2,186.1      1,953.3
                                                                    -----------------------
Total                                                               $  5,717.7   $  5,889.7
===========================================================================================
</TABLE>
 
See notes to consolidated financial statements.

                                                                              37

<PAGE>
 
UNISYS CORPORATION


Consolidated Statement of Cash Flows


<TABLE> 
<CAPTION> 
Year Ended December 31 (Millions)                                                     2000            1999            1998
========================================================================================================================== 
<S>                                                                             <C>            <C>              <C>   
Cash flows from operating activities
Income before extraordinary items                                               $    244.8     $     522.8      $    376.4
Add (deduct) items to reconcile income before extraordinary
   items to net cash provided by operating activities:
Extraordinary items                                                                  (19.8)          (12.1)
Depreciation                                                                         143.0           141.8           149.2
Amortization:
   Marketable software                                                               115.5           110.9           112.3
   Goodwill                                                                           12.5            12.5             8.9
Decrease (increase) in deferred income taxes, net                                     85.6            (9.9)          (26.7)
Decrease (increase) in receivables, net                                              158.2          (244.5)         (277.3)
(Increase) decrease in inventories                                                   (52.5)           98.0            94.4
(Decrease) increase in accounts payable and other accrued liabilities               (136.1)          (81.8)          103.1
(Decrease) increase in income taxes payable                                          (62.8)           78.2           148.0
(Decrease) increase in other liabilities                                              (6.4)           (2.2)           13.2
(Increase) in other assets                                                           (69.2)         (159.2)          (57.6)
Other                                                                                  7.1            63.1            (1.7)
                                                                                ------------------------------------------  
Net cash provided by operating activities                                            419.9           517.6           642.2
                                                                                ------------------------------------------ 
Cash flows from investing activities
Proceeds from investments                                                            790.4         1,033.8         1,991.0
Purchases of investments                                                            (716.7)       (1,013.8)       (2,006.5)
Proceeds from sales of properties                                                     20.0            47.9            51.1
Investment in marketable software                                                   (152.4)         (122.8)         (100.3)
Capital additions of properties                                                     (198.3)         (219.6)         (209.1)
Purchases of businesses                                                              (13.9)          (53.9)           (3.9)
                                                                                ------------------------------------------  
Net cash (used for) investing activities                                            (270.9)         (328.4)         (277.7) 
                                                                                ------------------------------------------   
Cash flows from financing activities
Payments of long-term debt                                                          (448.0)         (164.4)         (749.2)
Net proceeds from (reduction in) short-term borrowings                               179.6           (25.6)            9.6
Proceeds from employee stock plans                                                    51.1            87.7            79.5
Dividends paid on preferred shares                                                                   (59.4)         (106.5)
Redemption of preferred stock                                                                       (197.0)
Proceeds from issuance of long-term debt                                                              30.3           197.3
                                                                                ------------------------------------------   
Net cash (used for) financing activities                                            (217.3)         (328.4)         (569.3)
                                                                                ------------------------------------------   
Effect of exchange rate changes on cash and cash equivalents                         (17.7)          (13.2)           (3.0)
                                                                                ------------------------------------------   
Decrease in cash and cash equivalents                                                (86.0)         (152.4)         (207.8) 
Cash and cash equivalents, beginning of year                                         464.0           616.4           824.2
                                                                                ------------------------------------------   
Cash and cash equivalents, end of year                                          $    378.0     $     464.0      $    616.4
========================================================================================================================== 
</TABLE>
 
See notes to consolidated financial statements.

38

<PAGE>
 
UNISYS CORPORATION


Consolidated Statement of Stockholders' Equity


<TABLE> 
<CAPTION> 
                                                                                       Other,      Accumulated                  
                                                                                    Principally       Other        Comprehensive
                                    Preferred     Common   Accumulated   Treasury     Paid-In     Comprehensive       Income      
(Millions)                            Stock       Stock      Deficit      Stock       Capital     Income (Loss)*      (Loss)       
------------------------------------------------------------------------------------------------------------------------------- 
<S>                                 <C>            <C>     <C>           <C>        <C>           <C>              <C> 
Balance at December 31, 1997        $  1,438.2     $ 2.5   $ (1,802.1)   $ (12.2)   $ 2,049.6     $  (448.1)     
Conversions to common stock                (.1)                                            .5                    
Conversion of shareholder notes            6.6                                                                   
Issuance of stock under stock                                                                                    
   option and other plans                             .1                   (11.4)        90.2                    
Net income                                                      376.4                                              $   376.4
Other comprehensive income -                                                                                     
   translation adjustments                                                                            (83.5)           (83.5)
                                                                                                                   ---------
Comprehensive income                                                                                               $   292.9
                                                                                                                   ---------
Dividends                                                      (106.5)                                           
Unearned compensation                                                                     4.8                    
Tax benefit related to stock plans                                                       30.6                    
------------------------------------------------------------------------------------------------------------ 
Balance at December 31, 1998           1,444.7       2.6     (1,532.2)     (23.6)     2,175.7        (531.6)                 
Conversions to common stock           (1,245.3)       .4                              1,271.2                    
Redemption of preferred stock           (197.0)                                                                  
Issuance of stock under stock                                                                                    
   option and other plans                             .1                   (17.8)       103.4                    
Net income                                                      510.7                                              $   510.7
Other comprehensive income -                                                                                     
   translation adjustments                                                                            (38.8)           (38.8)
                                                                                                                   ---------
Comprehensive income                                                                                               $   471.9
                                                                                                                   ---------
Dividends                                                       (32.9)                                           
Tax benefit related to stock plans                                                       66.1                    
Other                                     (2.4)                                                                  
------------------------------------------------------------------------------------------------------------     
Balance at December 31, 1999                 -       3.1     (1,054.4)     (41.4)     3,616.4        (570.4)                 
Issuance of stock under stock                                                                                    
   option and other plans                             .1                     (.7)        70.0                    
Net income                                                      225.0                                              $   225.0
Other comprehensive income -                                                                                     
   translation adjustments                                                                            (73.3)           (73.3)
                                                                                                                   ---------
Comprehensive income                                                                                               $   151.7
                                                                                                                   ---------
Unearned compensation                                                                      .4                    
Tax benefit related to stock plans                                                       11.3                    
------------------------------------------------------------------------------------------------------------     
Balance at December 31, 2000        $        -     $ 3.2   $   (829.4)   $ (42.1)   $ 3,698.1     $  (643.7)     
------------------------------------------------------------------------------------------------------------------------------- 
</TABLE>
 
*Entire amount relates to foreign translation adjustments.

 See notes to consolidated financial statements.

                                                                              39

            

<PAGE>
 
      Unisys Corporation

      Notes to Consolidated Financial Statements


 1    Summary of significant accounting policies

      Principles of consolidation. The consolidated financial statements include
      the accounts of all majority-owned subsidiaries. Investments in companies
      representing ownership interests of 20% to 50% are accounted for by the
      equity method.

      Use of estimates. The preparation of financial statements in conformity
      with generally accepted accounting principles requires management to make
      estimates and assumptions that affect the amounts reported in the
      financial statements and accompanying notes. Actual results could differ
      from those estimates.

      Cash equivalents. All short-term investments purchased with a maturity of
      three months or less are classified as cash equivalents. 

      Inventories. Inventories are valued at the lower of cost or market. Cost
      is determined principally on the first-in, first-out method.

      Properties and depreciation. Properties are carried at cost and are
      depreciated over the estimated lives of such assets using the straight-
      line method. Out-sourcing equipment is depreciated over the shorter of the
      asset life or the term of the contract. For other classifications of
      properties, the principal rates used are summarized below:

                                Rate per Year (%)
                                -----------------
      Buildings                        2-5
      Machinery and office equipment   5-25
      Rental equipment                 25


      Advertising costs. The company expenses all advertising costs as they are
      incurred. The amount charged to expense during 2000, 1999, and 1998 was
      $38.2, $48.6, and $48.2 million, respectively.

      Revenue recognition. The company generally recognizes revenue when
      persuasive evidence of an arrangement exists, delivery has occurred, the
      fee is fixed or determinable, and collectibility is probable.
         Revenue from hardware sales is recognized upon shipment and the passage
      of title. Outside of the United States, the company recognizes revenue
      even if it retains a form of title to products delivered to customers,
      provided the sole purpose is to enable the company to recover the products
      in the event of customer payment default, and the arrangement does not
      prohibit the customers' use of the product in the ordinary course of
      business.
         Revenue from software licenses is recognized at the inception of the
      initial license term and upon execution of an extension to the license
      term. Revenue for post-contract software support arrangements, which are
      marketed separately, is recorded on a straight-line basis over the support
      period for multi-year contracts and at the inception of contracts of one
      year or less.
         Revenue from equipment and software maintenance is recognized on a
      straight-line basis as earned over the lives of the respective contracts.
         For equipment leased to a customer under an operating lease or a
      sales-type lease, revenue recognition commences when the equipment has
      been shipped, installed and is ready for use. Revenue for operating leases
      is recognized on a monthly basis over the term of the lease and for
      sales-type leases at the inception of the lease term.

40

<PAGE>
 
          Revenue under systems integration and services contracts is recognized
      on the percentage of completion method of accounting using the cost-to-
      cost method or when services have been performed and accepted, depending
      on the nature of the project.
          Accounting for large multi-year, fixed-price systems integration
      contracts involves considerable use of estimates in determining revenue,
      costs, and profits. Revisions in profit estimates are reflected in the
      period in which the facts that give rise to the revision become known.
      When estimates indicate a loss under a contract, cost of revenue is
      charged with a provision for such loss.

      Income taxes. Income taxes are provided on taxable income at the
      statutory rates applicable to such income. Deferred taxes have not been
      provided on the cumulative undistributed earnings of foreign subsidiaries
      because such amounts are expected to be reinvested indefinitely.

      Marketable software. The cost of development of computer software to be
      sold or leased, incurred subsequent to establishment of technological
      feasibility, is capitalized and amortized to cost of sales over the
      estimated revenue-producing lives of the products, but not in excess of
      three years following product release.

      Goodwill. Goodwill represents the excess of cost over fair value of net
      assets acquired, which is being amortized on the straight-line method.
      Accumulated amortization at December 31, 2000 and 1999 was $26.0 and $14.4
      million, respectively.
          The carrying value of goodwill is reviewed for impairment whenever
      events or changes in circumstances indicate that it may not be
      recoverable. If such an event occurred, the company would prepare
      projections of future cash flows for the applicable business. If such
      projections indicated that goodwill would not be recoverable, the
      company's carrying value of such asset would be reduced by the estimated
      excess of such value over projected discounted cash flow.

      Translation of foreign currency. The local currency is the functional
      currency for most of the company's international subsidiaries and, as
      such, assets and liabilities are translated into U.S. dollars at year-end
      exchange rates. Income and expense items are translated at average
      exchange rates during the year. Translation adjustments resulting from
      changes in exchange rates are reported in other comprehensive income.
      Exchange gains and losses on intercompany balances of a long-term
      investment nature are reported in other comprehensive income.
          For those international subsidiaries operating in hyper-inflationary
      economies, the U.S. dollar is the functional currency and, as such, non-
      monetary assets and liabilities are translated at historical exchange
      rates and monetary assets and liabilities are translated at current
      exchange rates. Exchange gains and losses arising from translation are
      included in other income (expense), net.

                                                                              41

<PAGE>
 
      Derivative financial instruments. The derivative financial instruments
      currently used by the company are foreign exchange forward contracts and
      options. The company does not hold or issue derivatives for speculative
      trading purposes.
          A change in the underlying exchange rate would have no impact on
      financial position or results of operations relating to these financial
      instruments. All of the company's foreign currency contracts and options
      have been designated as and are effective as hedges against specific
      exposures and have been accounted for as such. Therefore, a change in the
      derivative's value would be offset by an opposite change in the hedged
      exposure.
          The company monitors its risks in derivative transactions by
      periodically assessing the cost of replacing, at market rates, those
      contracts in the event of default by the counterparty. The company
      believes such risk to be remote. In addition, before entering into
      derivative contracts, and periodically during the life of the contract,
      the company reviews the counterparties' financial condition.
          Gains or losses on foreign exchange forward contracts and the cost of
      foreign currency options are deferred in current liabilities and other
      current assets, respectively. The cost of options is reported in income
      ratably over the option term, and any gains thereon as well as any gains
      or losses on foreign exchange contracts are recognized in income (either
      in revenue or cost of revenue) when the transactions being hedged are
      recognized. Cash flows on such instruments are reported in investing
      activities as proceeds or purchases of investments.
          If the criteria for hedge accounting discussed above were not met,
      gains or losses on these instruments would be included in income currently
      and would not be deferred. If a derivative financial instrument is
      terminated before the transaction date of the hedged transaction, any
      deferred gain or loss would continue to be deferred until the transaction
      date. If an expected transaction is no longer likely to occur, any
      deferred gains or losses on financial instruments that hedge such a
      transaction would be reported in income immediately.

      Reclassifications. Certain prior-year amounts have been reclassified to
      conform with the 2000 presentation.

42

<PAGE>
 
2 Earnings per share

  The following table shows how earnings per share were computed for the three
  years ended December 31, 2000.


<TABLE> 
<CAPTION> 
=============================================================================================================================     
     Year ended December 31                                                                                                        
     (Millions, except per share data)                                                       2000          1999          1998     
     ------------------------------------------------------------------------------------------------------------------------ 
     <S>                                                                               <C>           <C>            <C> 
     Basic earnings per share computation                                                                                          
                                                                                                                                   
     Income before extraordinary items                                                 $    244.8    $     522.8    $    376.4     
     Less dividends on preferred shares                                                                    (36.7)       (106.5)    
                                                                                       ---------------------------------------     
     Income available to common stockholders before extraordinary items                     244.8          486.1         269.9     
     Extraordinary items                                                                    (19.8)         (12.1)                  
                                                                                       ---------------------------------------  
     Net income available to common stockholders                                       $    225.0    $     474.0    $    269.9     
                                                                                       ---------------------------------------     
     Weighted average shares (thousands)                                                  313,115        287,290       253,335     
                                                                                       ---------------------------------------     
     Basic earnings per share                                                                                                      
                                                                                                                                   
     Before extraordinary items                                                        $      .78    $      1.69    $     1.07     
     Extraordinary items                                                                     (.06)          (.04)                  
                                                                                       ---------------------------------------     
     Total                                                                             $      .72    $      1.65    $     1.07     
                                                                                       ---------------------------------------     
     Diluted earnings per share computation                                                                                        
                                                                                                                                   
     Income available to common stockholders before extraordinary items                $    244.8    $     486.1    $    269.9     
     Plus interest expense on assumed conversion of 8 1/4% Convertible Notes,
        net of tax                                                                                            .3           1.5     
                                                                                       ---------------------------------------     
     Income available to common stockholders                                                                                       
        plus assumed conversions before extraordinary items                                 244.8          486.4         271.4     
     Extraordinary items                                                                    (19.8)         (12.1)                  
                                                                                       ---------------------------------------     
     Net income available to common stockholders                                       $    225.0    $     474.3    $    271.4     
                                                                                       ---------------------------------------     
     Weighted average shares (thousands)                                                  313,115        287,290       253,335     
     Plus incremental shares from assumed conversions:                                                                             
        Preferred stock                                                                                      877         1,350     
        Employee stock plans                                                                3,536          9,835        11,164     
        8 1/4% Convertible Notes                                                                             818         3,994     
                                                                                       ---------------------------------------     
     Adjusted weighted average shares                                                     316,651        298,820       269,843     
                                                                                       ---------------------------------------     
     Diluted earnings per share                                                                                                    
                                                                                                                                   
     Before extraordinary items                                                        $      .77    $      1.63    $     1.01     
     Extraordinary items                                                                     (.06)          (.04)                  
                                                                                       ---------------------------------------     
     Total                                                                             $      .71    $      1.59    $     1.01     
                                                                                       ---------------------------------------      

     The shares listed below were not included in the computation of diluted earnings per share because to do so would have been
     antidilutive for the periods presented.


     Year ended December 31 (thousands)                                                      2000           1999          1998  
     -------------------------------------------------------------------------------------------------------------------------   
     Employee stock plans                                                                  16,073          6,680           101  
     Preferred stock                                                                                                    47,448   
     -------------------------------------------------------------------------------------------------------------------------   

==============================================================================================================================   
</TABLE>
 

                                                                              43

<PAGE>
 
3 Acquisitions

During 2000, the company acquired the following companies: Network Plus Limited,
a London-based desktop and network services consulting company; VeriCom, a
Norwegian information technology consulting company; and QCOM, an Australian
information technology services provider. These companies were acquired for an
aggregate cash purchase price of approximately $20 million and were accounted
for under the purchase method of accounting.
     In addition during 2000, the company formed a new company with BankWest, a
full-service bank with its headquarters in Perth, Western Australia. The new
company, called Unisys West, will provide e-business services to businesses and
governments. Unisys also formed a new company called Intelligent Processing
Solutions Limited ("iPSL"), a UK-based company, which will provide high-volume
payment processing. The company's partners in iPSL are Barclays Bank and Lloyds
TSB Bank, both UK-based financial institutions. Both of the above new companies
are 51% owned by the company and are fully consolidated in the company's
financial statements. The minority owners' interests are represented in other
liabilities and other income (expense), net in the financial statements.
     During 1999, the company acquired three companies for an aggregate cash
purchase price of approximately $60 million. These acquisitions were accounted
for under the purchase method of accounting. During 1999, the company also
acquired three companies in exchange for approximately 2.9 million shares of the
company's common stock. These acquisitions were accounted for under the pooling
of interests method of accounting, and all prior periods were restated.

4 Accounting changes

In 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements." Its adoption had no
effect on the company's consolidated financial position, consolidated results of
operations, or liquidity.
     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement, which is
effective for the company for the year beginning January 1, 2001, establishes
accounting and reporting standards for derivative instruments and for hedging
activities. SFAS No. 133 requires a company to recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. Changes in the fair value of derivatives will
be reported currently in earnings or in other comprehensive income depending on
their effectiveness pursuant to SFAS No. 133. Adoption of SFAS No. 133 will not
have a material effect on the company's consolidated financial position,
consolidated results of operations, or liquidity.
     In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." This
statement revises the accounting standards for securitizations and other
transfers of financial assets and collateral and requires certain disclosures.
This statement is effective for transfers and servicing of financial assets
occurring after March 31, 2001. Management is evaluating what effect, if any,
this statement may have on the company's financial statements.

44

<PAGE>
 
5 One-time charges

2000 restructuring.  As a result of a comprehensive business review of the
company's operations, the company has decided to focus its resources on
value-added, e-business opportunities, de-emphasize or eliminate low-return
businesses, and lower its cost base in line with its new business model. As a
result, in the fourth quarter of 2000, the company recorded a pretax
restructuring charge of $127.6 million, or $.29 per diluted share, primarily for
a work-force reduction of approximately 2,000 people (1,400 in the United States
and 600 outside the United States). Of the total, approximately 1,300 people
were terminated in 2000 with the remaining 700 to leave in 2001. In 2000, 742
people, included above, accepted an early retirement program in the United
States. For those employees, funding will be provided through the company's
pension plan. Cash expenditures related to the involuntary reductions in 2000
were $8.7 million. A further breakdown of the individual components of these
costs follows:

=========================================================================
                        Work-Force Reductions(1)
(Millions)         Total      U. S.     Int'l    Other (2)
--------------------------------------------------------
Work-force
reductions (1)

Early retirement   $ 57.8     $ 57.8
Involuntary
reductions           60.9       13.3    $47.6
                   --------------------------
 Subtotal           118.7       71.1     47.6
Other (2)             8.9                        $ 8.9
                   --------------------------------------
Total charge        127.6       71.1     47.6      8.9
Utilized            (71.9)     (58.7)    (7.8)    (5.4)
                   --------------------------------------
Balance at
Dec. 31, 2000      $ 55.7     $ 12.4    $39.8    $ 3.5
                   --------------------------------------
Expected future
utilization:

2001               $ 51.9     $ 12.2    $36.8    $ 2.9

2002 and
thereafter            3.8         .2      3.0       .6
---------------------------------------------------------
(1) Includes severance, notice pay, medical, and other benefits.
(2) Includes facilities costs, and product and program discontinuances.
=========================================================================

The 2000 restructuring charge was recorded in the following statement of income
classifications: cost of revenue, $56.1 million; selling, general and
administrative expenses, $51.9 million; research and development expenses, $18.2
million; and other income (expense), net, $1.4 million.

Prior year restructurings.  In 1997 and 1995, the company recorded total pretax
restructuring charges of $113.6 million and $717.6 million, respectively, for a
total of $831.2 million. The charges were related to strategic realignments, the
discontinuance of the manufacturing and assembly of personal computers and low-
end servers, and the disposal of a small, non-strategic technology product. The
charges included (a) $501.5 million for work-force reductions of approximately
8,900 people, (b) $221.1 million for consolidation of facilities and
manufacturing capacity, and (c) $108.6 million for product and program
discontinuances.
     Activity related to these restructuring actions during the years ended
December 31, 2000, 1999, and 1998, was as follows:

================================================================================

                            Work-Force
(Millions)      Total     Reductions(1)   Facilities(2)   Products
-------------------------------------------------------------------------------
Balance at
Dec. 31, 1997   $ 253.6   $130.5          $103.2          $ 19.9
Utilized         (127.3)   (80.0)          (36.0)          (11.3)
Other(3)         (18.8)     (7.5)          (10.8)            (.5)
                ---------------------------------------------------
Balance at
Dec. 31, 1998     107.5     43.0            56.4             8.1
Utilized          (48.8)   (23.1)          (22.3)           (3.4)
Other(3)           (1.5)     2.6            (3.4)            (.7)
                ---------------------------------------------------
Balance at
Dec. 31, 1999      57.2     22.5            30.7             4.0
Utilized          (20.8)    (6.8)          (13.2)            (.8)
Other(3)           (9.3)    (2.1)           (5.4)           (1.8)
                ---------------------------------------------------
Balance at
Dec. 31, 2000   $  27.1   $ 13.6          $ 12.1           $ 1.4
                ---------------------------------------------------
Expected future
utilization:

2001            $  21.5   $ 13.6          $  6.5           $ 1.4

2002 and
thereafter          5.6                      5.6
-------------------------------------------------------------------
(1) Includes severance, notice pay, medical, and other benefits.
(2) Includes consolidation of office facilities and manufacturing capacity.
(3) Includes changes in estimates, reversals of excess reserves, translation
    adjustments, and additional provisions.

================================================================================

                                                                              45

<PAGE>
 
In 1998, there was a reduction in accrued work-force provisions, principally for
the reversal of unneeded reserves due to approximately 150 voluntary
terminations, and the favorable results of negotiations on termination
indemnities relating principally to PC manufacturing personnel. In addition, as
a result of the sale of the non-strategic technology product operations in 1998
on more favorable terms than originally anticipated, the company reversed $6.0
million of unneeded accruals, principally for termination indemnities for
approximately 130 people.
     As a result of the prior year restructuring actions, cash expenditures in
2000, 1999 and 1998 were $17.6, $44.6, and $118.4 million, respectively, and
employee levels were reduced in 2000, 1999, and 1998 by 21, 284, and 900 people,
respectively. The $13.6 million balance of the reserve at December 31, 2000 for
work-force reductions represents the remaining balance of extended payment
severance packages for terminated employees. The $12.1 million December 31, 2000
balance for facility consolidations represents contractual obligations (reduced
by sub-lease income) existing under long-term leases of vacated facilities.


6    Accounts receivable  

In December 2000, the company entered into an agreement, renewable annually
for up to three years, to sell through Unisys Funding Corporation I, a wholly
owned subsidiary, interests in eligible U.S. trade accounts receivable for up to
$275 million. Unisys Funding Corporation I has been structured to isolate its
assets from creditors of Unisys. The company received proceeds of $232 million
from the initial sale of accounts receivable interests under the program, which
has been included in cash flows from operating activities in the accompanying
consolidated statement of cash flows. The company retained subordinated
interests of $223 million in the associated receivables, which have been
included in accounts and notes receivable, net in the accompanying consolidated
balance sheet. As collections reduce previously sold interests, interests in new
eligible receivables can be sold, subject to meeting certain conditions.
     The selling price of the receivables interests reflects a discount based on
the A-1 rated commercial paper borrowing rates of the purchasers (6.7% at
December 31, 2000). The company remains responsible for servicing the underlying
accounts receivable, for which it will receive a fee of 0.5% of the outstanding
balance, which it believes represents adequate compensation. The company
estimates the fair value of its retained interests by considering two key
assumptions: the payment rate, which is derived from the average life of the
accounts receivable which is less than 60 days, and the rate of expected credit
losses. Based on the company's favorable collection experience and very short-
term nature of the receivables, both assumptions are considered to be highly
predictable. Therefore, the company's estimated fair value of its retained
interests in the pool of eligible receivables is approximately equal to the
previous cost, less the associated allowance for doubtful accounts. As a result,
the loss on the initial sale was not material.
     Revenue recognized in excess of billings on services contracts, or unbilled
accounts receivable, was $171.3 and $217.8 million at December 31, 2000 and
1999, respectively. Such amounts are included in accounts and notes receivables,
net.

46        

<PAGE>
 
  7 Income taxes

======================================================================
  Year ended December 31 (Millions)          2000     1999      1998 
  ------------------------------------------------------------------ 
  Income before income taxes                                         
       United States                     $  389.0   $ 485.4  $ 397.8 
       Foreign                              (10.0)    284.9    196.4 
                                         --------------------------- 
  Total income before                                                
     income taxes                        $  379.0   $ 770.3  $ 594.2 
  ------------------------------------------------------------------ 
  Provision for income taxes                                         

          Current                                                    
            United States                $   10.1   $  55.3  $  55.8 
            Foreign                          63.6      79.1     22.7 
            State and local                   4.9      10.5     23.3 
                                         --------------------------- 
            Total                            78.6     144.9    101.8 
                                         --------------------------- 
          Deferred                                                   
            United States                    72.8      75.7    115.2 
            Foreign                         (17.2)     24.4       .7 
            State and local                             2.5       .1 
                                         --------------------------- 
            Total                            55.6     102.6    116.0 
                                         ---------------------------  
  Total provision for income taxes       $  134.2   $ 247.5  $ 217.8  
  ------------------------------------------------------------------
======================================================================

   Following is a reconciliation of the provision for income taxes at the United
States statutory tax rate to the provision for income taxes as reported:

====================================================================
  Year ended December 31 (Percent)            2000     1999   1998   
  ----------------------------------------------------------------   
  United States statutory income                                     
   tax                                       35.0%    35.0%   35.0%  
  Difference in estimated income                                     
   taxes on foreign earnings, losses,                                
   and remittances                            9.6       .5    (7.7)  
  State taxes                                  .8      1.2     2.5    
  Tax refund claims, audit issues,                                   
   and other matters                        (10.4)    (2.3)    5.3     
  Amortization of goodwill                     .5       .3      .3     
  U.S. tax law change                                 (2.9)          
  Other                                       (.1)      .3     1.2      
                                         -------------------------    
  Provision for income taxes                 35.4%    32.1%   36.6%   
  ----------------------------------------------------------------
====================================================================

   The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities at December 31, 2000
and 1999, were as follows:

===============================================================
  December 31 (Millions)                   2000        1999   
  ----------------------------------------------------------- 
  Deferred tax assets                                         
  Capitalized research and                                    
   development                          $  592.7     $  596.1 
  Tax loss carryforwards                   280.0        254.2 
  Foreign tax credit carryforwards         159.1        114.4 
  Other tax credit carryforwards           232.2        243.3 
  Prepayments                              101.7        138.5 
  Postretirement benefits                   80.1         82.4 
  Employee benefits                         83.8         88.5 
  Depreciation                              61.0         46.3 
  Restructuring                             67.1         38.2 
  Other                                    242.6        281.7 
                                        ---------------------  
                                         1,900.3      1,883.6 
  Valuation allowance                     (309.2)      (308.7)
                                        ---------------------  
  Total deferred tax assets             $1,591.1     $1,574.9 
                                        ---------------------  
  Deferred tax liabilities                                    
  Pensions                              $  451.9     $  383.4 
  Sales-type leases                         85.2         77.4 
  Other                                     64.2         38.6 
                                        ---------------------  
  Total deferred tax liabilities        $  601.3     $  499.4 
                                        ---------------------  
  Net deferred tax assets               $  989.8     $1,075.5 
  -----------------------------------------------------------  
===============================================================

   SFAS No. 109 requires that deferred tax assets be reduced by a valuation
allowance if it is more likely than not that some portion or all of the deferred
tax asset will not be realized. The valuation allowance at December 31, 2000, 
applies to certain state and local and foreign tax loss carryforwards and 
temporary differences that, in management's opinion, are more likely than not to
expire unused.
   Cumulative undistributed earnings of foreign subsidiaries, for which no U.S.
income or foreign withholding taxes have been recorded, approximated $740.0
million at December 31, 2000. Such earnings are expected to be reinvested
indefinitely. Determination of the amount of unrecognized deferred tax liability
with respect to such earnings is not practicable. The additional taxes payable
on the earnings of foreign subsidiaries, if remitted, would be substantially
offset by U.S. tax credits for foreign taxes already paid. While there are no
specific

                                                                              47

<PAGE>
 
plans to distribute the undistributed earnings in the immediate future, where
economically appropriate to do so, such earnings may be remitted.
   Cash paid during 2000, 1999, and 1998 for income taxes was $110.0, $96.6, and
$92.7 million, respectively.
   In 1999, the company recognized a one-time tax benefit of $22.0 million, or
$.07 per diluted common share, related to a U.S. Treasury income tax regulation
pertaining to the use of net operating loss carryforwards of acquired companies.
   At December 31, 2000, the company has U.S. federal and state and local tax
loss carryforwards and foreign tax loss carryforwards for certain foreign
subsidiaries, the tax effect of which is approximately $280.0 million. These
carryforwards will expire as follows (in millions): 2001, $5.9; 2002, $9.5;
2003, $12.7; 2004, $19.2; 2005, $15.1; and $217.6 thereafter. The company also
has available tax credit carryforwards of approximately $391.3 million, which
will expire as follows (in millions): 2001, $87.7; 2002, $56.7; 2003, $10.9;
2004, $7.7; 2005, $24.6; and $203.7 thereafter.
   The company's net deferred tax assets include substantial amounts of
capitalized research and development, and tax credit carryforwards. Failure to
achieve forecasted taxable income might affect the ultimate realization of the
net deferred tax assets. There can be no assurance that in the future there
would not be increased competition or other factors that may result in a decline
in sales or margins, loss of market share, delays in product availability, or
technological obsolescence.
   The company is currently contesting issues before the Internal Revenue
Service in connection with Sperry Corporation for the years ended March 31,
1985, through September 16, 1986. In management's opinion, adequate provisions
for income taxes have been made for all years.

8 Properties

  Properties comprise the following:

===========================================================
  December 31 (Millions)               2000         1999 
  -------------------------------------------------------
  Land                             $     8.3    $     8.4
  Buildings                            148.0        164.4
  Machinery and office equipment     1,207.7      1,323.0
  Rental and outsourcing                                 
     equipment                         220.1        227.2
                                   ----------------------
  Total properties                 $ 1,584.1    $ 1,723.0
  ------------------------------------------------------- 
===========================================================

9  Investments at equity

   Substantially all of the company's investments at equity consist of Nihon
   Unisys, Ltd., a Japanese company ("NUL"). At December 31, 2000, the company
   owned approximately 28% of NUL's common stock that has a fair market value of
   approximately $320 million. The company has approximately $174 million of
   retained earnings that represents undistributed earnings of NUL.

10 Debt

   Long-term debt comprises the following:

========================================================

   December 31 (Millions)              2000     1999  
   --------------------------------------------------
   11 3/4% senior notes due 2004     $ 334.2  $ 334.2 
   7 7/8% senior notes due 2008        200.0    200.0 
   12% senior notes                             399.5 
   Other, net of unamortized                          
    discounts                           18.9     39.4  
                                     ----------------                      
   Total                               553.1    973.1 
   Less - Current maturities            16.8     22.9  
                                     ----------------                 
   Total long-term debt              $ 536.3  $ 950.2  
   --------------------------------------------------
========================================================

48

<PAGE>
 
   Total long-term debt maturities in 2001, 2002, 2003, 2004, and 2005 are
$16.8, $1.7, $.2, $334.4, and $.2 million, respectively.
   Cash paid during 2000, 1999, and 1998 for interest was $90.5, $141.5, and
$185.6 million, respectively.
   On April 15, 2000, the company redeemed all of its $399.5 million outstanding
12% senior notes due 2003 at the stated redemption price of 106% of principal.
As a result, the company recorded an extraordinary charge of $19.8 million, net
of $10.7 million of income tax benefits, or $.06 per diluted share, for the call
premium and unamortized debt expense. The redemption was funded through a
combination of cash and short-term borrowings under the company's two credit
agreements discussed below.
   During 1999, the company repurchased $115.8 million principal amount of its
11 3/4% senior notes due 2004 and $25.5 million principal amount of its 12%
senior notes due 2003 at a cost of $157.4 million. As a result, the company
recorded an extraordinary charge of $12.1 million, net of $6.5 million of income
tax benefits, or $.04 per diluted common share.
   In March 2000, the company entered into a $150 million credit agreement
expiring April 2001 for the purpose of funding the redemption of its 12% senior
notes. As of December 31, 2000, $127.5 million was borrowed under this agreement
at a rate of 7.56%. The company also has a $400 million credit agreement
expiring June 2001. As of December 31, 2000, there were no borrowings
outstanding under the facility and the entire $400 million was available for
borrowings. The company pays commitment fees on the total amount of the
facility. In addition, the company has access to certain uncommitted lines of
credit from U.S. banks and international subsidiaries maintain short-term credit
arrangements with banks in accordance with local customary practice.

11 Other accrued liabilities

   Other accrued liabilities (current) comprise the following:

================================================================================
   December 31 (Millions)                           2000               1999
   --------------------------------------------------------------------------
   Payrolls and commissions                      $   314.7         $   360.9
   Customers' deposits and                                                  
    prepayments                                      545.0             522.0
   Taxes other than income taxes                     120.2             113.5
   Restructuring*                                     73.4              36.2
   Other                                             270.2             354.0
                                                -----------------------------
   Total other accrued liabilities               $ 1,323.5         $ 1,386.6 
   --------------------------------------------------------------------------

   *At December 31, 2000 and 1999, an additional $9.4 million and $21.0
   million, respectively, was reported in other liabilities (long term) on
   the consolidated balance sheet.
================================================================================

12 Leases

   Rental expense, less income from subleases, for 2000, 1999, and 1998 was
   $126.6, $120.8, and $118.8 million, respectively.
     Minimum net rental commitments under noncancelable operating leases
   outstanding at December 31, 2000, substantially all of which relate to real
   properties, were as follows: 2001, $126.5; 2002, $107.1; 2003, $84.6; 2004,
   $64.6; 2005, $42.3; and $271.5 million thereafter. Such rental commitments
   have been reduced by minimum sublease rentals of $73.0 million due in the
   future under noncancelable subleases.

                                                                              49

<PAGE>
 
13 Financial instruments

   The company uses derivative financial instruments to manage its exposure to
   market risks from changes in foreign currency exchange rates. The derivative
   instruments used are foreign exchange forward contracts and foreign exchange
   options.
     Due to its foreign operations, the company is exposed to the effects of
   foreign currency exchange rate fluctuations on the U.S. dollar. Foreign
   exchange forward contracts and options generally have maturities of three
   months except for foreign exchange forward contracts for Japanese yen which
   generally have maturities of one year. These instruments are entered into for
   the sole purpose of hedging certain royalty income and cost exposures.
     The cost of foreign currency options is recorded in other current assets in
   the consolidated balance sheet. At December 31, 2000, such amount was $.5
   million. When the U.S. dollar strengthens against foreign currencies, the
   decline in value of the underlying exposures is partially offset by gains in
   the value of purchased currency options designated as hedges. When the U.S.
   dollar weakens, the increase in the value of the underlying exposures is
   reduced only by the premium paid to purchase the options. The cost of options
   is reported in income ratably over the option term, and any gains thereon are
   reported in income when the related transactions being hedged (generally
   within six months) are recognized.
     The company also enters into foreign exchange forward contracts. Gains and
   losses on such contracts are deferred and included in current liabilities
   until the corresponding transaction is recognized. At December 31, 2000, the
   company had a total of $217.0 million (of notional value) of foreign exchange
   forward contracts, $168.3 million to sell foreign currencies, and $48.7
   million to buy foreign currencies. At December 31, 1999, the company had a
   total of $264.7 million (of notional value) of such contracts, $237.0 million
   to sell foreign currencies, and $27.7 million to buy foreign currencies. At
   December 31, 2000, a realized net gain on such contracts of approximately
   $2.5 million was deferred and included in current liabilities. Gains or
   losses on foreign exchange forward contracts are reported in income when the
   related transactions being hedged (generally within three months except for
   yen contracts) are recognized.
     In 1999, the company entered into interest rate swaps and currency swaps
   for euros and Japanese yen. The currency swaps were designated as hedges of
   the foreign currency exposure on the company's net investments in foreign
   subsidiaries and equity investments. The currency effects of these hedges are
   reflected in accumulated other comprehensive income (loss) thereby offsetting
   a portion of the foreign currency translation of net assets. The difference
   between receipts of a U.S. fixed rate of interest and payments of a foreign
   currency denominated floating rate is reflected in interest expense. In 2000,
   the company terminated these swaps, and as a result received net cash of
   $18.5 million and recognized a pretax loss of $2.7 million. Under the swaps,
   the company recognized an interest expense benefit of approximately $16
   million and $7 million in 2000 and 1999, respectively.

50

<PAGE>
 
      Financial instruments comprise the following:

================================================================================

   December 31 (Millions)                           2000              1999
   --------------------------------------------------------------------------
   Outstanding:
     Long-term debt                                $ 553.1         $   973.1
     Foreign exchange forward contracts*             217.0             264.7
     Foreign exchange options*                        63.9             288.2
     Interest rate swaps*                                -             400.0
     Foreign currency swaps*                             -             400.0
                                                  --------------------------
   Estimated fair value:                                            
     Long-term debt                                $ 557.0         $ 1,021.2
     Foreign exchange forward contracts                3.0              (1.9)
     Foreign exchange options                           .2               8.4
     Interest rate swaps                                 -               3.4
     Foreign currency swaps                              -             (27.2)
   --------------------------------------------------------------------------
   *notional value
================================================================================

     Financial instruments also include temporary cash investments and customer
   accounts receivable. Temporary investments are placed with creditworthy
   financial institutions, primarily in over-securitized treasury repurchase
   agreements, euro-time deposits, or commercial paper of major corporations. At
   December 31, 2000, the company's cash equivalents principally have maturities
   of less than one month. Due to the short maturities of these instruments,
   they are carried on the balance sheet at cost plus accrued interest, which
   approximates market value. Realized gains or losses during 2000 and 1999, as
   well as unrealized gains or losses at December 31, 2000, were immaterial.
   Receivables are due from a large number of customers that are dispersed
   worldwide across many industries. At December 31, 2000 and 1999, the company
   had no significant concentrations of credit risk.
     The carrying amount of cash and cash equivalents, and notes payable
   approximates fair value because of the short maturity of these instruments.
   The fair value of the company's long-term debt is based on the quoted market
   prices for publicly traded issues. For debt that is not publicly traded, the
   fair value is estimated, after considering any conversion terms, based on
   current yields to maturity for the company's publicly traded debt with
   similar maturities. In estimating the fair value of its derivative positions,
   the company utilizes quoted market prices, if available, or quotes obtained
   from outside sources.
   
14 Litigation
   
   There are various lawsuits, claims, and proceedings that have been brought or
   asserted against the company. Although the ultimate results of these
   lawsuits, claims, and proceedings are not currently determinable, management
   does not expect that these matters will have a material adverse effect on the
   company's consolidated financial position, consolidated results of
   operations, or liquidity.

                                                                              51

<PAGE>
 
15 Segment information
  
   The company has two business segments: Services and Technology. The products
   and services of each segment are marketed throughout the world to commercial
   businesses and governments. The major service and product lines by segment
   are as follows: Services - systems integration and solutions, outsourcing,
   network services, and multivendor maintenance; Technology -enterprise-class
   servers and specialized technologies.
     The accounting policies of each business segment are the same as those
   described in the summary of significant accounting policies. Intersegment
   sales and transfers are priced as if the sales or transfers were to third
   parties. The company evaluates business segment performance on operating
   income exclusive of restructuring charges and unusual and nonrecurring items.
   All corporate and centrally incurred costs are allocated to the business
   segments based principally on assets, revenue, employees, square footage, or
   usage.
     Corporate assets are principally cash and cash equivalents, prepaid pension
   assets, and deferred income taxes. The expense or income related to corporate
   assets are allocated to the business segments. In addition, corporate assets
   include an offset for accounts receivable that have been recorded as sales in
   accordance with SFAS No. 125 because such receivables are included in the
   assets of the business segments.
     No single customer accounts for more than 10% of revenue. Revenue from
   various agencies of the U.S. Government, which is reported in both business
   segments, approximated $689, $865, and $917 million in 2000, 1999, and 1998,
   respectively.
     A summary of the company's operations by business segment for 2000, 1999,
   and 1998 is presented below:


============================================================================= 

   (Millions of dollars)       Total     Corporate   Services   Technology
   ------------------------------------------------------------------------ 
   2000                                                                    
   ----                                                                    
   Customer revenue          $6,885.0                $4,741.6     $2,143.4 
   Intersegment                          $ (437.2)       46.6        390.6 
                             --------------------------------------------- 
   Total revenue             $6,885.0    $ (437.2)   $4,788.2     $2,534.0 
                             --------------------------------------------- 
   Operating income                                                        
      (loss)                 $  426.8    $ (103.3)   $   81.4     $  448.7 
   Depreciation and                                                        
      amortization              271.0                   116.7        154.3 
   Total assets               5,717.7     2,438.8     1,989.0      1,289.9 
   Investments at                                                          
      equity                    225.8         1.7                    224.1 
   Capital expenditures                                                    
      for properties            198.3        21.4       111.9         65.0 
                                                                           
                                                                           
   1999                                                                    
   ----                                                                    
   Customer revenue          $7,544.6                $5,287.0     $2,257.6 
   Intersegment                          $ (577.5)       65.6        511.9 
                             --------------------------------------------- 
   Total revenue             $7,544.6    $ (577.5)   $5,352.6     $2,769.5 
                             --------------------------------------------- 
   Operating income                                                        
      (loss)                 $  960.7    $  (23.6)   $  421.0     $  563.3 
   Depreciation and                                                        
      amortization              265.2                   115.1        150.1 
   Total assets               5,889.7     2,754.9     1,991.8      1,143.0 
   Investments at                                                          
      equity                    225.5         1.8                    223.7 
   Capital expenditures                                                    
      for properties            219.6        59.9        97.8         61.9 
                                                                           
   1998                                                                    
   ----                                                                    
   Customer revenue          $7,243.9                $4,944.8     $2,299.1 
   Intersegment                          $ (511.2)       73.7        437.5 
                             --------------------------------------------- 
   Total revenue             $7,243.9    $ (511.2)   $5,018.5     $2,736.6 
                             --------------------------------------------- 
   Operating income                                                        
      (loss)                 $  799.0    $  (45.3)   $  332.3     $  512.0 
   Depreciation and                                                        
      amortization              270.4                    88.1        182.3 
   Total assets               5,613.2     2,717.8     1,837.6      1,057.8 
   Investments at                                                          
      equity                    184.6         2.1                    182.5 
   Capital expenditures                                                    
      for properties            209.1        44.2        86.5         78.4  
   ------------------------------------------------------------------------ 

==============================================================================

52

<PAGE>
 
    Presented below is a reconciliation of total business segment operating
income to consolidated income before income taxes:


=============================================================== 
  Year ended December 31
  (Millions)                      2000      1999       1998

  ----------------------------------------------------------- 
  Total segment operating
       income                   $  530.1   $ 984.3  $   844.3
  Interest expense                 (79.8)   (127.8)    (171.7)
  Other income (expense), net       32.0     (62.6)     (33.1)
  Corporate and eliminations        22.9     (23.6)     (45.3)
  Other special charges           (126.2)
                                -----------------------------
     Total income before
          income taxes          $  379.0   $ 770.3  $   594.2
  ----------------------------------------------------------- 
=============================================================== 

   Presented below is a reconciliation of total business segment assets to
consolidated assets:

======================================================================  

  December 31 (Millions)          2000       1999         1998

  --------------------------------------------------------------- 
  Total segment assets         $ 3,278.9  $  3,134.8    $ 2,895.4
  Cash and cash equivalents        378.0       464.0        616.4
  Prepaid pension assets         1,063.0       975.9        833.8
  Deferred income taxes          1,044.2     1,128.3      1,123.2
  Elimination for sale of
    receivables                   (279.1)      (30.7)       (28.4)
  Other corporate assets           232.7       217.4        172.8
                               ----------------------------------
     Total assets              $ 5,717.7   $ 5,889.7    $ 5,613.2
  --------------------------------------------------------------- 
======================================================================  

   Geographic information about the company's revenue, which is principally
based on location of the selling organization, and properties, is presented
below:

============================================================= 

  (Millions)                 2000       1999         1998
  --------------------------------------------------------- 
  Revenue

   United States          $ 2,875.5   $ 3,357.9   $ 3,154.3
   United Kingdom             762.9       806.5       735.8
   Other foreign            3,246.6     3,380.2     3,353.8
                          --------------------------------- 
     Total                $ 6,885.0   $ 7,544.6   $ 7,243.9
                          ---------------------------------  
  Properties, net
  
   United States          $   389.2   $   367.2   $   322.3
   United Kingdom              52.6        64.2        56.2
   Brazil                      37.2        38.8        61.9
   Other foreign              141.2       150.6       145.0
                          ---------------------------------    
     Total                $   620.2   $   620.8   $   585.4
  --------------------------------------------------------- 
============================================================= 

 16   Employee plans
      
      Stock plans. Under plans approved by the stockholders, stock options,
      stock appreciation rights, restricted stock, and restricted stock
      units may be granted to officers and other key employees.
         Options have been granted to purchase the company's common stock
      at 100% of the fair market value at the date of grant. Options have
      a maximum duration of ten years and generally become exercisable in
      annual installments over a four-year period following date of grant.
         Restricted stock and restricted stock units have been granted and
      are subject to forfeiture until the expiration of a specified period
      of service commencing on the date of grant. Compensation expense
      resulting from the awards is charged to income ratably from the date
      of grant until the date the restrictions lapse and is based on fair
      market value at the date of grant. During the years ended December
      31, 2000, 1999, and 1998, $1.0, $2.5, and $6.0 million was charged
      to income, respectively.
         Effective July 1, 1998, the company implemented a world-wide
      Employee Stock Purchase Plan ("ESPP"), which enables substantially
      all regular employees to purchase shares of the company's common
      stock through payroll deductions of up to 10% of eligible pay. The
      price the employee pays is 85% of the market price at the beginning
      or end of a calendar quarter, whichever is lower. During the years
      ended December 31, 2000, 1999, and 1998, employees purchased shares,
      all of which were newly issued shares, for which $37.3, $35.1 and
      $5.6 million was paid to the company, respectively.
         U.S. employees are eligible to participate in an employee savings
      plan. Under this plan, a percentage of the employee's pay may be
      contributed to various investment alternatives. Effective July 1,
      1998, a company match for up to 1% of pay was reinstituted.
      Effective January 1, 2000 such company match was increased to 2%.
      The match consists of the company contributing newly issued shares
      of its common stock to the plan. The charge to income, related to
      such company match, for the years ended December 31, 2000, 1999, and
      1998 was $19.1, $8.2, and $4.1 million, respectively.

                                                                              53

<PAGE>
 
   The company applies APB Opinion 25 for its stock plans and the
disclosure-only option under SFAS No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation expense is recognized for stock
options granted and for common stock purchases under the ESPP.
   Pro forma information regarding net income and earnings per share is required
by SFAS No. 123, and has been determined as if the company had accounted for its
stock plans under the fair value method of SFAS No. 123. The fair value of stock
options is estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions for 2000, 1999, and 1998,
respectively: risk-free interest rates of 6.84%, 5.14%, and 5.67%, volatility
factors of the expected market price of the company's common stock of 55%, a
weighted average expected life of the options of five years, and no dividends.
   For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The company's
pro forma net income for the years ended December 2000, 1999, and 1998,
respectively, follows: 2000, $182.5 million, or $.58 per diluted share; 1999,
$472.2 million, or $1.46 per diluted share; and 1998, $361.6 million, or $.95
per diluted share.

A summary of the status of stock option activity follows:


<TABLE> 
<CAPTION> 
============================================================================================================================= 
  Year ended December 31
  (Shares in thousands)                     2000                              1999                             1998
  -------------------------------------------------------------   --------------------------     ---------------------------- 
                                                 Weighted Avg.                Weighted Avg.                    Weighted Avg.
                                     Shares      Exercise Price    Shares    Exercise Price      Shares       Exercise Price
                                     --------------------------   --------------------------     ----------------------------  
<S>                                  <C>         <C>              <C>        <C>                 <C>          <C> 
  Outstanding at                             
    beginning of year                 19,158      $  19.74         18,252       $  13.28         20,439           $   9.90
  Granted                              7,667         33.36          6,981          30.54          5,492              23.14
  Exercised                           (1,455)         9.58         (4,649)         11.28         (6,842)             10.76
  Forfeited and expired               (3,285)        24.41         (1,426)         17.05           (837)             14.05
                                     --------------------------   --------------------------     ----------------------------  
  Outstanding at end of year          22,085         24.44         19,158          19.74         18,252              13.28
                                     --------------------------   --------------------------     ----------------------------  
  Exercisable at end of year           7,946         15.72          6,138          11.39          7,547              10.50
                                     --------------------------   --------------------------     ----------------------------
  Shares available for granting                                                                 
    options at end of year             4,008                        2,601                         4,592
                                     --------------------------   --------------------------     ----------------------------  
  Weighted average fair value                
    of options granted during                                
    the year                                      $  18.76                      $  15.95                          $  12.79
</TABLE>
 



<TABLE> 
<CAPTION> 
  December 31, 2000                          
  (Shares in thousands)                           Outstanding                                  Exercisable
  -----------------------------------------------------------------------------       ------------------------------ 
  Exercise                                         Average          Average                              Average
  Price Range                         Shares        Life *       Exercise Price       Shares          Exercise Price
  -----------------------------------------------------------------------------       ------------------------------ 
<S>                                   <C>         <C>            <C>                  <C>             <C> 
  $     4-11                           3,864        5.26            $  7.02            3,209              $ 7.16
  $     11-30                          5,898        6.78              19.01            3,285               17.43
  $     30-52                         12,323        8.78              32.50            1,452               30.74
                                     -----------------------------------------       -------------------------------
  Total                               22,085        7.63              24.44            7,946               15.72
  -----------------------------------------------------------------------------       ------------------------------ 
  *    Average contractual remaining life in years.
============================================================================================================================= 
</TABLE>
 

54

<PAGE>
 
Retirement benefits

Retirement plans funded status and amounts recognized in the company's
consolidated balance sheet at December 31, 2000 and 1999, follows:


<TABLE> 
<CAPTION> 
=======================================================================================================================

                                                                        U.S. Plans               International Plans        
                                                              --------------------------       ---------------------
   December 31 (Millions)                                        2000            1999            2000        1999       
   -----------------------------------------------------------------------------------------------------------------
   <S>                                                        <C>             <C>              <C>          <C> 
   Change in benefit obligation                                                                                         
      Benefit obligation at beginning of year                 $  3,491.1      $  3,684.1       $   844.2    $  811.7    
      Service cost                                                  37.4            39.3            18.7        18.0    
      Interest cost                                                263.5           251.3            49.9        51.5    
      Plan participants' contributions                                                               9.4        10.2    
      Plan amendments                                               59.0                             1.1                
      Actuarial (gain) loss                                        (29.2)         (234.5)           (7.4)       16.3    
      Benefits paid                                               (262.8)         (249.1)          (34.7)      (35.9)   
      Effect of settlements/curtailments                                                             1.4         1.1    
      Foreign currency translation adjustments                                                    (121.7)      (66.9)   
      Other                                                                                         (3.8)       38.2    
                                                              --------------------------       ---------------------    
      Benefit obligation at end of year                       $  3,559.0      $  3,491.1       $   757.1    $  844.2    
   -----------------------------------------------------------------------------------------------------------------    
                                                                                                                        
   Change in plan assets                                                                                                
      Fair value of plan assets at beginning of year          $  5,045.5      $  4,459.1       $   959.3    $  877.9    
      Actual return on plan assets                                 163.5           831.0            40.4       113.8    
      Employer contribution                                          5.1             4.5            10.1        15.3    
      Plan participants' contributions                                                               9.4        10.2    
      Benefits paid                                               (262.8)         (249.1)          (34.7)      (35.9)   
      Foreign currency translation adjustments                                                    (136.6)      (73.2)   
      Other                                                                                                     51.2    
                                                              --------------------------       --------------------- 
      Fair value of plan assets at end of year                $  4,951.3      $  5,045.5       $   847.9    $  959.3    
   -----------------------------------------------------------------------------------------------------------------    
                                                                                                                        
   Funded status                                              $  1,392.3      $  1,554.4       $    90.8    $  115.1    
      Unrecognized net actuarial (gain) loss                      (413.6)         (660.0)          (13.7)      (34.4)   
      Unrecognized prior service (benefit) cost                    (12.8)          (20.0)            6.9         7.6    
      Unrecognized net obligation at date of adoption                                 .8              .3          .7    
                                                              --------------------------       --------------------- 
      Prepaid pension cost                                    $    965.9      $    875.2       $    84.3    $   89.0    
   -----------------------------------------------------------------------------------------------------------------    
                                                                                                                        
   Amounts recognized in the statement of financial                                                                     
     position consist of:                                                                                               
    Prepaid pension cost                                      $    965.9      $    875.2       $    97.1    $  100.7    
    Other liabilities                                                                              (12.8)      (11.7)     
                                                              --------------------------       --------------------- 
                                                              $    965.9      $    875.2       $    84.3    $   89.0     
   -----------------------------------------------------------------------------------------------------------------    
=======================================================================================================================
</TABLE>
 
   The projected benefit obligations, accumulated benefit obligations and fair
value of plan assets for plans with accumulated benefit obligations in excess of
plan assets was as follows (in millions of dollars): $168.7, $161.4, and $91.2
million at December 31, 2000; and $187.2, $178.1, and $108.2 million at December
31, 1999.

                                                                              55

<PAGE>
 
Net periodic pension costs for 2000, 1999, and 1998 includes the following
components:


<TABLE> 
<CAPTION> 
===================================================================================================================================
                                                                             U.S. Plans                  International Plans
  Year ended December 31 (Millions)                                 2000       1999        1998        2000      1999      1998
  -------------------------------------------------------------------------------------------------------------------------------
  <S>                                                             <C>         <C>       <C>          <C>       <C>       <C>   
  Service cost                                                    $   37.4    $  39.3   $    35.7    $  18.7   $  18.0   $   15.3
  Interest cost                                                      263.5      251.3       248.3       49.9      51.5       45.8
  Expected return on plan assets                                    (440.3)    (395.4)     (356.5)     (67.3)    (67.4)     (56.8)
  Amortization of prior service (benefit) cost                        (5.9)      (6.3)       (6.6)        .9       1.0         .8
  Amortization of asset or liability at adoption                        .8         .7          .7         .3        .1
  Recognized net actuarial loss (gain)                                 1.1        1.4        23.7         .5       2.8        (.1)
  Settlement/curtailment (gain) loss                                   (.4)       1.4         1.1
                                                                  ---------------------------------------------------------------
  Net periodic pension (income) cost                              $ (143.4)   $(109.0)  $   (55.1)   $   4.4   $   7.1   $    5.0
  -------------------------------------------------------------------------------------------------------------------------------
                                                                
  Weighted-average assumptions as of December 31 
  were as follows:
  Discount rate                                                       8.00%      7.75%       7.00%      6.57%     6.35%      6.36%
  Rate of compensation increase                                       5.40%      5.40%       5.40%      3.77%     3.81%      4.07%
  Expected long-term rate of return on assets                        10.00%     10.00%      10.00%      8.51%     8.44%      8.23%
  -------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
</TABLE>
 

Other postretirement benefits
A reconciliation of the benefit obligation, fair value of the plan assets, and
the funded status of the postretirement medical plan at December 31, 2000 and
1999, follows:


=====================================================================
  December 31 (Millions)                          2000       1999      
  ----------------------------------------------------------------- 
  Change in benefit obligation                                       
     Benefit obligation at beginning of        
       year                                    $   217.4   $  225.8  
     Interest cost                                  14.9       14.9  
     Plan participants' contributions               24.1       23.8  
     Actuarial loss (gain)                           7.2        1.5  
     Benefits paid                                 (44.3)     (43.1) 
     Effect of settlement/curtailment                (.2)      (5.5) 
                                               -------------------- 
  Benefit obligation at end of year            $   219.1   $  217.4  
                                               --------------------  
  Change in plan assets                                              
     Fair value of plan assets at                                    
       beginning of year                       $    13.4   $   13.3  
     Actual return on plan assets                    1.4        (.1) 
     Employer contributions                         18.7       19.5  
     Plan participants' contributions               24.1       23.8  
     Benefits paid                                 (44.3)     (43.1) 
                                               --------------------  
  Fair value of plan assets at end of year     $    13.3   $   13.4  
                                               -------------------- 
  Funded status                                $  (205.8)  $ (204.0) 
  Unrecognized net actuarial loss                   17.5       12.1  
  Unrecognized prior service benefit               (11.8)     (13.6) 
                                               -------------------- 
  Accrued benefit cost                         $  (200.1)  $ (205.5)  
  ----------------------------------------------------------------- 
=====================================================================

   Net periodic postretirement benefit cost for 2000, 1999, and 1998 follows:

========================================================================
  Year ended December 31 (Millions)         2000      1999      1998
  -------------------------------------------------------------------
  Interest cost                           $   14.9   $ 14.9    $ 15.5
  Expected return on plan assets                        (.4)     (1.1)
  Amortization of prior
     service benefit                          (2.0)    (2.2)     (2.7)
  Recognized net actuarial loss                 .4       .6        .6
  Settlement/curtailment gain                          (6.5)
                                          --------------------------- 
  Net periodic benefit cost               $   13.3   $  6.4    $ 12.3
                                          --------------------------- 
  Weighted-average assumptions as 
    of December 31 were as follows:

  Discount rate                               7.70%    7.50%     7.20%
  Expected return on plan assets              8.00%    8.00%     8.00%
  -------------------------------------------------------------------
========================================================================

56

<PAGE>
 
        The assumed health care cost trend rate used in measuring the
      expected cost of benefits covered by the plan was 10.2% for 2000,
      gradually declining to 5.5% in 2006 and thereafter. A one-percentage
      point increase (decrease) in the assumed health care cost trend rate
      would increase (decrease) the accumulated postretirement benefit
      obligation at December 31, 2000, by $8.6 and $(7.9) million,
      respectively, and increase (decrease) the interest cost component of
      net periodic postretirement benefit cost for 2000 by $.6 and $(.6)
      million, respectively.

 17   Stockholders' equity

      The company has 720.0 million authorized shares of common stock, par
      value $.01 per share, and 40.0 million shares of authorized
      preferred stock, par value $1 per share, issuable in series. 
        During the year ended December 31, 1999, the company made several
      calls of its Series A Cumulative Convertible Preferred Stock
      ("Series A Preferred Stock") for redemption. As a result, of the
      28.4 million shares of Series A Preferred Stock outstanding at
      December 31, 1998, 24.5 million were converted into 40.8 million
      shares of the company's common stock and 3.9 million shares of
      Series A Preferred Stock were redeemed for $197.0 million in cash.
        In 1999, the remaining balance of $27 million of 8 1/4% convertible
      subordinated notes due 2006 were converted into 3.9 million shares
      of the company's common stock.
        Each outstanding share of common stock has attached to it one
      preferred share purchase right. The rights become exercisable only
      if a person or group acquires 20% or more of the company's common
      stock, or announces a tender or exchange offer for 30% or more of
      the common stock. Until the rights become exercisable, they have no
      dilutive effect on net income per common share.
        At December 31, 2000, 28.3 million shares of unissued common stock
      of the company were reserved for stock options and for stock
      purchase and savings plans.
        Changes in issued shares during the three years ended December 31,
      2000, were as follows:

=========================================================================
                                     Preferred    Common      Treasury
  (Thousands)                          Stock       Stock        Stock
  ---------------------------------------------------------------------
  Balance at December 31, 1997         28,800     251,764       (739)
  Conversions to common stock              (2)        110
  Issuance of stock under stock
     option and other plans                143      7,573       (553)
                                      ------------------------------
  Balance at December 31, 1998          28,941    259,447     (1,292)
  Conversions to common stock          (24,952)    46,090            
  Redemptions                           (3,941)
  Issuance of stock under stock
     option and other plans                         6,916       (578)
  Other                                   (48)
                                      ------------------------------
  Balance at December 31, 1999               -    312,453     (1,870)
  Issuance of stock under stock
     option and other plans                         4,882        (26)
                                      ------------------------------
  Balance at December 31, 2000               -    317,335     (1,896)
  ---------------------------------------------------------------------
=========================================================================

   Comprehensive income for the three years ended December 31, 2000, includes
the following components:

=======================================================================
  Year ended
  December 31 (Millions)                   2000     1999       1998
  -------------------------------------------------------------------
  Net income                          $   225.0   $ 510.7    $ 376.4
                                      ------------------------------
  Other comprehensive                                        
     income (loss)                                           
       Foreign currency translation                          
          adjustments                    (54.3)     (41.6)     (89.6)
       Related tax (benefit)              19.0       (2.8)      (6.1)
       expense                        
                                      ------------------------------ 
  Total other comprehensive                                  
     income (loss)                       (73.3)     (38.8)     (83.5)
                                      ------------------------------
  Comprehensive income                $  151.7    $ 471.9    $ 292.9
  -------------------------------------------------------------------
=======================================================================

                                                                              57

<PAGE>
 
Report of Management

The management of the company is responsible for the integrity of its financial
statements. These statements have been prepared in conformity with accounting
principles generally accepted in the United States and include amounts based on
the best estimates and judgments of management. Financial information included
elsewhere in this report is consistent with that in the financial statements.
   The company maintains a system of internal accounting controls designed to
provide reasonable assurance at a reasonable cost that assets are safeguarded
against loss or unauthorized use, and that transactions are executed in
accordance with management's authorization and recorded and summarized properly.
This system is augmented by written policies and procedures, an internal audit
program, and the selection and training of qualified personnel.
   Ernst & Young LLP, independent auditors, have audited the company's financial
statements. Their accompanying report is based on audits conducted in accordance
with auditing standards generally accepted in the United States, which require a
review of the system of internal accounting controls and tests of accounting
procedures and records to the extent necessary for the purpose of their audits.
   The Board of Directors, through its Audit Committee, which is composed
entirely of outside directors, oversees management's responsibilities in the
preparation of the financial statements and selects the independent auditors,
subject to stockholder ratification. The Audit Committee meets regularly with
the independent auditors, representatives of management, and the internal
auditors to review the activities of each and to assure that each is properly
discharging its responsibilities. To ensure complete independence, the internal
auditors and representatives of Ernst & Young LLP have full access to meet with
the Audit Committee, with or without management representatives present, to
discuss the results of their examinations and their opinions on the adequacy of
internal controls and the quality of financial reporting.

/s/ Lawrence A. Weinbach                 /s/ Janet Brutschea Haugen 

Lawrence A. Weinbach                     Janet Brutschea Haugen 
Chairman, President,                     Senior Vice President 
and Chief Executive Officer              and Chief Financial Officer



Report of Independent Auditors

To the Board of Directors of Unisys Corporation

   We have audited the accompanying consolidated balance sheets of Unisys
Corporation at December 31, 2000 and 1999, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 2000. These financial statements are the
responsibility of Unisys Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
   In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Unisys Corporation
at December 31, 2000 and 1999, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States.


/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
January 18, 2001


58

<PAGE>
 
Unisys Corporation

Supplemental Financial Data (Unaudited)

Quarterly financial information


<TABLE>
<CAPTION>
                                                    First         Second         Third         Fourth             
(Millions, except per share data)                  Quarter       Quarter        Quarter       Quarter        Year  
===================================================================================================================
<S>                                             <C>           <C>            <C>           <C>           <C> 
2000
---------------------------------
Revenue                                         $  1,668.7    $  1,597.1     $  1,690.9    $  1,928.3    $  6,885.0
Gross profit                                         539.3         480.8          474.7         594.3       2,089.1
Income before income taxes                           161.4          85.3           65.0          67.3         379.0
Income before extraordinary item                     106.5          56.3           42.9          39.1         244.8
Net income                                           106.5          36.5           42.9          39.1         225.0
Earnings per common share - basic
   Before extraordinary item                           .34           .18            .14           .12           .78
   Extraordinary item                                               (.06)                                      (.06)
                                                   ----------------------------------------------------------------      
   Total                                               .34           .12            .14           .12           .72
                                                   ----------------------------------------------------------------      
Earnings per common share - diluted
   Before extraordinary item                           .34           .18            .14           .12           .77
   Extraordinary item                                               (.06)                                      (.06)
                                                   ----------------------------------------------------------------      
   Total                                               .34           .12            .14           .12           .71
                                                   ----------------------------------------------------------------      
Market price per common share - high                 36.06         28.19          15.31         16.38         36.06
                              - low                  24.25         14.25           9.13          9.25          9.13
===================================================================================================================

1999
---------------------------------
Revenue                                         $  1,822.8    $  1,896.5     $  1,865.4   $   1,959.9    $  7,544.6
Gross profit                                         668.6         664.1          670.2         681.8       2,684.7
Income before income taxes                           169.7         182.5          196.1         222.0         770.3
Income before extraordinary item                     109.9         118.0          150.5         144.4         522.8
Net income                                           109.9         118.0          138.4         144.4         510.7
Dividends on preferred shares                         22.8          12.0            1.9                        36.7
Earnings on common shares                             87.1         106.0          136.5         144.4         474.0
Earnings per common share - basic                                                       
   Before extraordinary item                           .33           .39            .49           .47          1.69
   Extraordinary item                                                              (.04)                       (.04)
                                                   ----------------------------------------------------------------     
   Total                                               .33           .39            .45           .47          1.65
                                                   ----------------------------------------------------------------    
Earnings per common share - diluted                                                     
   Before extraordinary item                           .31           .37            .47           .46          1.63
   Extraordinary item                                                              (.04)                       (.04)
                                                   ----------------------------------------------------------------  
   Total                                               .31           .37            .43           .46          1.59
                                                   ---------------------------------------------------------------- 
Market price per common share - high                 36.50         39.94          49.69         47.44         49.69
                              - low                  27.63         27.38          37.06         20.94         20.94
===================================================================================================================
</TABLE>
 

In the fourth quarter of 2000, the company recognized a pretax restructuring
charge of $127.6 million, or $.29 per diluted common share. Excluding this item,
diluted earnings per share for the year before the extraordinary item was $1.06.
See Note 5 of the Notes to Consolidated Financial Statements.

In the third quarter of 1999, the company completed three acquisitions that were
accounted for as poolings of interests and all prior periods were restated. See
Note 3 of the Notes to Consolidated Financial Statements. 

Included in the third quarter of 1999, the company recognized a one-time tax
benefit of $22.0 million, or $.07 per diluted common share. Excluding this item,
diluted earnings per share for the year before the extraordinary item was $1.56.
See Note 7 of the Notes to Consolidated Financial Statements.

The individual quarterly per-common share amounts may not total to the
per-common share amount for the full year because of accounting rules governing
the computation of earnings per common share. 

Market prices per common share are as quoted on the New York Stock Exchange
composite listing.

                                                                              59

<PAGE>
 
Ten-Year summary of selected financial data


<TABLE> 
<CAPTION> 
(Millions, except 
 per share data)              2000(1)    1999      1998    1997(1)   1996    1995(1)    1994(1)      1993       1992      1991(1)  
==================================================================================================================================
<S>                        <C>       <C>        <C>       <C>      <C>       <C>       <C>         <C>        <C>        <C>      
Results of operations                                              
Revenue                    $6,885.0   $7,544.6  $7,243.9  $6,662.9 $6,397.9  $6,370.3   $6,130.6   $6,133.0   $6,750.9   $ 6,943.0  
Operating income (loss)       426.8      960.7     799.0    (408.4)   313.1    (568.4)     273.8      692.7      690.2      (612.7) 
Income (loss) from                  
   continuing operations            
   before income taxes        379.0      770.3     594.2    (748.1)    80.2    (786.0)      17.4      365.2      304.6    (1,422.2) 
Income (loss) from                  
   continuing operations            
   before extraordinary                         
   items and changes in             
   accounting principles      244.8      522.8     376.4    (852.9)    50.7    (632.2)      14.8      280.6      168.6    (1,517.8) 
Net income (loss)             225.0      510.7     376.4    (852.9)    38.6    (629.5)     103.2      559.7      363.5    (1,390.9) 
Dividends on preferred              
  shares                                  36.7     106.5     111.1    120.8     120.3      120.1      121.6      122.1       121.2
Earnings (loss) on common                                             
  shares                      225.0      474.0     269.9    (964.0)   (82.2)   (749.8)     (16.9)     438.1      241.4    (1,512.1) 
Earnings (loss) from                
  continuing operations             
  per common share                                    
     Basic                      .78       1.69      1.07     (5.25)    (.40)    (4.36)      (.61)       .97        .28      (10.05) 
     Diluted                    .77       1.63      1.01     (5.25)    (.40)    (4.36)      (.61)       .88        .28      (10.05) 
                                                           
Financial position                                         
Working capital                     
  (deficit)                $  (98.8)  $  227.2  $  247.5  $  321.9 $  684.5  $   93.5   $1,044.2   $  700.9   $  537.7   $   406.7
Total assets                5,717.7    5,889.7   5,613.2   5,631.6  7,002.3   7,153.3    7,238.1    7,386.3    7,365.1     8,256.5
Long-term debt                536.3      950.2   1,106.7   1,438.4  2,271.5   1,533.3    1,864.1    2,025.0    2,172.8     2,694.6
Common stockholders'                                                  
  equity(2)                 2,186.1    1,953.3      90.9    (210.3)   188.8     303.7    1,052.0    1,072.0      561.8       359.2
Common stockholders'                                                                                                                
  equity per share             6.93       6.29       .35      (.84)    1.07      1.76       6.10       6.24       3.44        2.20
Other data                                                          
Research and                                                           
  development              $  333.6   $  339.4  $  308.3  $  314.8 $  352.0  $  411.7   $  464.8   $  496.9   $  513.3   $   617.3
Capital additions                                                      
  of properties               198.3      219.6     209.1     184.0    164.3     196.0      209.4      174.0      228.4       224.1
Investment in                                                                                                                       
  marketable software         152.4      122.8     100.3     133.5    116.6     123.0      121.3      118.7      110.2       167.7 
Depreciation                  143.0      141.8     149.2     159.1    184.4     205.5      228.7      254.0      313.4       413.9
Amortization                                                           
   Marketable software        115.5      110.9     112.3      97.2    101.7     151.7      150.5      144.6      131.8       241.0
   Goodwill                    12.5       12.5       8.9     963.9     46.1      40.9       36.9       36.7       36.8       246.6 
Common shares                       
   outstanding (millions)     315.4      310.6     258.2     251.0    176.4     172.9      172.5      171.9      163.4       163.1 
Stockholders of record              
   (thousands)                 29.7       32.8      28.6      37.3     39.2      41.5       45.3       47.8       51.7        54.6 
Employees (thousands)          36.9       35.8      33.5      32.9     33.2      37.6       38.0       38.4       42.0        46.7
=================================================================================================================================== 
</TABLE>
 

(1) Includes special pretax charges of $127.6 million, $1,039.2 million,
    $846.6 million, $186.2 million, and $1,200.0 million for the years ended
    December 31, 2000, 1997, 1995, 1994, and 1991, respectively.

(2) After deduction of cumulative preferred dividends in arrears in 1991,
    1992, and 1993.

60





<PAGE>
 
Exhibit 21

                         SUBSIDIARIES OF THE REGISTRANT



     Unisys Corporation, the registrant, a Delaware company, has no parent. The
registrant owns directly or indirectly all the voting securities of the
following subsidiaries:

                                                       State
                                                      or Other
                                                   Jurisdiction
                                                     Under the
                                                   Laws of Which
Name of Company                                      Organized
---------------                                    -------------

Unisys Australia Limited                             Michigan
Unisys Espana S.A.                                   Spain
Unisys (Schweiz) A.G.                                Switzerland
Unisys Belgium                                       Belgium
Unisys Deutschland G.m.b.H.                          Germany
Unisys Sudamericana S.A.                             Argentina
Unisys Electronica Ltda.                             Brazil
Datamec, S.A.                                        Brazil
Unisys France                                        France
Unisys Italia S.p.A.                                 Italy
Unisys Limited                                       England
Unisys Nederland N.V.                                Netherlands
Unisys de Mexico, S.A. de C.V.                       Mexico
Unisys Korea Limited                                 Korea
Unisys Funding Corporation I                         Delaware
Unisys Africa, Inc.                                  Delaware

     The names of certain subsidiaries are omitted from the above list; such
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.





<PAGE>
 
Exhibit 23


                        CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Unisys Corporation of our report dated January 18, 2001, included in the 2000
Annual Report to Stockholders of Unisys Corporation.

Our audits also included the financial statement schedule of Unisys Corporation
listed in Item 14(a). This schedule is the responsibility of Unisys
Corporation's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

We consent to the incorporation by reference in the following Registration
Statements:

(1)  Registration Statement (Form S-3 No. 33-25715) of Unisys Corporation, 
(2)  Registration Statement (Form S-3 No. 33-51747) of Unisys Corporation,
(3)  Registration Statement (Form S-3 No. 333-20373) of Unisys Corporation,  
(4)  Registration Statement (Form S-3 No. 333-51885) of Unisys Corporation,
(5)  Registration Statement (Form S-8 No. 333-51887) pertaining to the Unisys
     LTIP,
(6)  Registration Statement (Form S-8 No. 333-51889) pertaining
 to the Unisys
     Global Employee Stock Purchase Plan, 
(7)  Registration Statement (Form S-8 No. 333-73399) pertaining to the Deferred
     Compensation Plan for Executives of Unisys Corporation,
(8)  Registration Statement (Form S-4 No. 333-74745) of Unisys Corporation,
(9)  Registration Statement (Form S-8 No. 333-87409) pertaining to the
     PulsePoint Communications 1983 Stock Option Plan, the Stock Option Plan for
     Independent Directors of Digital Sound Corporation and the Tech Hackers,
     Inc. 1997 Equity Incentive Plan,
(10) Registration Statement (Form S-8 No. 333-87411) pertaining to the Unisys
     Savings Plan, and
(11) Registration Statement (Form S-8 No. 333-40012) pertaining to the Director
     Stock Unit Plan;

of our report dated January 18, 2001, with respect to the consolidated financial
statements incorporated herein by reference and our report included in the
preceding paragraph with respect to the financial statement schedule included in
this Annual Report (Form 10-K) of Unisys Corporation.


/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
February 2, 2001



<PAGE>
 
Exhibit 24

                               POWER OF ATTORNEY
                              Unisys Corporation
                          Annual Report on Form 10-K
                     for the year ended December 31, 2000


     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below does hereby make, constitute and appoint LAWRENCE A. WEINBACH, JANET
BRUTSCHEA HAUGEN AND NANCY STRAUS SUNDHEIM, and each one of them severally, his
true and lawful attorneys-in-fact and agents, for such person and in such
person's name, place and stead, to sign the Unisys Corporation Annual Report on
Form 10-K for the year ended December 31, 2000, and any and all amendments
thereto and to file such Annual Report on Form 10-K and any and all amendments
thereto with the Securities and Exchange Commission, and does hereby grant unto
such attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as said person
might or could do in person, hereby ratifying and confirming all that such
attorney-in-fact and agents and each of them may lawfully do or cause to be done
by virtue hereof.

Dated:  February 2, 2001



/s/ J. P. Bolduc                                /s/ Rajiv L. Gupta
----------------------                          ------------------------
J. P. Bolduc                                        Rajiv L. Gupta
Director                                            Director


/s/ James
 J. Duderstadt                         /s/ Edwin A. Huston
-----------------------                         ------------------------
James J. Duderstadt                                 Edwin A. Huston
Director                                            Director


/s/ Henry C. Duques                             /s/ Kenneth A. Macke
-----------------------                         -------------------------
Henry C. Duques                                     Kenneth A. Macke
Director                                            Director


/s/ Gail D. Fosler                              /s/ Theodore E. Martin
-----------------------                         -------------------------
Gail D. Fosler                                      Theodore E. Martin
Director                                            Director


/s/ Melvin R. Goodes                            /s/ Lawrence A. Weinbach
-----------------------                         -------------------------
Melvin R. Goodes                                    Lawrence A. Weinbach
Director                                            Chairman of the Board,
                                                    President and Chief
                                                    Executive Officer;
                                                    Director