<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, 1994

                              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.)

Township Line and Union Meeting Roads
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:


<TABLE> 
<CAPTION> 
                                     Name of each exchange on
  Title of each class                     which registered
  -------------------                ------------------------
<S>                                    <C> 
Common Stock, par value $.01           New York Stock Exchange
Series A Cumulative Convertible
 Preferred Stock, par value
 $1, $3.75 annual fixed dividend       New York Stock Exchange
Preferred Share Purchase Rights        New York Stock Exchange
10.30% Credit Sensitive Notes
 Due July 1, 1997                      New York Stock Exchange
8 1/4% Convertible Subordinated
 Notes Due 2000                        New York Stock Exchange
</TABLE>
 

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

                           None

<PAGE>
 
                           -2-

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.  [ X ]

Aggregate market value of the voting stock held by non-
affiliates:  approximately $1,558,425,197 as of March 1, 1995.
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 March 1, 1995:  171,001,364.

              DOCUMENTS INCORPORATED BY REFERENCE


Portions of the Unisys Corporation 1994 Annual Report to
Stockholders -- Part I, Part II and Part IV.

Portions of the Unisys Corporation Proxy Statement for 1995
Annual Meeting of Stockholders -- Part III.

<PAGE>
 
                           -3-


                          PART I



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

  Unisys Corporation ("Unisys") provides information
services, technology and software on a worldwide basis.

  Unisys operates primarily in one business segment:
information systems and related services and supplies.  This
segment represents more than 90% of consolidated revenue,
operating profit and identifiable assets. Financial information
concerning revenue, operating profit and identifiable assets
relevant to the segment is set forth in Note 11, "Business
segment information", of the Notes to Consolidated Financial
Statements appearing in the Unisys 1994 Annual Report to
Stockholders, and such information is incorporated herein by
reference.

  Principal executive offices of Unisys are located at
Township Line and Union Meeting Roads, Blue Bell, Pennsylvania
19424.

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

  Principal information systems products and services 
include enterprise systems and servers, departmental servers 
and desktop systems, software, custom defense systems, information 
services and systems integration, and equipment maintenance.

  Enterprise systems and servers comprise a complete line of
small to large processors and related communications and
peripheral products, such as printers, storage devices and
document handling processors and equipment.  Departmental servers
and desktop systems include UNIX servers, workstations, personal
computers, and terminals.  Software consists of application and
systems software.  Custom defense systems include specialized
information processing systems, software, and services marketed
primarily to government defense agencies.  Information services
and systems integration includes systems integration, outsourcing
services, application development, information planning, and
education.  Equipment maintenance results from charges for
preventive maintenance, spare parts, and other repair activities.
___________________
UNIX is a registered trademark licensed in the United States and
other countries, exclusively by X/Open Company, Ltd.

<PAGE>
 
                           -4-

  Information about revenue from classes of similar products
and services for the three years ended December 31, 1994,
appears under the heading "Revenue by similar classes of
products and services" appearing in the Unisys 1994 Annual Report
to Stockholders, and such information is incorporated herein
by reference.

  Unisys markets its products and services throughout most of
the world, primarily through a direct sales force.  In certain
foreign countries, Unisys products and services are marketed
primarily through distributors.  Unisys manufactures a
significant portion of its product lines.  Some products,
including certain personal and UNIX open system-based computers,
peripheral products, electronic components and subassemblies and
software products, are manufactured for Unisys to its design or
specifications by other business equipment manufacturers,
component manufacturers or software suppliers.

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 used on or in connection with
Unisys products are considered to be valuable assets of Unisys.

Backlog
- -------

  Unisys does not accumulate backlog information on a
company-wide basis.  Unisys believes that backlog is not a
meaningful indicator of future revenues due to the significant
portion of Unisys revenue received from software, information
services and systems integration, and equipment maintenance
(approximately 55% in 1994) and the shortening of the time
period from receipt of a purchase order to billing upon shipment
of equipment.  Unisys "lead time" for commercial equipment (the
time that customers are told that it will take from receipt of
an order to shipment) is between 13 and 150 days depending upon
the type of system and location of customer.  However, the
average is between 35 and 45 days.  Therefore, Unisys believes
that the dollar amount of backlog is not material to an
understanding of its business taken as a whole.

<PAGE>
 
                           -5-

U.S. Government Business
- ------------------------

  Revenue and earnings connected with defense and other U.S.
governmental business are particularly subject to the size and
phasing of federal government programs in which Unisys may
participate.  During 1994, revenue from sales of custom systems
and services under Federal defense and space contracts and
subcontracts represented approximately 15% of total consolidated
revenue.  Sales of commercial products to the U.S. government
represented an additional 7% of total consolidated revenue.

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

  Unisys business is affected by rapid change in technology
in the information systems and services field and aggressive
competition from many domestic and foreign companies, including
computer hardware manufacturers, software providers and
information services companies.  Unisys competes primarily on
the basis of product performance, service, 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 engineering and research and development costs were
$870.9 million in 1994, $934.7 million in 1993 and $980.7
million in 1992.  Excluding capitalized software and hardware
support, Unisys-sponsored research and development costs were
$483.4 million in 1994, $515.2 million in 1993 and $535.9
million in 1992.  Customer-sponsored research and development
costs were $197.2 million in 1994, $231.1 million in 1993, and
$243.3 million in 1992.

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 1995 and 1996.

Employees
- ---------

  As of December 31, 1994, Unisys had approximately 46,300
employees.

<PAGE>
 
                           -6-

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

  Financial information by geographic area is set forth in
Note 11, "Business segment information", of the Notes to
Consolidated Financial Statements appearing in the Unisys 1994
Annual Report to Stockholders, and such information is
incorporated herein by reference.


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

  In the United States, Unisys had 57 major facilities, each
having approximately 50,000 square feet of floor space or more,
as of December 31, 1994.  The aggregate floor space of these
major facilities was approximately 12,552,071 square feet, of
which an aggregate of approximately 11,131,694 square feet was
located in the following states:  California, Illinois,
Michigan, Minnesota, New York, Pennsylvania, Utah and Virginia.
Fourteen of the major facilities in the United States, with an
aggregate of approximately 5,040,199 square feet of floor space,
were owned by Unisys while 43 of the major facilities in the
United States, with approximately 7,511,872 square feet of floor
space, were leased to Unisys.  Of the aggregate floor space of
major facilities in the United States, approximately 11,312,629
square feet were in current operation, approximately 1,051,745
square feet were subleased to others and approximately 187,697
square feet were being held in reserve or were declared surplus
with disposition efforts in progress.

  Outside of the United States, Unisys had 44 major
facilities, each having approximately 50,000 square feet of
floor space or more, as of December 31, 1994.  The aggregate
floor space of these major facilities was approximately
4,280,771 square feet, of which an aggregate of approximately
3,319,270 square feet was located in the following countries:
Brazil, Canada, France, Germany, Mexico, the Netherlands, Sweden
Switzerland and the United Kingdom.  Ten of the major facilities
outside the United States, with approximately 1,598,739 square
feet of floor space, were owned by Unisys while 34 of the major
facilities outside the United States, with approximately
2,682,032 square feet of floor  space, were leased to Unisys.
Of the aggregate floor space of major facilities outside the
United States, approximately 3,349,935 square feet were in
current operation, approximately 562,344 square feet were
subleased to others and approximately 368,492 square feet were
being held in reserve or were declared surplus with disposition
efforts in progress.

<PAGE>
 
                           -7-

  Unisys major facilities include offices, laboratories,
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, on the basis thereof, will from time to time
acquire additional facilities, expand existing facilities and
dispose of existing facilities or parts thereof.


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

  As of March 1, 1995, Unisys has no material pending legal 
proceedings reportable under the requirements of this Item 3.


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 1994.


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

  Information concerning the executive officers of Unisys set
forth below is as of March 1, 1995.


<TABLE>
<CAPTION>
     Name                Age      Position with Unisys
     ----                ---    -------------------------
<S>                      <C>    <C>
                             
James A. Unruh            53    Chairman of the Board
                                  and Chief Executive
                                  Officer
                             
Stephen A. Carns          49    Executive Vice President;
                                  President, Information
                                  Services and Systems
                                  Group
                             
Alan G. Lutz              49    Executive Vice President;
                                  President, Computer
                                  Systems Group
                             
Albert F. Zettlemoyer     60    Executive Vice President;
                                  President, Government
                                  Systems Group
                             
Harold S. Barron          58    Senior Vice President,
                                  General Counsel and
                                  Secretary
                             
Edward A. Blechschmidt    42    Senior Vice President;
                                  President, United
                                  States/Canada Division
</TABLE>


<PAGE>
 
                            -8-
 

<TABLE> 
<S>                       <C>   <C> 
Malcolm D. Coster         50    Senior Vice President;
                                  President, Europe-
                                  Africa Division
                                
George T. Robson          47    Senior Vice President and
                                  Chief Financial Officer
                                
Jack A. Blaine            50    Vice President;
                                  President,
                                  Latin America and
                                  Caribbean Division
                                
Frank G. Brandenberg      48    Vice President;
                                  President,
                                  Client/Server Systems
                                
Gerald A. Gagliardi       47    Vice President,
                                  Customer Services
                                  Worldwide
                                
George R. Gazerwitz       54    Vice President;
                                  President,
                                  Japan Division
                                
Patricia L. Higgins       45    Vice President;
                                  President,
                                  Communications Line
                                  of Business
                                
John J. Holton            62    Vice President, Strategic
                                  Account Marketing,
                                  United States/Canada
                                  Division
                                
Deborah C. Hopkins        40    Vice President and
                                  Controller
                                
Clive W. Ingham           49    Vice President;
                                  Group General Manager,
                                  European Group,
                                  Europe-Africa Division
                                
Jack F. McHale            46    Vice President,
                                  Investor and Corporate
                                  Communications
                                
Thomas E. McKinnon        50    Vice President,
                                  Human Resources
                                
Dewaine L. Osman          60    Vice President, Corporate
                                  Planning and Business
                                  Development
</TABLE>


<PAGE>
 
                           -9-


<TABLE> 
<S>                       <C>       <C> 
Stefan C. Riesenfeld      46        Vice President and
                                      Treasurer
                          
William G. Rowan          52        Vice President,
                                      Chief Information
                                      Officer
</TABLE>
 

  There are no family relationships among any of the above-
named executive officers.  The By-Laws 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. Unruh has been the Chairman of the Board and Chief
Executive Officer since 1990.  He was President and Chief
Operating Officer from 1989 to 1990 and Executive Vice President
from 1986 to 1989.  He has also held the position of Senior Vice
President and Chief Financial Officer.  Mr. Unruh has been a
member of the Board of Directors since 1986 and has been an
officer since 1982.

  Mr. Carns was elected an Executive Vice President of Unisys
and named President of Unisys Information Services and Systems
Group in October 1994.  He was President and Chief Operating
Officer of Systematics, a provider of value-added software and
outsourcing services from 1992 to 1994.  He was President and
Chief Operating Officer of Cap Gemini America from 1990 to 1992
and Vice President of IBM's Professional Services Group from
1985 to 1990.  Mr. Carns has been an officer since October 1994.

  Mr. Lutz was elected an Executive Vice President of Unisys
in June 1994.  He was named President of Unisys Computer Systems
Group in May 1994.  He was President of the Kassandra Group, a
technology and product consulting firm to the telecommunications
industry from 1993 to 1994.  From 1987 to 1993, he held numerous
positions with Northern Telecom, including President of
Switching Networks and President of Public Networks.  Mr. Lutz
has been an officer since June 1994.

  Mr. Zettlemoyer was elected an Executive Vice President of
Unisys and named President of Unisys Government Systems Group in
August 1993.  He was a Senior Vice President of Unisys and
President of Paramax Systems Corporation, a subsidiary of Unisys,
from December 1992 to August 1993.  He was Vice President,
Corporate Planning, from July to December 1992; President,
Electronic and Information Systems Group, of Paramax Systems
Corporation from 1991 to 1992 and President, Electronic and
Information Systems Group, Defense Systems Division from 1989 to
1991.  Mr. Zettlemoyer has been an officer since 1987.

  Mr. Barron has been Senior Vice President and General Counsel
of Unisys since 1992.  In April 1994 he was also elected
Secretary.  He was Vice President and General Counsel from 1991
to 1992 and a member of the law firm Seyfarth, Shaw, Fairweather
and Geraldson from 1986 to 1991.  Mr. Barron has been an officer
since 1991.

<PAGE>
 
                           -10-

  Mr. Blechschmidt was elected a Senior Vice President of
Unisys in February 1994 and has been President of the United
States/Canada Division since January 1995.  He was a Vice
President of Unisys and President of the Pacific Asia Americas
Division from 1990 to January 1995.  He was Vice President,
Japan Operations and President of the Unisys Japan Limited
subsidiary from 1987 to 1990.  Mr. Blechschmidt has been an
officer since 1990.

  Mr. Coster was elected a Senior Vice President of Unisys and
named President,  Europe-Africa Division in April 1994.  He was
an Executive Partner of Coopers & Lybrand responsible for the
management consulting practice and head of worldwide business
development from 1986 to 1994.  Prior to joining Coopers, he
worked with James Martin Associates and with British
Petroleum/SCICON.  Mr. Coster has been an officer since April 1994.

  Mr. Robson has been Senior Vice President and Chief Financial
Officer since 1991.  He was Vice President and Chief Financial
Officer from 1990 to 1991 and Vice President and Corporate
Controller from 1987 to 1990.  Mr. Robson has been an officer
since 1987.

  Mr. Blaine has been a Vice President of Unisys and President,
Latin America and Caribbean Division since January 1995.
Mr. Blaine was Vice President and General Manager, Latin America
and Caribbean Group, of the Pacific Asia Americas Division from
1990 to January 1995.  He was Vice President, Human Resources,
of Unisys from 1988 to 1990.  Mr. Blaine has been an officer
since 1988.

  Mr. Brandenberg has been a Vice President of Unisys and the
President of Client/Server Systems since May 1994.  He was Vice
President and Deputy President of the Computer Systems Group
from 1992 to May 1994; Vice President and General Manager of the
Computer Systems Group from 1990 to 1992 and Vice President and
General Manager of the Diversified Products Group from 1989 to
1990.  Mr. Brandenberg has been an officer since 1990.

  Mr. Gagliardi has been Vice President, Customer Services
Worldwide since June 1994.  He was Vice President and General
Manager, Customer Services and Support from 1991 to 1994 and Vice
President and General Manager, Customer Technical Services from
1989 to 1990.  Mr. Gagliardi has been an officer since July 1994.

  Mr. Gazerwitz has been Vice President and President, Japan
Division since August 1994.  He was Vice President, Marketing,
of the United States Division from December 1992 to August 1994.
He was Vice President and Group Vice President, Eastern Region,
United States Information Systems from 1990 to 1992; and Vice
President and President, Customer Services and Support, United
States Information Systems from 1988 to 1990.  Mr. Gazerwitz has
been an officer since 1984.

<PAGE>
 
                           -11-

  Ms. Higgins was elected a Vice President of Unisys and
named President, Communications Line of Business in January 1995.
She was the Group Vice President, Manhattan Market Area, and a
corporate officer of NYNEX Corporation from 1991 to December
1994.  From 1977 to 1991, Ms. Higgins held numerous positions at
AT&T Company, including Vice President of International Sales
Operations and Service Vice President in Business Communications
Services.  Ms. Higgins has been an officer since January 1995.

  Mr. Holton has been Vice President, Strategic Account
Marketing, United States/Canada Division since 1990.  He was
Vice President, Corporate Marketing, from 1989 to 1990.
Mr. Holton has been an officer since 1985.

  Ms. Hopkins has been Vice President and Controller since
1993.  She was Vice President, Corporate Business Analysis from
1991 to 1993; and Director, Image Business Development, Program
Management, of the Computer Systems Product Group from 1989 to
1991.  Ms. Hopkins has been an officer since 1993.

  Mr. Ingham has been a Vice President of Unisys and the Group
General Manager, European Group, Europe-Africa Division since
November 1993.  He was Vice President, Corporate Marketing, from
1991 until November 1993; and Vice President and General Manager,
Asia Group, of the Pacific Asia Americas Division from 1989 to
1991.  Mr. Ingham has been an officer since 1992.

  Mr. McHale has been Vice President, Investor and Corporate
Communications, since 1989.  He was Vice President, Public and
Investor Relations, from 1986 to 1989.  Mr. McHale has been an
officer since 1986.

  Mr. McKinnon has been Vice President, Human Resources,
since 1990.  He was Vice President of the Pacific Asia Americas
Division from 1989 to 1990; and Staff Vice President, Corporate
Human Resources, from 1987 to 1989.  Mr. McKinnon has been an
officer since 1991.

  Mr. Osman has been Vice President, Corporate Planning and
Business Development, since 1992.  He was acting Vice President,
Commercial Marketing from November 1993 to December 1994.  Prior
to October 1992, he had been President of Ascom Timeplex, Inc.
(formerly Timeplex, Inc., the communications networking
subsidiary of Unisys) since its divestiture by Unisys in 1991.
From 1986 to 1991, Mr. Osman was an officer of Unisys, serving
as President of the Communications and Networks Group and as
President of Timeplex, Inc. from 1989 to 1991.  He was
reelected an officer in 1992.

<PAGE>
 
                          -12-

  Mr. Riesenfeld has been Vice President and Treasurer since
1989.  He was Vice President, Corporate Development, from 1986
to 1989.  Mr. Riesenfeld has been an officer since 1988.

  Mr. Rowan has been a Vice President of Unisys and Chief
Information Officer since 1992.  He was Vice President and
Controller from 1991 to 1992; Vice President, Business Operations,
from February to April 1991; and Vice President, Finance, of the
Pacific Asia Americas Division from 1986 to 1991.  Mr. Rowan has
been an officer since 1991.


                         PART II



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

  Information as to the markets for Unisys Common Stock, the
high and low sales prices for Unisys Common Stock, the
approximate number of record holders of Unisys Common Stock, the
payment of dividends, and restrictions on such payment is set
forth under the headings "Quarterly financial information",
"Eight-year summary of selected financial data", "Common Stock 
Information", "Management's Discussion and Analysis of Financial 
Condition and Results of Operations" and Notes 9 and 13 of the Notes 
to Consolidated Financial Statements in the Unisys 1994 Annual
Report to Stockholders and is incorporated herein by reference.
The approximate number of holders is based upon record holders
as of December 31, 1994.


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

  A summary of selected financial data for Unisys for each of
the last five years is set forth under the heading "Eight-year
summary of selected financial data" in the Unisys 1994 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,
changes in 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
1994 Annual Report to Stockholders and is incorporated herein
by reference.

<PAGE>
 
                          -13-


I
TEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------

  The financial statements of Unisys, consisting of the
consolidated balance sheet at December 31, 1994 and 1993 and the
related consolidated statements of income and cash flows for
each of the three years in the period ended December 31, 1994,
appearing in the Unisys 1994 Annual Report to Stockholders,
together with the report of Ernst & Young LLP, independent
auditors, on the financial statements at December 31, 1994 and
1993 and for each of the three years ended December 31, 1994,
1993, and 1992, appearing in the Unisys 1994 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 1994
Annual Report to Stockholders, is incorporated herein by reference.


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

  Not applicable.


                        PART III


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

  (a)  Identification of Directors.  Information concerning
the directors of Unisys Corporation 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 1996" and "Members of the Board of Directors
Continuing in Office -- Term Expiring in 1997" in the Unisys
Proxy Statement for the 1995 Annual Meeting of Stockholders
and is incorporated herein by reference.

  (b)  Identification of Executive Officers.  Information
concerning executive officers of Unisys Corporation 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 heading "EXECUTIVE COMPENSATION" in the Unisys Proxy
Statement for the 1995 Annual Meeting of Stockholders and is
incorporated herein by reference.

<PAGE>
 
                          -14-


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

  (a)  Security Ownership of Certain Beneficial Owners.  The
TCW Group, Inc. (865 South Figueroa Street, Los Angeles,
California 90017) has filed a Schedule 13G with the Securities
and Exchange Commission dated January 21, 1995 reporting
beneficial ownership of 17,449,919 shares of Unisys Common
Stock.  Such shares represented approximately 10.0% of the total
outstanding shares of Unisys Common Stock as of March 1, 1995.
The TCW Group, Inc. has reported sole voting power and sole
dispositive power with respect to all such shares.  To Unisys
knowledge, as of March 1, 1995, no other person was the
beneficial owner of more than 5% of the total outstanding shares
of Unisys Common Stock.

  (b)  Security Ownership of Management.  Certain information
furnished by members of management with respect to shares of
Unisys equity securities beneficially owned as of March 1, 1995
by all directors individually, by certain named officers and by
all directors and officers of Unisys as a group is set forth
under the heading "SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" in the Unisys Proxy Statement for the
1995 Annual Meeting of Stockholders and is incorporated herein
by reference.


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

  Information concerning certain relationships and
transactions between Unisys and members of its management is set
forth under the headings "EXECUTIVE COMPENSATION" and "REPORT OF
THE COMPENSATION AND ORGANIZATION COMMITTEE -- Compensation
Committee Interlocks and Insider Participation" in the Unisys
Proxy Statement for the 1995 Annual Meeting of Stockholders
and is incorporated herein by reference.


                          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 1994 Annual Report to
    Stockholders which are incorporated herein by reference:

<PAGE>
 
                           -15-


<TABLE> 
<CAPTION> 
                                                       Annual Report
                                                          Page No.
                                                       -------------
<S>                                                    <C> 
Consolidated Balance Sheet at                         
 December 31, 1994 and December 31, 1993..............       25
                                                      
Consolidated Statement of Income for each of the      
 three years in the period ended December 31, 1994....       23
                                                      
Consolidated Statement of Cash Flows for each of the  
 three years in the period ended December 31, 1994....       27
                                                      
Notes to Consolidated Financial Statements............     30-41
                                                      
Report of Independent Auditors........................       42
</TABLE>
 

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


<TABLE> 
<CAPTION> 
Schedule                                                Form 10-K
 Number                                                  Page No.
- --------                                                ---------
<S>                                                     <C> 
II     Valuation and Qualifying Accounts.............       18
</TABLE>
 

  The financial statement schedule should be read in
conjunction with the consolidated financial statements and notes
thereto in the Unisys 1994 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 since
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 at pages 19 through 22.  Management contracts and
compensatory plans and arrangements are listed as Exhibits 10.1
through 10.24.

(b) Reports on Form 8-K.

  During the quarter ended December 31, 1994, no Current
Reports on Form 8-K were filed.

<PAGE>
 
                          -16-


                       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

                             By: /s/ James A. Unruh
                                James A. Unruh
                                Chairman of the Board
                                and Chief Executive Officer

                             Date: March 13, 1995

   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 March 13, 1995.

/s/ James A. Unruh              *Melvin R. Goodes
- ---------------------           ---------------------
James A. Unruh                   Melvin R. Goodes
Chairman of the Board            Director
and Chief Executive
Officer (principal
executive officer) and
Director

/s/ George T. Robson            *Edwin A. Huston
- ---------------------           ---------------------
George T. Robson                 Edwin A. Huston
Senior Vice President and        Director
Chief Financial Officer
(principal financial
officer)

/s/ Deborah C. Hopkins          *Kenneth A. Macke
- ---------------------           ---------------------
Deborah C. Hopkins               Kenneth A. Macke
Vice President and               Director
Controller (principal
accounting officer)

*J. P. Bolduc                   *Robert McClements, Jr.
- ---------------------           ---------------------
J. P. Bolduc                    Robert McClements, Jr.
Director                        Director

<PAGE>
 
                          -17-


*James J. Duderstadt            *Donald V. Seibert
- ---------------------           -----------------------
 James J. Duderstadt             Donald V. Seibert
 Director                        Director

*Gail D. Fosler                 *Alan E. Schwartz
- ---------------------           -----------------------
 Gail D. Fosler                  Alan E. Schwartz
 Director                        Director



                                *By: /s/ George T. Robson
                                     -----------------------
                                         George T. Robson
                                         Attorney-in-Fact

<PAGE>
 
                          -18-
 
                     UNISYS CORPORATION
     SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                        (Millions)


<TABLE> 
<CAPTION>
                                              Additions
                                  Balance at  Charged                         Balance
                                  Beginning   to Costs                        at End
Description                       of Period   and Expenses   Deductions (a)   of Period
- ---------------------------------------------------------------------------------------
<S>                               <C>         <C>            <C>               <C> 
Allowance for Doubtful Accounts
 (deducted from accounts and
  notes receivable):
 
Year Ended
  December 31, 1992                $123.5         $32.5         $(32.2)        $123.8
 
Year Ended
  December 31, 1993                $123.8         $ 9.6         $(36.1)        $ 97.3
 
Year Ended
  December 31, 1994                $ 97.3         $10.2         $(16.4)        $ 91.1
</TABLE>


(a) Write-off of bad debts less recoveries.

<PAGE>
 
                          -19-


                      EXHIBIT INDEX

Exhibit
Number                        Description
- -------                       -----------
          
 3.1      Restated Certificate of Incorporation of Unisys
          Corporation, incorporated by reference to Exhibit
          3(a) to the registrant's Annual Report on Form 10-K
          for the year ended December 31, 1992.
          
 3.2      By-Laws of Unisys Corporation, incorporated by
          reference to Exhibit 3(b) to the registrant's Annual
          Report on Form 10-K for the year ended December 31,
          1992.
          
 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
          between Burroughs Corporation and Harris Trust
          Company of New York, as Rights Agent, 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      Second Rights Agreement, dated as of June 28, 1990,
          by and between registrant and Mitsui & Co., Ltd. and
          joined by Harris Trust Company of New York,
          incorporated by reference to Exhibit 4.4 to the
          registrant's Current Report on Form 8-K dated
          June 28, 1990.
          
 4.4      Purchase Agreement, dated as of June 25, 1990,
          between the registrant and Mitsui & Co., Ltd.,
          incorporated by reference to Exhibit 4.3 to the
          registrant's Current Report on Form 8-K dated
          June 28, 1990.
          
10.1      Deferred Compensation Plan for Executives of Unisys
          Corporation, effective November 1, 1994, incorporated
          by reference to Exhibit 10.2 to the registrant's
          Quarterly Report on Form 10-Q for the quarterly
          period ended September 30, 1994.

<PAGE>
 
                          -20-

10.2      Deferred Compensation Plan for Directors of Unisys
          Corporation, as amended and restated as of January
          1, 1994, incorporated by reference to Exhibit 10.2
          to the registrant's Annual Report on Form 10-K for
          the year ended December 31, 1993.

10.3      Unisys Worldwide Information Services Long Term
          Incentive Plan effective as of January 1, 1993,
          incorporated by reference to Exhibit 10.3 to the
          registrant's Annual Report on Form 10-K for the year
          ended December 31, 1993.

10.4      Form of Executive Employment Agreement, incorporated
          by reference to Exhibit 10(a) to the registrant's
          Annual Report on Form 10-K for the year ended
          December 31, 1985.

10.5      Form of Executive Employment Agreement, incorporated
          by reference to Exhibit 10.1 to the registrant's
          Quarterly Report on Form 10-Q for the quarter ended
          September 30, 1987.

10.6      Agreement, dated December 31, 1994, between the 
          registrant and William B. Patton, Jr.

10.7      Employment Agreement, dated August 10, 1994,
          between the registrant and James A. Unruh,
          incorporated by reference to Exhibit 10.1 to the
          registrant's Quarterly Report on Form 10-Q for the
          quarterly period ended September 30, 1994.

10.8      Stock Unit Plan for Directors of Unisys Corporation,
          as amended and restated as of September 23, 1993,
          incorporated by reference to Exhibit 10 to the
          registrant's Quarterly Report on Form 10-Q for the
          quarterly period ended September 30, 1993.

10.9      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.

10.10     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.

10.11     1982 Unisys Long-Term Incentive Plan, as amended and
          restated through September 1, 1989, incorporated by
          reference to Exhibit 10(p) to the registrant's
          Annual Report on Form 10-K for the year ended
          December 31, 1990.

<PAGE>
 
                          -21-

10.12     Amendment, dated December 11, 1989, to the 1982
          Unisys Long-Term Incentive Plan, incorporated by
          reference to Exhibit 10(o) to the registrant's
          Annual Report on Form 10-K for the year ended
          December 31, 1989.

10.13     Amendment, dated July 25, 1990, to 1982 Unisys Long-
          Term Incentive Plan, incorporated by reference to
          Exhibit 10(r) to the registrant's Annual Report on
          Form 10-K for the year ended December 31, 1990.
 
10.14     1990 Unisys Long-Term Incentive Plan, effective as
          of January 1, 1990 incorporated by reference to
          Exhibit A to the registrant's Proxy Statement, dated
          March 20, 1990, for its 1990 Annual Meeting of
          Stockholders.
 
10.15     Amendment, dated May 26, 1994, to 1990 Unisys
          Long-Term Incentive Plan, effective as of
          February 22, 1990.
 
10.16     Sperry Corporation Pension Plan for Outside
          Directors of the Board of Directors, as amended,
          incorporated by reference to Exhibit 10-J to the
          Annual Report of Sperry Corporation on Form 10-K for
          the fiscal year ended March 31, 1984 (File No. 1-3908).
 
10.17     Form of Loan Agreement including Note used for
          bridge loans to executive officers purchasing
          residences, incorporated by reference to Exhibit
          10(kk) to the registrant's Annual Report on Form 10-
          K for the year ended December 31, 1986.
          
10.18     Form of Loan Agreement including Note used for term
          loans to executive officers purchasing residences,
          incorporated by reference to Exhibit 10(ll) to the
          registrant's Annual Report on Form 10-K for the year
          ended December 31, 1986.
          
10.19     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.
          
10.20     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.

10.21     Unisys Corporation Elected Officer Pension Plan,
          effective June 1, 1988, incorporated by reference to
          Exhibit 10(zz) to the registrant's Annual Report on
          Form 10-K for the year ended December 31, 1988.

<PAGE>
 
                          -22-

10.22     Amendment, dated February 27, 1992, to Unisys
          Corporation Elected Officers' Pension Plan,
          incorporated by reference to the registrant's Annual
          Report on Form 10-K for the year ended December 31,
          1992.

10.23     Amendment, dated July 28, 1994, to Unisys Corporation
          Elected Officer Pension Plan, effective July 28, 1994.

10.24     Unisys Corporation Supplemental Executive Retirement
          Income Plan, as amended and restated effective
          April 1, 1988, incorporated by reference to Exhibit
          10(aaa) to the registrant's Annual Report on Form
          10-K for the year ended December 31, 1988.

11        Computation of Earnings Per Share.
 
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, 1994.
 
21        Subsidiaries of Unisys Corporation.
 
23        Consent of Ernst & Young LLP.
 
24        Power of Attorney.
 
27        Financial Data Schedule.





<PAGE>
 
                                                                    Exhibit 10.6

                [LETTERHEAD OF UNISYS CORPORATION APPEARS HERE]


December 31, 1994



Mr. William B. Patton, Jr.
P. O. Box 1222
Blue Bell, PA  19422

Dear Bill:

You are presently employed by Unisys Corporation (the "Company").  The purpose
of this letter is to set forth the agreement (the "Agreement") with you
concerning your relationship with the Company on and after January 1, 1995
(hereinafter the "Effective Date").  This Agreement supersedes and replaces all
prior understandings and agreements, whether written or verbal, between you and
the Company with respect to your employment with the Company, except for the
Letter Agreement from James A. Unruh dated December 20, 1993 and the related
Release effective January 1, 1994.  The provisions of this Agreement are as
follows:

     1.   Resignation.  You shall resign as an officer and employee of the
          Company as of December 31, 1994.

     2.   Consulting Services.  For a term commencing on the Effective Date and
          ending December 31, 1995, unless sooner terminated as provided in
          Section 9 (such period from the Effective Date through December 31,
          1995 or earlier termination being hereinafter referred to as the
          "Consulting Term"), you shall make yourself available to the Company
          to serve as a non-employee consultant
 to provide services to the
          Company at such times and places as are requested by the Company;
          provided that you shall not be required to perform more than ten (10)
          hours of consultant activities (including travel time) in any one day,
          nor more than one hundred (100) hours of consultant activities
          (including travel time) in any one calendar month.   Your activities
          as a non-employee consultant shall be directed by the President,
          Information Services and Systems Group ("ISSG"), or his designee.  The
          Company shall give you such notice as is practicable as to when
          consultant activities are requested.  You will use your best efforts
          to accommodate any request for consultant activity by the Company,
          notwithstanding any other commitments you may have.

     3.   Consulting Compensation.  The compensation for your consulting
          services shall be as follows:

<PAGE>
 
                                     - 2 -


          (a)  Consulting Fee.  You shall be paid a consulting fee at a rate
               equal to $17,500 per month during the Consulting Term.

          (b)  1994 Executive Variable Compensation ("EVC").  Notwithstanding
               your termination prior to the payment date, you shall be entitled
               to receive an  EVC award for the 1994 EVC award year in
               accordance with the terms of the EVC Plan and your EVC award
               letter dated April 22, 1994.

          (c)  Bonus Fee.  You are not entitled to an EVC award payout for the
               1995 EVC award year.  Unless the Consulting Term is terminated
               before December 31, 1995, you shall be entitled to receive a
               bonus fee payable in March, 1996, in an amount equal to the
               product of (i) the average percentage EVC award payout for
               eligible United States/Canada Division participants for the 1995
               EVC award year, times (ii) $410,000.

          (d)  Stock Options.  With respect to your outstanding stock options
               granted under the 1990 Long-Term Incentive Plan (the "1990
               Plan"), such stock options shall be exercisable in accordance
               with the terms of the 1990 Plan and any agreements pertaining to
               such stock options; provided, however, that:

               (i)  The portions of such stock options scheduled to vest on or
                    before April 30, 1995 shall be so exercisable; and

               (ii) You shall have the right to exercise your vested stock
                    options until December 31, 1999.

          (e)  Pension.  You are not entitled to a benefit under the Unisys
               Pension Plan and the Supplemental Employee Retirement Income
               Plan.  For purposes of calculating your benefit under the Unisys
               Elected Officer Pension Plan, your termination date shall be
               December 31, 1994, but an additional one year shall be counted as
               service and an additional amount of $410,000 plus any amounts
               paid to you under Sections 3(b) and 3(c) shall be counted as
               eligible compensation for 1995 for purposes of calculating your
               Final Average Compensation.

          (f)  Medical.  On and after the Effective Date, you shall be entitled
               to the same medical coverage under the same terms, including your
               payment of applicable premiums, as if you were a participant in
               the Unisys Post-Retirement and Extended Disability Medical Plan
               (the "PRM Plan").  Such coverage will be provided to you and your
               eligible dependents through the PRM Plan or through any other
               arrangement deemed appropriate by the Company.

<PAGE>
 
                                     - 3 -


          (g)  Miscellaneous.  On or after the Effective Date, you will be
               provided with post-retirement life insurance coverage in the
               amount of $750,000.  You will continue to be covered by the
               Company's umbrella liability insurance policy through July 31,
               1995 and the Company will pay up to an aggregate of $5,000 for
               financial counseling services and tax preparation services
               provided to you in 1995.  You will be entitled to executive
               outplacement consulting services similar to those services
               offered to similarly-situated executives, up to a maximum cost of
               $25,000 inclusive of office space.  You may utilize the services
               of the outplacement consultants retained by the Company or you
               may select your own outplacement consultant.

     4.   Additional Payment.  In consideration of your execution of the release
          described in Section 11 hereof and in consideration and settlement of
          any claim you may have for damages for wrongful termination, age
          discrimination or any other claims based on tort, you shall be paid
          $200,000, such amount being payable to you in four installments of
          $50,000 each, payable on February 15, 1995, May 1, 1995, September 1,
          1995 and December 31, 1995.  You acknowledge that the payments set
          forth above are not an admission on the part of the Company of any
          liability for any wrongdoing whatsoever.

     5.   Expenses.  The Company shall reimburse you for reasonable travel and
          associated expenses incurred in the performance of your consultant
          activities hereunder consistent with the Unisys Travel Policy provided
          that you have obtained advance approval for such travel and expenses
          from the President, ISSG, or his designee.

     6.   Taxes.  You shall be responsible for the payment of all applicable
          Federal, state and local taxes due with respect to the consulting fees
          under Sections 3(a) and 3 (c) and the additional payment under Section
          4, including, but not limited to, Federal and state income taxes,
          Social Security tax, Unemployment Insurance taxes and any other taxes
          or fees as are required.  The remaining remuneration paid to you under
          Section 3 will be treated as wages as deemed appropriate by the
          Company and the Company will withhold applicable taxes accordingly.
          The Company will file all informational returns with the Internal
          Revenue Service and similar state and local taxing authorities
          regarding the remuneration paid to you hereunder.  However, the
          Company agrees that payments made under Section 4 hereof are not wages
          or compensation for services rendered and no IRS Form 1099 will be
          issued in respect thereof.

     7.   Relationship of Parties.  On and after the Effective Date, you shall
          be acting as an independent contractor and not as an employee, agent
          or representative of Unisys.

<PAGE>
 
                                     - 4 -



     8.   Conduct After Effective Date.

          (a)  During the period beginning on and after the Effective Date and
               ending January 1, 1996:

               (i)       you shall not engage or become employed as a business
                         owner, employee, agent, representative or consultant in
                         any activity which is in competition with any line of
                         business of the Company (or its subsidiaries or
                         affiliates) existing as of the Effective Date, except
                         with the express prior written consent of the Chief
                         Executive Officer of the Company, which consent will
                         not be unreasonably withheld or delayed in the case
                         where you intend to become a consultant to or an
                         employee of a company whose aggregate sales in 1994 did
                         not exceed $200 million;

               (ii)      you shall not induce or attempt to induce any customer
                         of Unisys to become a customer of a competitor of
                         Unisys so as directly or indirectly to displace a
                         Unisys product or service;

               (iii)     you shall not make any negative comment publicly or
                         privately about the Company (or its subsidiaries or
                         affiliates), any of its products, services or other
                         businesses, its present or past Board of Directors, its
                         officers, or employees, nor shall you in any way
                         discuss the circumstances of your termination of
                         employment other than to state that you have retired
                         from the Company and, during the Consulting Term, that
                         you have been retained as a consultant to Unisys;

               (iv)      you shall not solicit or attempt to solicit any
                         employee of the Company (or any of its subsidiaries or
                         affiliates) to render services for any other person,
                         firm or business entity;

               (v)       you shall not use or furnish or divulge to any other
                         person, firm or business entity any information
                         relating to the Company's business (or that of any of
                         its subsidiaries or affiliates), or any trade secrets,
                         processes, contracts or arrangements involved in any
                         such business; and

<PAGE>
 
                                     - 5 -



               (vi)      you shall not engage in any other conduct detrimental
                         to the best interests of the Company (or its
                         subsidiaries or affiliates).
 
          (b)  During the period beginning January 1, 1996 and ending on
               December 31, 1997, you shall continue to be bound by Sections 8
               (iii) through (vi) hereof.

          (c)  For so long as you are entitled to a pension under the Unisys
               Elected Officer Pension Plan, the provisions of such Plan,
               including Section 6.04 thereof, shall apply to you.

          (d)  During the Consulting Term, you shall be obligated to comply with
               the Unisys Code of Ethical Conduct and the Company's Policies and
               Procedures related thereto as if you were an employee of the
               Company.

     9.   Termination.

          (a)  This Agreement may be terminated at any time and for any reason
               by the Company.  Unless the Agreement is terminated for "cause",
               you shall be entitled to receive the compensation and benefits
               described in Sections 3(a)-(g) and Section 4.

          (b)  If the Agreement is terminated for "cause", all of the
               compensation and benefits described in Sections 3(a)-(g) and
               Section 4 shall immediately cease (provided that any amounts or
               benefits paid prior to the termination of the Agreement shall not
               be affected) and you shall be considered to have terminated your
               employment for all purposes as of December 31, 1994.  For
               purposes of this Agreement, "cause" shall mean (i) your refusal
               or failure to exercise your best efforts in the performance of
               your consulting duties and responsibilities under this Agreement
               or your refusal or failure to perform your consulting duties in
               accordance with the specific directions of the President, ISSG,
               or his designee, or (ii) a breach of any of your obligations
               described in Section 8.

          (c)  The Company will provide you with written notice of the facts
               constituting any breach of Section 9(b)(i).  The Company may
               thereafter terminate this Agreement pursuant to Section 9(b)(i)
               upon the occurrence of any further breach thereof without further
               notice.  If the Company believes that you have engaged in any
               conduct that would violate Section 8(a)(vi), the Company will
               give you written notice requesting that you immediately cease and
               desist from such conduct.  The Company may thereafter

<PAGE>
 
                                     - 6 -



               terminate this Agreement for a breach of Section 8(a)(vi) upon
               the occurrence of any further breach thereof without further
               notice.  No notice of a breach of this Agreement shall be
               required prior to the Company's termination of this Agreement
               except as expressly provided in this Section 9(c).

          (d)  In the event of your death or your inability to perform your
               duties and responsibilities under this Agreement as a result of
               your disability, the Consulting Term shall terminate for all
               purposes as of the date of such death or disability.

          (e)  If the Agreement is terminated for cause, as defined in Section
               9(b):

               (i)       all outstanding stock options shall expire;

               (ii)      your pension under the Elected Officer Pension Plan
                         shall be calculated, or recalculated, as applicable,
                         without regard to the additional year of service and
                         additional compensation described in Section 3(e);

               (iii)     any medical coverage provided through a Company-
                         sponsored arrangement shall be terminated, subject to
                         applicable law; and

               (iv)      your post-retirement life insurance coverage shall
                         terminate.

          (f)  In addition to any other remedies it may have, the Company shall
               be entitled to an injunction restraining you from doing or
               continuing to do any act in violation of Section 8, or requiring
               you to act in conformance with Section 8.

          (g)  You agree that a breach by you of any of the provisions of this
               Agreement will damage the Company in an amount which is difficult
               to determine and, accordingly, the Company may retain as
               liquidated damages and not as a penalty any amounts payable to
               you under this Agreement whether in the form of consulting fees,
               additional payments, or other benefits, including those described
               in Sections 3(a)-(g) hereof.

<PAGE>
 
                                     - 7 -



     10.  Other Benefits.  The rights granted to you under Section 3 are in
          addition to all other obligations of the Company to you as a
          terminated employee, and except as otherwise expressly provided in the
          Agreement, your rights and obligations to benefits from the Company
          shall be determined in accordance with the applicable benefit plans.
          Unless otherwise expressly provided in this Agreement, your
          termination date for all employment and benefit purposes shall be
          December 31, 1994.

     11.  Release.  In consideration of the Company's entering into this
          Agreement and as a condition to the Company's obligations hereunder,
          you agree to waive and release any and all claims against the Company
          and any of its subsidiaries and affiliates and their directors,
          officers and employees that you now have or may have in the future
          arising out of your employment or termination of employment with the
          Company, and you shall execute a release, in the form attached hereto,
          which release shall be incorporated and become a part of this
          Agreement.

     12.  Arbitration.  Any dispute or controversy arising under or in
          connection with this Agreement shall be settled exclusively by
          arbitration in Philadelphia, Pennsylvania.  The arbitration shall be
          conducted in accordance with the rules of the American Arbitration
          Association except that the arbitrator shall be selected by mutual
          agreement of the parties.  If the parties cannot mutually agree upon
          an arbitrator, then each party shall select an arbitrator of their
          choice, and the two arbitrators so selected shall mutually select a
          third arbitrator.  Any arbitration award will be final and conclusive
          upon the parties, and a judgment enforcing such award may be entered
          in any court of competent jurisdiction.  The prevailing party in any
          such arbitration shall be entitled to recover from the other party the
          attorney's fees, costs and expenses incurred by them in such
          arbitration.

     13.  Miscellaneous.

          (a)  Any notice or other communication required or permitted pursuant
               to this Agreement shall be in writing and shall be deemed to have
               been duly given when delivered or mailed by United States mail,
               First Class, postage prepared addressed to you at Avalon at Chase
               Oaks, Unit 1914, 801 Legacy Drive, Plano, Texas, 75023.  In the
               case of a notice or other communication to Unisys, it shall be
               directed to Thomas E. McKinnon, Vice President, Human Resources
               at  P. O. Box 500, M.S. A-14, Blue Bell, Pennsylvania 19424-0001.

<PAGE>
 
                                     - 8 -



          (b)  No provision of this Agreement may be modified, waived or
               discharged unless such waiver, modification or discharge is
               agreed to in writing.  No agreements or representations, oral or
               otherwise, express or implied, with respect to the subject matter
               hereof have been made by either party which are not expressly set
               forth or incorporated by reference in this Agreement.

          (c)  The validity, interpretation construction and performance of this
               Agreement shall be governed by the laws of the Commonwealth of
               Pennsylvania, without giving effect to the provisions thereof
               relating to conflicts of law.

          (d)  The invalidity or unenforceability of any provision of this
               Agreement shall not affect the validity or enforceability of any
               other provision of this Agreement, and all other provisions shall
               remain in full force and effect.

Please indicate your acceptance of the foregoing by signing the enclosed copy of
this letter, Release and form of resignation and returning them to my attention.

Very truly yours,

Unisys Corporation



By: /s/ Stephen A. Carns
   -------------------------------------
     Stephen A. Carns
     President, Information Services and
          Systems Group



Agreed to and accepted as of the 31st day of December, 1994.


/s/ William B. Patton, Jr.
- --------------------------------------
William B. Patton, Jr.



<PAGE>
 
                                                                   Exhibit 10.15



                                   AMENDMENT
                                    TO THE
                        UNISYS LONG-TERM INCENTIVE PLAN
                        -------------------------------


I.  Section 2.07(c) is amended and restated in its entirety, effective as of
February 22, 1990, to read as follows:

               "(c)  Approval by the stockholders of Unisys of a reorganization,
          merger or consolidation, in each case, unless, following such
          reorganization, merger or consolidation all or substantially all of
          the individuals and entities who were the respective beneficial owners
          of the Outstanding Company Common Stock and Company Voting Securities
          immediately prior to such reorganization, merger or consolidation
          beneficially own, directly or indirectly, more than 60% of,
          respectively, the then outstanding shares of common stock and the
          combined voting power of the then outstanding voting securities
          entitled to vote generally in the election of directors, as the case
          may be, of the corporation resulting from such reorganization, merger
          or consolidation in substantially the same proportion as their
          ownership of the Outstanding Company Common Stock and Company Voting
          Securities immediately prior to such reorganization, merger or
          consolidation, as the case may be; or"





<PAGE>
 
                                                                   Exhibit 10.23

                                   AMENDMENT
                                      TO
                      UNISYS ELECTED OFFICER PENSION PLAN


The Unisys Elected Officer Pension Plan (the "Plan") is amended, effective July
28, 1994, to read as follows:

I.   A new Section 2.20 is added to the Plan to read as follows:

     "2.20  "Change in Control" shall mean

          (a)  The acquisition, other than from the Company, by any individual,
          entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of
          the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
          of beneficial ownership (within the meaning of Rule 13d-3 promulgated
          under the Exchange Act) of 20% or more of either (i) the then
          outstanding shares of common stock of the Company (the "Outstanding
          Company Common Stock") or (ii) the combined voting power of the then
          outstanding voting securities of the Company entitled to vote
          generally in the election of directors (the "Company Voting
          Securities"), provided, however, that any acquisition by (x) the
          Company or any of its subsidiaries, or any employee benefit plan (or
          related trust) sponsored or maintained by the Company or any of its
          subsidiaries or (y) any corporation with respect to which, following
          such acquisition, more than 60% of, respectively, the then outstanding
          shares of common stock of such corporation and the combined
 voting
          power of the then outstanding voting securities of such corporation
          entitled to vote generally in the election of directors is then
          beneficially owned, directly or indirectly, by all or substantially
          all of the individuals and entities who were the beneficial owners,
          respectively, of the Outstanding Company Common Stock and Company
          Voting Securities immediately prior to such acquisition in
          substantially the same proportion as their ownership, immediately
          prior to such acquisition, of the Outstanding Company Common Stock and
          Company Voting Securities, as the case may be, shall not constitute a
          Change in Control; or

          (b)  Individuals who, as of July 28, 1994 constitute the Board (the
          "Incumbent Board") cease for any reason to constitute at least two-
          thirds of the Board, provided that any individual becoming a director
          subsequent to July 28, 1994 whose election or nomination for election
          by the Company, was approved by a vote of at least a majority of the
          directors then comprising the Incumbent Board shall be considered as
          though such individual were a member of the Incumbent board, but
          excluding, for this purpose, any such

<PAGE>
 
          individual whose initial assumption of office is in connection with an
          actual or threatened election contest relating to the election of
          members of the Board; or

          (c)  Approval by the shareholders of the Company of a reorganization,
          merger or consolidation (a "Business Combination"), in each case, with
          respect to which all or substantially all of the individuals and
          entities who were the respective beneficial owners of the Outstanding
          Company Common Stock and Company Voting Securities immediately prior
          to such Business Combination do not, following such Business
          Combination, beneficially own, directly or indirectly, more than 60%
          of, respectively, the then outstanding shares of common stock and the
          combined voting power of the then outstanding voting securities
          entitled to vote generally in the election of directors, as the case
          may be, of the corporation resulting from such Business Combination in
          substantially the same proportion as their ownership immediately prior
          to such Business Combination of the Outstanding Company Common Stock
          and Company Voting Securities, as the case may be; or

          (d)  (i) A complete liquidation or dissolution of the Company or (ii)
          the sale or other disposition of all or substantially all of the
          assets of the Company other than to a corporation with respect to
          which, following such sale or disposition, more than 60% of,
          respectively, the then outstanding shares of common stock and the
          combined voting power of the then outstanding voting securities
          entitled to vote generally in the election of directors is then owned
          beneficially, directly or indirectly, by all or substantially all of
          the individuals and entities who were the beneficial owners,
          respectively, of the Outstanding Company Common Stock and Company
          Voting Securities immediately prior to such sale or disposition in
          substantially the same proportion as their ownership of the
          Outstanding Company Common Stock and Company Voting Securities, as the
          case may be, immediately prior to such sale or disposition."

II.  Section 3.01(c) is amended in its entirety to read as follows:

          "(c)  A former Officer who was eligible under paragraph (a) above and
          continues in active employment for more than twelve months after
          ceasing to be an Officer shall be eligible, upon application, to
          receive a vested annual retirement benefit calculated in accordance
          with Sections 5.01(a), 5.03, 5.06 and 5.07, utilizing as an offset the
          amount of benefits payable under the Company Plan and the Supplemental
          Plan calculated as if the 

<PAGE>
 
          Participant had elected a single life annuity form of benefit under
          the Company Plan, and such former Officer shall not be eligible for
          the survivor benefits described in Section 5.04. This Section 3.01(c)
          shall not apply after the occurrence of a Change in Control with
          respect to any individual who was an Officer on the date of the Change
          in Control."

III. A new Section 3.01(d) is added to read as follows:

          "(d)  Notwithstanding the participation requirements described in
          Section 3.01(a), each Employee who is an Officer on the date of the
          Change in Control and who, as of the date of the Change in Control,
          has completed 5 or more years of Credited Service shall be eligible to
          participate in this Plan."

IV.  Section 5.01(a) is amended in its entirety to read as follows:

          "(a)  Subject to the adjustments set forth in Sections 5.02 and 5.03,
          a Participant shall receive an annual retirement benefit payable at
          Normal Retirement Date equal to:

          (1)  40% of the Participant's Final Average Compensation for the
               Participant's first 10 years of Credited Service, or, for a
               Participant who has less than 10 years of Credited Service, one-
               third of one percent of the Participant's Final Average
               Compensation for each month of Credited Service; plus

          (2)  1% of the Participant's Final Average Compensation for each year
               of Credited Service in excess of 10 (but not in excess of 30)
               including proportional credit for a fraction of a year; minus

          (3)  50% of the Participant's Primary Social Security Benefit.



<PAGE>
 
                                                                      Exhibit 11


                              UNISYS CORPORATION
                STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1994
                         (Millions, except share data)

<TABLE>
<CAPTION>
 
                                                                                   1994           1993           1992
- ---------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>            <C>            <C>
Primary Earnings Per Common Share
 
Average Number of Outstanding Common Shares                                 170,752,220    162,735,752    161,649,778
Additional Shares Assuming Exercise of Stock Options                          1,563,156      2,333,930      2,075,251
- ---------------------------------------------------------------------------------------------------------------------
Average Number of Outstanding Common Shares and  Common Share Equivalents   172,315,376    165,069,682    163,725,029
- ---------------------------------------------------------------------------------------------------------------------
 
Income Before Extraordinary Items and Changes in Accounting Principles     $      108.2   $      361.6   $      296.2
Dividends on Series A, B and C Preferred Stock                                 (  120.1)      (  121.6)     (   122.1)
- ---------------------------------------------------------------------------------------------------------------------
Primary Earnings (Loss) on Common Shares Before Extraordinary Items 
 and Changes in Accounting Principles                                          (   11.9)         240.0          174.1
Extraordinary Items                                                            (    7.7)      (   26.4)          65.0
Effect of Changes in Accounting Principles                                                       230.2
- ---------------------------------------------------------------------------------------------------------------------
Primary Earnings (Loss) on Common Shares                                   $   (   19.6)  $      443.8   $      239.1
- ---------------------------------------------------------------------------------------------------------------------
 
Primary Earnings (Loss) Per Common Share
  Before Extraordinary Items and Changes in
    Accounting Principles                                                  $   (    .07)  $       1.46   $       1.06
Extraordinary Items                                                            (    .04)      (    .16)           .40
Effect of Changes in Accounting Principles                                                        1.39
- ---------------------------------------------------------------------------------------------------------------------
  Total                                                                    $   (    .11)  $       2.69   $       1.46
- ---------------------------------------------------------------------------------------------------------------------

Fully Diluted Earnings Per Common Share
 
Average Number of Outstanding Common Shares and
  Common Share
 Equivalents                                                  172,315,376    165,069,682    163,725,029
Additional Shares:
  Assuming Conversion of Series A Preferred Stock                                           47,586,877
  Assuming Conversion of 8-1/4% Convertible Notes                            33,698,698     33,699,634     17,954,723
  Attributable to Stock Options                                                 111,276        193,741        133,489
- ---------------------------------------------------------------------------------------------------------------------
 
Common Shares Outstanding Assuming Full Dilution                            206,125,350    246,549,934    181,813,241
- ---------------------------------------------------------------------------------------------------------------------
 
Primary Earnings (Loss) on Common Shares Before
  Extraordinary Items and Changes in Accounting
  Principles                                                               $   (   11.9)  $      240.0   $      174.1
Exclude Dividends on Series A Preferred Stock                                                    106.8
Interest Expense on 8-1/4% Convertible Notes,
  Net of Applicable Tax                                                            17.8           17.8           15.8
- ---------------------------------------------------------------------------------------------------------------------

Fully Diluted Earnings on Common Shares Before
  Extraordinary Items and Changes in Accounting
  Principles                                                                       5.9          364.6          189.9
Extraordinary Items                                                           (    7.7)      (   26.4)          65.0
Effect of Changes in Accounting Principles                                                      230.2
- ---------------------------------------------------------------------------------------------------------------------
Fully Diluted Earnings (Loss) on Common Shares                            $   (    1.8)  $      568.4   $      254.9
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
 

<PAGE>
 

<TABLE> 
<CAPTION> 
<S>                                                                       <C>            <C>            <C>
Fully Diluted Earnings (Loss) Per Common Share
  Before Extraordinary Items and Changes in Accounting
  Principles                                                              $        .03    $      1.48   $       1.04
Extraordinary Items                                                           (    .04)      (    .11)           .36
Effect of Changes in Accounting Principles                                                        .94
- ---------------------------------------------------------------------------------------------------------------------
Total                                                                     $   (    .01)   $      2.31   $       1.40
- ---------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Common Share as Reported

Primary
  Before Extraordinary Items and Changes in Accounting
  Principles                                                              $   (    .07)   $      1.46   $       1.06
  Extraordinary Items                                                         (    .04)      (    .16)           .40
  Effect of Changes in Accounting Principles                                                     1.39
- ---------------------------------------------------------------------------------------------------------------------
  Total                                                                   $   (    .11)*  $      2.69   $       1.46
- ---------------------------------------------------------------------------------------------------------------------
Fully Diluted
  Before Extraordinary Items and Changes in Accounting
  Principles                                                              $   (    .07)   $      1.48   $       1.04
  Extraordinary Items                                                         (    .04)      (    .11)           .36
  Effect of Changes in Accounting Principles                                                      .94
- ---------------------------------------------------------------------------------------------------------------------
  Total                                                                   $   (    .11)*  $      2.31   $       1.40 **
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
 
*  Based on weighted average number of outstanding common shares since inclusion
   of common stock equivalents or assumed conversion of 8 1/4% notes or Series A
   Convertible Preferred Stock would have been antidilutive.

** Excludes assumed conversion and add back of dividends on Series A Convertible
   Preferred Stock since it would be antidilutive.



<PAGE>
 
                                                                      Exhibit 12


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


<TABLE> 
<CAPTION> 

                                            Years Ended December 31
- --------------------------------------------------------------------------------
                                      1994     1993    1992      1991     1990
- --------------------------------------------------------------------------------
<S>                                 <C>     <C>      <C>     <C>        <C> 
Income (loss) before income taxes   $ 153.2 $  503.4 $ 435.6 $(1,288.3) $(337.3)
Add (deduct) share of loss (income)
  of associated companies              16.6     14.5     3.2  (    6.5)   (51.8)
- --------------------------------------------------------------------------------
   Subtotal                           169.8    517.9   438.8  (1,294.8)  (389.1)
- --------------------------------------------------------------------------------
Interest expense (net of interest
  capitalized)                        203.7    241.7   340.6     407.6    446.7
Amortization of debt issuance
  expenses                              6.2      6.6     4.8       1.8      1.5
Portion of rental expense
  representative  of interest          70.1     76.0    84.3      86.4     82.5
- --------------------------------------------------------------------------------
   Total Fixed Charges                280.0    324.3   429.7     495.8    530.7
- --------------------------------------------------------------------------------
Earnings (loss) before income
  taxes and fixed charges          $  449.8  $ 842.2   868.5 $(  799.0)  $141.6
- --------------------------------------------------------------------------------
Ratio of earnings to
  fixed charges                        1.61     2.60    2.02      (a)       (a)
- --------------------------------------------------------------------------------
</TABLE>
 
(a) Earnings in 1991 and 1990 were inadequate to cover fixed charges by
    $1,294.8 million and $389.1 million, respectively.





<PAGE>
 
                                                                      Exhibit 13


                    Management's Discussion and Analysis of
                 Financial Condition and Results of Operations
                ----------------------------------------------

Overview
- --------

In 1994, the Company reported net income of $100.5 million compared to net
income of $565.4 million in 1993.  The 1994 results include a special pretax
charge of $186.2 million ($133.1 million after tax).  Excluding the effects of
the special charge, extraordinary items and accounting changes, fully diluted
earnings per common share in 1994 were $.71 compared to $1.48 a year ago.

In the fourth quarter of 1994, the Company recorded a special pretax charge of
$186.2 million ($133.1 million after tax), or $.78 per fully diluted common
share.  The purpose of the charge was to reduce the Company's overall cost
structure.  The charge principally relates to a work force reduction of
approximately 4,600 people.  As a result of this action, the Company expects to
create annual savings estimated at more than $200 million.  See Note 2 of the
Notes to Consolidated Financial Statements.

During 1995, the Company will focus on achieving profitable revenue growth and
further reducing its cost structure.  The Company expects that, in the near
term, profit pressures will continue before the favorable effects of the
restructuring are realized.


Results of Operations
- ---------------------

Revenue for 1994 was $7.4 billion, down 4% from 1993 revenue of $7.7 billion.
The largest decline (18%) occurred in the Government Systems business, which
continues to be impacted by a decline in government spending and increased
competition.  Sales declined 13% to $4.1 billion in 1994 from $4.7 billion in
1993, due to decreases in sales of enterprise systems and servers (14%),
software (9%), and custom defense systems (21%).  Services revenue increased 24%
to $2.0 billion in 1994 from $1.6 billion in 1993 as the Company continued to
implement its strategy to aggressively grow its services and systems integration
business.  This business is now the Company's largest single revenue stream with
27% of total revenue in 1994 compared to 21% in 1993 and 16% in 1992.  Equipment
maintenance revenue declined 7% to $1.3 billion in 1994 from $1.4 billion in
1993, due principally to a decline in equipment sales and improved product
reliability.

Revenue for 1993 was $7.7 billion, down 8% from 1992 revenue of $8.4 billion.
Sales declined 13% to $4.7 billion in 1993 from $5.4 billion in 1992, due to
decreases in sales of enterprise systems and servers, departmental servers and
desktop systems, and custom defense systems, offset in part by an increase in
software revenue.  Services revenue increased 19% to $1.6 billion in 1993 from
$1.3 billion in 1992.  Equipment maintenance revenue declined 14% to $1.4
billion in 1993 from $1.7 billion in 1992, due principally to a decline in
equipment sales and improved product reliability.

Revenue from international operations in 1994 was $3.8 billion, up 3% from 1993,
due principally to an increase in revenue in Japan.  Revenue from the remainder
of the Pacific Asia area and from Europe was approximately the same as last
year.  The effect of foreign currency translation on 1994 revenue was not
material.  Revenue from U.S. operations in 1994 was $3.6 billion, down 11% from
1993.  This decline was caused by a 20% reduction in U.S. revenue from the
Government Systems business.  Revenue from operations outside the U.S. in 1993
was $3.7 billion, down 14% from 1992.  Approximately 35% of this revenue 


                                       1

<PAGE>
 
decline was due to the negative impact of currency translation. Revenue from
U.S. operations in both 1993 and 1992 was $4.1 billion.

In 1994, the Company received approximately 16% of its revenue from custom
defense systems, down from 20% in both 1993 and 1992.  A substantial portion of
this revenue was derived from contracts with agencies of the U.S. Department of
Defense and the Canadian Department of National Defence.  Any future declines in
defense industry spending or increased competition could affect the Company's
ability to obtain new defense contracts, and no assurance can be given that
current, in-process, multiple-year contracts will not be downsized or
discontinued.

Total gross profit margin decreased to 33% in 1994 (35% excluding the 1994
special charge) from 37% in 1993.  Sales gross profit margin in 1994 was 39%
(both before and after the charge) compared to 41% in 1993; services gross
profit margin for 1994 was 21% (22% excluding the charge) compared to 23% in
1993; and equipment maintenance gross profit margin for 1994 was 35% (40%
excluding the charge) compared to 43% in 1993.  Total gross profit margin is
expected to continue to be pressured by competitive pricing and the continuing
shift to lower-margin products and services.  In addition, business risks
associated with services contracts, particularly large, multi-year, fixed-price
systems integration contracts, may from time to time create volatility in
margins.

In 1992, total gross profit margin was 36%, sales gross profit margin was 38%,
services gross profit margin was 21%, and equipment maintenance gross profit
margin was 42%.

Selling, general and administrative expenses for 1994 were $1.7 billion, an
increase of 1% from $1.6 billion in 1993.  Exclusive of the special charge,
selling, general and administrative expenses were $1.6 billion in 1994, a slight
decline from 1993.  Selling, general and administrative expenses were $1.8
billion in 1992.  Total employment at December 31, 1994 was approximately 46,300
compared to approximately 49,000 at December 31, 1993 and 54,300 at December 31,
1992.

Research and development expenses in 1994 were $483.4 million compared to $515.2
million in 1993, a decline of 6%.  Exclusive of the special charge, research and
development expenses were $455.5 million in 1994, a decline of 12% from 1993.
Research and development expenses in 1993 were $515.2 million compared to $535.9
million in 1992.  The reduction in 1994 principally reflects the Company's move
to common hardware platforms and technologies.  The declines are also consistent
with the continuing shift of revenue to services business which requires less
research and development.

As a result of the above, operating income was $306.0 million in 1994 (4.1% of
revenue) compared to $734.1 million in 1993 (9.5% of revenue) and $720.7 million
in 1992 (8.6% of revenue).  Exclusive of the special charge, operating income in
1994 was $491.2 million, or 6.6% of revenue.

Interest expense was $203.7 million in 1994, down from $241.7 million in 1993,
reflecting principally lower average debt levels.  Interest expense in 1993 was
down from $340.6 million in 1992, reflecting both lower average debt levels and
lower average interest rates.

Other income in 1994 was $50.9 million compared to $11.0 million in 1993 and
$55.5 million in 1992.  The increase in other income in 1994 compared to 1993
was due principally to favorable foreign currency translation and lower
contingency expenses related to "Ill Wind" settlement payments. Included in 1994
and 1993 are charges of $.7 million and $20.0 million, respectively, 


                                       2

<PAGE>
 
related to the "Ill Wind" settlement. This settlement requires the Company to
make contingency payments based on proceeds from asset sales and on net income.
Since net income after preferred dividends for 1994 was a loss, no contingency
payments were due on this aspect of the settlement. The $.7 million represents
amounts due on proceeds from asset sales. The maximum contingent amount payable
in 1995 under this settlement agreement is $40.0 million.

It is the Company's policy to minimize its exposure to foreign currency
fluctuations.  On a net basis, and after taking into account the cost of the
Company's hedging program, foreign currency effects had a minimal effect on
pretax results in each of the past three years.

Income before income taxes for 1994 was $153.2 million ($339.4 million exclusive
of the special charge).  Income before income taxes in 1993 and 1992 was $503.4
million and $435.6 million, respectively.

Estimated income taxes were $45.0 million in 1994 ($98.1 million before the
special charge) compared with $141.8 million in 1993 and $139.4 million in 1992.
Included in 1993 is a net benefit of $19.2 million, or $.09 per fully diluted
common share, relating to a U.S. tax law change enacted in August of 1993.  This
law increased the top corporate tax rate from 34% to 35% retroactive to January
1, 1993.  Since the Company had net deferred tax assets in the U.S., the effect
of the tax rate change was to increase these tax assets with a corresponding
reduction in provision for taxes.  The 1995 worldwide effective tax rate is
expected to be approximately 34%.

Net income for 1994 was $100.5 million compared to $565.4 million in 1993 and
$361.2 million in 1992.  Income before the special charge, extraordinary items,
and changes in accounting principles was $241.3 million in 1994, $361.6 million
in 1993 and $296.2 million in 1992.

Excluding the effects of the special charge, extraordinary items, and accounting
changes, fully diluted earnings per common share in 1994 were $.71 compared to
$1.48 in 1993 and $1.04 in 1992.

Accounting Changes and Extraordinary Items
- ------------------------------------------

Effective January 1, 1994, the Company adopted the Financial Accounting
Standards Board Statement of Financial Accounting Standards ("SFAS")112,
"Employers' Accounting for Postemployment Benefits Other Than Pensions."  SFAS
112 establishes financial accounting standards for employers that provide
benefits to former or inactive employees after employment but before retirement.
The effect of adoption on the Company's consolidated financial position,
consolidated statement of income, and liquidity was immaterial.

Effective January 1, 1994, the Company also adopted SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities" and SFAS 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial Instruments."
SFAS 115 establishes financial accounting standards for investments in equity
securities that have readily determinable fair values and for all investments in
debt securities.  SFAS 119 establishes disclosure requirements about derivative
financial instruments.

In 1994, the Company recorded an extraordinary charge for repurchases of debt of
$7.7 million, net of $5.1 million of income tax benefits, or $.04 per fully
diluted common share.


                                       3

<PAGE>
 
Effective January 1, 1993, the Company adopted SFAS 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," and SFAS 109, "Accounting for
Income Taxes."  The adoption of SFAS 106 decreased net income for 1993 by $194.8
million, net of $124.5 million of income tax benefits, or $.79 per fully diluted
common share, and the adoption of SFAS 109 increased net income for 1993 by
$425.0 million, or $1.73 per fully diluted common share.  See Notes 4 and 12 of
the Notes to Consolidated Financial Statements.

At December 31, 1994, the Company had deferred tax assets in excess of deferred
tax liabilities of $1,155 million.  For the reasons cited below, management
believes that it is more likely than not that $828 million of such assets will
be realized, therefore resulting in a valuation allowance of $327 million.  In
assessing the likelihood of realization of this asset, the Company has
considered various factors including its forecast of future taxable income and
available tax planning strategies that could be implemented to realize deferred
tax assets.

The principal basis used to assess the likelihood of realization was the
Company's forecast of future taxable income which was adjusted by applying
probability factors to the achievement of this forecast.  Forecasted taxable
income is expected to arise from ordinary and recurring operations and to be
sufficient to realize the entire amount of net deferred tax assets.
Approximately $2.4 billion of future taxable income (predominantly U.S.) is
needed to realize all of the net deferred tax assets.

The Company's net deferred tax assets include substantial amounts of net
operating loss and tax credit carryforwards.  The major portion of such
carryforwards expire in 1998 and beyond.  In addition, substantial amounts of
foreign net operating losses have an indefinite carryforward period.  Failure to
achieve forecasted taxable income might affect the ultimate realization of the
net deferred tax assets.  In recent years, the information management business
has undergone dramatic changes and there can be no assurance that in the future
there could not be increased competition or other factors which may result in a
decline in sales or margins, loss of market share, or technological
obsolescence.  The Company will evaluate quarterly the realizability of its net
deferred tax assets by assessing its valuation allowance and by adjusting the
amount of such allowance, if necessary.

In 1993, the Company settled certain lawsuits in connection with its sale of the
Sperry Aerospace Group in December 1986 to Honeywell, Inc.  The Aerospace Group
was part of Sperry Corporation, which was acquired by the Company in September
1986 in the largest acquisition at the time in the computer industry.  The
lawsuits alleged violations of securities laws and fraudulent and negligent
misrepresentations of interim financial statements of the Sperry Aerospace Group
as of and for the six months ended September 30, 1986 prepared in connection
with the sale.  The sale of the Aerospace Group as a non-strategic business was
part of the financing strategy for the acquisition of Sperry Corporation and was
carried out very shortly after the completion of this acquisition.  The
Aerospace Group operations were never reported in the financial results of the
Company.  The settlement of litigation arising out of the sale, therefore, was
unrelated to the ordinary activities of the Company.  Accordingly, the Company
reported this litigation settlement as an extraordinary charge of $26.4 million,
net of $16.8 million of income tax benefits, or $.11 per fully diluted common
share.

In 1992, the Company recorded, in accordance with AICPA Opinion No. 11, an
extraordinary item of $65.0 million, or $.36 per fully diluted common share,
related to the tax benefit of book operating loss carryforwards.  Since these
tax benefits were not previously recognized in the Company's financial
statements, accounting rules followed by the Company at that time required 


                                       4

<PAGE>
 
that they be reported as an extraordinary item in the results of operations in
the period when they were realized.

Financial Condition
- -------------------

Net cash provided by operating activities amounted to $648.8, $1,019.7, and
$1,176.5 million in 1994, 1993, and 1992, respectively.  Investments in
properties and rental equipment were $225.7, $196.8, and $251.7 million in 1994,
1993, and 1992, respectively.  Proceeds from sales of properties were $24.8,
$26.5, and $90.3 million in 1994, 1993, and 1992, respectively.

During 1994, the Company repurchased and redeemed $112.5 million of debt.  The
Company intends, from time to time, to continue to redeem or repurchase its
securities in the open market or in privately negotiated transactions depending
upon availability, market conditions, and other factors.

In 1993, the Securities and Exchange Commission declared effective a
registration statement filed by the Company covering $500 million of debt or
equity securities.  The registration statement enables the Company to be
prepared for future market opportunities.  Proceeds from future offerings of
these securities are anticipated to be used for general corporate purposes,
including reduction or refinancing of debt.

The Company has a $300 million revolving credit agreement with a syndicate of
banks, which expires on May 31, 1995.  This agreement provides for short-term
borrowings and up to $100 million of letters of credit.  During 1994, there were
no borrowings under this agreement.

At December 31, 1994, total debt was $1.9 billion, a decline of $111.8 million
from December 31, 1993 principally due to the repurchases and redemptions
described above.  Cash, cash equivalents, and marketable securities at December
31, 1994 were $884.6 million compared to $950.5 million at December 31, 1993.
During 1994, debt net of cash and marketable securities decreased $45.9 million
to $1.1 billion.  As a percent of total capital, debt net of cash and marketable
securities was 29% at December 31, 1994 and 1993.

Dividends paid on preferred stock amounted to $228.0 million in 1994 compared to
$183.7 million in 1993 and $46.1 million in 1992.  The current-year amount
includes full payment for all preferred dividend arrearages.

Stockholders' equity decreased $91.0 million during 1994, principally reflecting
net income of $100.5 million and favorable currency translation adjustments of
$20.0 million offset by preferred dividends of $214.6 million.

The Company expects to settle certain open tax years with the Internal Revenue
Service in late 1995 or early 1996.  It is expected that such settlements will
result in cash payments of approximately $130 million (including interest).
These payments will not affect earnings since provision for these taxes has been
made in prior years.


                                       5

<PAGE>
 

<TABLE>
<CAPTION>
Consolidated Statement of Income
Unisys Corporation
 
- ------------------------------------------------------------------------------
Year Ended December 31
(Millions, except per share data)                   1994       1993       1992
- ------------------------------------------------------------------------------
<S>                                             <C>        <C>        <C> 
Revenue
Sales                                           $4,077.8   $4,705.4   $5,399.5
Services                                         1,980.2    1,593.1    1,336.4
Equipment maintenance                            1,341.7    1,444.0    1,686.0
- ------------------------------------------------------------------------------
                                                 7,399.7    7,742.5    8,421.9
- ------------------------------------------------------------------------------
Costs and expenses
Cost of sales                                    2,507.2    2,798.7    3,342.8
Cost of services                                 1,561.1    1,225.2    1,061.6
Cost of equipment maintenance                      872.7      820.4      980.1
Selling, general and administrative expenses     1,669.3    1,648.9    1,780.8
Research and development expenses                  483.4      515.2      535.9
- ------------------------------------------------------------------------------
                                                 7,093.7    7,008.4    7,701.2
- ------------------------------------------------------------------------------
Operating income                                   306.0      734.1      720.7
Interest expense                                   203.7      241.7      340.6
Other income, net                                   50.9       11.0       55.5
- ------------------------------------------------------------------------------
Income before income taxes                         153.2      503.4      435.6
Estimated income taxes                              45.0      141.8      139.4
- ------------------------------------------------------------------------------
Income before extraordinary items and
    changes in accounting principles               108.2      361.6      296.2
Extraordinary items                                 (7.7)     (26.4)      65.0
Effect of changes in accounting principles                    230.2
- ------------------------------------------------------------------------------
Net income                                         100.5      565.4      361.2
Dividends on preferred shares                      120.1      121.6      122.1
- ------------------------------------------------------------------------------
Earnings (loss) on common shares                $  (19.6)  $  443.8   $  239.1
- ------------------------------------------------------------------------------
Earnings (loss) per common share
Primary
Before extraordinary items and changes
  in accounting principles                      $   (.07)  $   1.46   $   1.06
Extraordinary items                                 (.04)      (.16)       .40
Effect of changes in accounting principles                     1.39
- ------------------------------------------------------------------------------
Total                                           $   (.11)  $   2.69   $   1.46
- ------------------------------------------------------------------------------
Fully diluted
Before extraordinary items and changes
  in accounting principles                      $   (.07)  $   1.48   $   1.04
Extraordinary items                                 (.04)      (.11)       .36
Effect of changes in accounting principles                      .94
- ------------------------------------------------------------------------------
Total                                           $   (.11)  $   2.31   $   1.40
- ------------------------------------------------------------------------------
</TABLE>


See notes to consolidated financial statements.


                                       6

<PAGE>
 

<TABLE>
<CAPTION>
Consolidated Balance Sheet
Unisys Corporation
 
December 31 (Millions)                                         1994      1993
- -----------------------------------------------------------------------------
Assets                                               
- -----------------------------------------------------------------------------
<S>                                                        <C>       <C> 
Current assets                                       
Cash and cash equivalents                                  $  868.4  $  835.4
Marketable securities                                          16.2     115.1
Accounts and notes receivable, net                          1,063.8   1,088.2
Inventories                                                   773.0     753.9
Deferred income taxes                                         310.5     313.4
Other current assets                                          109.6      94.1
- -----------------------------------------------------------------------------
Total                                                       3,141.5   3,200.1
- -----------------------------------------------------------------------------
Long-term receivables, net                                     75.1     104.3
- -----------------------------------------------------------------------------
Properties and rental equipment                             2,714.3   2,776.0
Less-Accumulated depreciation                               1,780.6   1,814.2
- -----------------------------------------------------------------------------
Properties and rental equipment, net                          933.7     961.8
- -----------------------------------------------------------------------------
Cost in excess of net assets acquired                       1,142.5   1,183.9
- -----------------------------------------------------------------------------
Investments at equity                                         315.8     303.6
- -----------------------------------------------------------------------------
Deferred income taxes                                         583.2     543.8
- -----------------------------------------------------------------------------
Other assets                                                1,132.1   1,221.7
- -----------------------------------------------------------------------------
Total                                                      $7,323.9  $7,519.2
- -----------------------------------------------------------------------------
</TABLE>



                                       7

<PAGE>
 

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Liabilities and stockholders' equity
- -----------------------------------------------------------------------------
<S>                                                        <C>       <C>
Current liabilities                                 
Notes payable                                              $    8.9  $    6.0

Current maturities of long-term debt                           71.2      25.0
Accounts payable                                              986.1   1,027.0
Other accrued liabilities                                   1,178.9   1,016.1
Dividends payable                                              26.6      39.9
Estimated income taxes                                        237.7     251.9
- -----------------------------------------------------------------------------
Total                                                       2,509.4   2,365.9
- -----------------------------------------------------------------------------
Long-term debt                                              1,864.1   2,025.0
- -----------------------------------------------------------------------------
Other liabilities                                             345.9     432.8
- -----------------------------------------------------------------------------
Stockholders' equity                                
Preferred stock                                             1,570.3   1,570.2
Common stock, shares issued:                        
  1994 - 171.8; 1993 - 171.2                                    1.7       1.7
Retained earnings                                              45.7     159.8
Other capital                                                 986.8     963.8
- -----------------------------------------------------------------------------
Stockholders' equity                                        2,604.5   2,695.5
- -----------------------------------------------------------------------------
Total                                                      $7,323.9  $7,519.2
- -----------------------------------------------------------------------------
</TABLE>


See notes to consolidated financial statements.


                                       8

<PAGE>
 

<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
Unisys Corporation
 
- ----------------------------------------------------------------------------------
Year Ended December 31 (Millions)                    1994        1993        1992
- ----------------------------------------------------------------------------------
<S>                                             <C>         <C>         <C> 
Cash flows from operating activities
Net income                                      $   100.5   $   565.4   $   361.2
Add (deduct) items to reconcile net income to
  net cash provided by operating activities:
Effects of extraordinary items and changes
  in accounting principles                            7.7      (203.8)      (65.0)
Depreciation                                        258.3       290.8       357.0
Amortization:
  Marketable software                               150.5       144.6       131.8
  Cost in excess of net assets acquired              41.4        41.3        41.4
(Increase) decrease in deferred income taxes,
 net                                                (55.8)      202.6       (12.2)
Decrease in receivables, net                         40.7       313.3       594.6
(Increase) decrease in inventories                  (19.1)      119.9       151.0
Increase (decrease) in accounts payable and
  other accrued liabilities                         145.7      (314.4)     (347.1)
(Decrease) increase in estimated income taxes       (12.2)     (164.9)       16.3
(Decrease) in other liabilities                     (69.6)      (61.2)      (20.3)
Decrease (increase) in other assets                  44.9        53.7      (172.6)
Other                                                15.8        32.4       140.4
- ----------------------------------------------------------------------------------
Net cash provided by operating activities           648.8     1,019.7     1,176.5
- ----------------------------------------------------------------------------------
Cash flows from investing activities
Proceeds from investments                         1,792.7     1,821.2     2,060.1
Purchases of investments                         (1,816.4)   (1,829.4)   (2,033.7)
Proceeds from marketable securities                 197.9       146.5
Purchases of marketable securities                  (97.2)     (187.2)      (73.7)
Proceeds from sales of properties                    24.8        26.5        90.3
Investment in marketable software                  (121.3)     (118.7)     (110.2)
Capital additions of properties and
  rental equipment                                 (225.7)     (196.8)     (251.7)
- ----------------------------------------------------------------------------------
Net cash used for investing activities             (245.2)     (337.9)     (318.9)
- ----------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from issuance of debt                                              973.6
Principal payments of debt                         (140.1)     (394.4)     (404.7)
Net proceeds from (reduction in)
  short-term borrowings                               2.9       (47.2)   (1,362.2)
Dividends paid on preferred shares                 (228.0)     (183.7)      (46.1)
Other                                                 3.7         7.1         1.7
- ----------------------------------------------------------------------------------
Net cash used for financing activities             (361.5)     (618.2)     (837.7)
- ----------------------------------------------------------------------------------
Effect of exchange rate changes on cash
  and cash equivalents                               (9.1)      (37.3)      (24.4)
- ----------------------------------------------------------------------------------
Increase (decrease) in cash and cash
 equivalents                                         33.0        26.3        (4.5)
- ----------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year        835.4       809.1       813.6
- ----------------------------------------------------------------------------------
Cash and cash equivalents, end of year          $   868.4   $   835.4   $   809.1
- ----------------------------------------------------------------------------------
</TABLE>


See notes to consolidated financial statements.


                                       9

<PAGE>
 
Notes to Consolidated Financial Statements
Unisys Corporation

1.  Summary of significant accounting policies

Principles of consolidation
- ---------------------------

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

Cash equivalents
- ----------------

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

Marketable securities
- ---------------------

Marketable securities, consisting principally of unsecured corporate
obligations, are carried at cost plus accrued interest, which approximates
market.

Inventories
- -----------

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

Properties, rental equipment and depreciation
- ---------------------------------------------

Properties and rental equipment are carried at cost and are depreciated over the
estimated lives of such assets using the straight-line method.  Leasehold
improvements are amortized over the shorter of the asset lives or the terms of
the respective leases.  The principal rates used are summarized below by
classification of properties:


<TABLE>
<CAPTION>
- ---------------------------------------------
                            Rate per Year (%)
- ---------------------------------------------
<S>                                 <C>
Buildings                                 2-5
Machinery and equipment                  5-25
Tools and test equipment            10-33 1/3
Rental equipment                           25
- ---------------------------------------------
</TABLE>


Revenue recognition
- -------------------

Sales revenue is generally recorded upon shipment of product in the case of
sales contracts, upon shipment of the program in the case of software, and upon
installation in the case of sales-type leases.  Revenue from services and
equipment maintenance is recorded as earned over the lives of the respective
contracts.

Revenue under cost-type contracts is recognized when costs are incurred, and
under fixed-price contracts when products or services are accepted and 


                                      10

<PAGE>
 
billings can be made. General and administrative expenses are charged to income
as incurred. Cost of revenue under long-term contracts is charged based on
current estimated total costs. 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 since such amounts are expected
to be reinvested indefinitely.

Earnings per common share
- -------------------------

In 1994, the computation of both primary and fully diluted earnings per share
was based on the weighted average number of outstanding common shares.  The
inclusion of additional shares assuming the exercise of stock options,
conversion of Series A Cumulative Convertible Preferred Stock, or conversion of
the 8 1/4% convertible subordinated notes due August 1, 2000 would have been
antidilutive.  In 1993 and 1992, the computation of primary earnings per share
was based on the weighted average number of outstanding common shares and
additional shares assuming the exercise of stock options, and the computation of
fully diluted earnings per share assumed the conversion of the 8 1/4%
convertible subordinated notes due August 1, 2000.  The computation of fully
diluted earnings per share for 1993 further assumed conversion of Series A
Cumulative Convertible Preferred Stock.  The inclusion of additional shares
assuming the conversion of Series A Cumulative Convertible Preferred Stock would
have been antidilutive in 1992.  The shares used in the computations for the
three years ended December 31, 1994 were as follows (in thousands):


<TABLE>
<CAPTION>
- ------------------------------------------
                  1994     1993     1992
<S>              <C>      <C>      <C>
- ------------------------------------------
Primary          170,752  165,070  163,725
Fully diluted    170,752  246,550  181,813
- ------------------------------------------
</TABLE>


Software capitalization
- -----------------------

The cost of development of computer software to be sold or leased 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.
Unamortized marketable software costs (which are included in other assets) at
December 31, 1994 and 1993 were $265.3 and $294.5 million, respectively.


                                      11

<PAGE>
 
Cost in excess of net assets acquired
- -------------------------------------

Cost in excess of net assets acquired represents the excess of cost over fair
value of the net assets of Sperry Corporation and Convergent, Inc., which is
being amortized on the straight-line method over 40 years and 12 years,
respectively.  Accumulated amortization at December 31, 1994 and 1993 was $566.1
and $524.7 million, respectively.

The carrying value of cost in excess of net assets acquired is reviewed for
impairment whenever events or changes in circumstances indicate that it may not
be recoverable.  If such an event occured, the Company would prepare projections
of future results of operations for the remaining amortization period.  If such
projections indicated that the cost in excess of net assets acquired would not
be recoverable, the Company's carrying value of such asset would be reduced by
the estimated excess of such value over projected income.

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 a separate component of
stockholders' equity.  Exchange gains and losses on certain forward exchange
contracts designated as hedges of international net investments and exchange
gains and losses on intercompany balances of a long-term investment nature are
also reported in the separate component of stockholders' equity.

For those international subsidiaries operating in hyperinflationary economies,
the U.S. dollar is the functional currency and, as such, nonmonetary 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.

The Company also enters into forward exchange contracts and options which have
been designated as hedges of certain transactional exposures.  Gains and losses
on these instruments are deferred and are recognized in income together with the
transaction being hedged.

2.  1994 special charge

In the fourth quarter of 1994, the Company recorded a pretax charge of $186.2
million, $133.1 million after tax, or $.78 per fully diluted common share.  The
charge was related to involuntary employee termination benefits including
severance, notice pay, medical and other benefits for approximately 4,600 people
and was taken to reduce the Company's cost structure.  Such costs were accrued
and charged to expense in accordance with a management plan which was approved
and announced in the fourth quarter of 1994.  Actual costs incurred are charged
to the accrued liability when the actions are taken.

The 1994 pretax charge of $186.2 million was recorded in the statement of income
as follows: cost of sales, $30.3 million; cost of services, $17.5 million; cost
of equipment maintenance, $61.8 million; selling, general and administrative
expenses, $47.7 million; research and development expenses, $27.9 million; and
other income, net, $1.0 million.

Cash expenditures during 1994 relating to the current actions were $6.3 million
for 825 terminations, and are expected to be approximately $150 


                                      12

<PAGE>
 
million in 1995. The remainder, which relates primarily to foreign operations,
is expected to be expended in 1996.

3.  Accounting changes and extraordinary items

Effective January 1, 1994, the Company adopted the Financial Accounting
Standards Board Statement of Financial Accounting Standards ("SFAS")112,
"Employers' Accounting for Postemployment Benefits Other Than Pensions."  SFAS
112 establishes financial accounting standards for employers that provide
benefits to former or inactive employees after employment but before retirement.
The effect of adoption on the Company's consolidated financial position,
consolidated statement of income, and liquidity was immaterial.

Effective January 1, 1994, the Company also adopted SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities" and SFAS 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial Instruments."
SFAS 115 establishes financial accounting standards for investments in equity
securities that have readily determinable fair values and for all investments in
debt securities.  SFAS 119 establishes disclosure requirements about derivative
financial instruments.

In 1994, the Company recorded an extraordinary charge for the repurchases of
debt of $7.7 million, net of $5.1 million of income tax benefits, or $.04 per
fully diluted common share.

Effective January 1, 1993, the Company adopted SFAS 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," and SFAS 109, "Accounting for
Income Taxes."  The adoption of SFAS 106 decreased net income $194.8 million,
net of $124.5 million of income tax benefits, or $.79 per fully diluted common
share, and the adoption of SFAS 109 increased net income by $425.0 million, or
$1.73 per fully diluted common share.  For further discussion of SFAS 106 and
109, see notes 12 and 4, respectively.

In 1993, the Company settled certain lawsuits in connection with its sale of the
Sperry Aerospace Group in December 1986 to Honeywell, Inc.  The Aerospace Group
was part of Sperry Corporation, which was acquired by the Company in September
1986 in the largest acquisition at the time in the computer industry.  The
lawsuits alleged violations of securities laws and fraudulent and negligent
misrepresentations of interim financial statements of the Sperry Aerospace Group
as of and for the six months ended September 30, 1986 prepared in connection
with the sale.  The sale of the Aerospace Group as a non-strategic business was
part of the financing strategy for the acquisition of Sperry Corporation and was
carried out very shortly after the completion of this acquisition.  The
Aerospace Group operations were never reported in the financial results of the
Company.  The settlement of litigation arising out of the sale, therefore, was
unrelated to the ordinary activities of the Company.  Accordingly, the Company
reported this litigation settlement as an extraordinary charge of $26.4 million,
net of $16.8 million of income tax benefits, or $.11 per fully diluted common
share.

In 1992, the Company recorded an extraordinary item of $65.0 million, or $.36
per fully diluted common share, related to the tax benefit of book operating
loss carryforwards.  See note 4.


                                      13

<PAGE>
 
4.  Estimated income taxes


<TABLE> 
<CAPTION> 
- -------------------------------------------------------------------------------
Year ended December 31 (Millions)                    1994       1993      1992
- -------------------------------------------------------------------------------
<S>                                                <C>        <C>       <C>
Income before income taxes
   United States                                   $ 23.3     $375.7    $129.9
   Foreign                                          129.9      127.7     305.7
- -------------------------------------------------------------------------------
Total income before income taxes                   $153.2     $503.4    $435.6
- -------------------------------------------------------------------------------
Estimated income taxes
   Current
      United States                                $ 25.0     $ (2.0)   $ 38.4
      Foreign                                        87.9      (34.3)    119.6
      State and local                               (12.1)     (10.2)      2.3
- -------------------------------------------------------------------------------
      Total                                         100.8      (46.5)    160.3
- -------------------------------------------------------------------------------
   Deferred
      United States                                 (32.8)     127.8
      Foreign                                       (23.0)      47.5     (20.9)
      State and local                                           13.0
- -------------------------------------------------------------------------------
      Total                                         (55.8)     188.3     (20.9)
- -------------------------------------------------------------------------------
Total estimated income taxes                       $ 45.0     $141.8    $139.4
- -------------------------------------------------------------------------------
</TABLE>
 

Reconciliation of United States statutory tax rate to effective tax rate 
follows:


<TABLE> 
<CAPTION> 
- -------------------------------------------------------------------------------
Year ended December 31                               1994       1993      1992
- -------------------------------------------------------------------------------
<S>                                                  <C>        <C>       <C> 
United States statutory
   income tax rate                                   35.0%      35.0%     34.0%
State taxes                                          (7.9)        .8        .4
Tax refund claims                                   (21.9)       (.8)     (3.9)
Amortization of cost in excess
    of net assets acquired                            9.4        2.9       3.2
Difference in estimated
   income taxes on foreign
   earnings and remittances                          14.0       (2.8)      (.5)
Change in U.S. tax rate                                         (3.8)
Other                                                  .8       (3.1)     (1.2)
- -------------------------------------------------------------------------------
Effective tax rate                                   29.4%      28.2%     32.0%
- -------------------------------------------------------------------------------
</TABLE>



                                      14

<PAGE>
 
The Company adopted SFAS 109 effective January 1, 1993.  Prior years' financial
statements have not been restated.  Under the provisions of SFAS 109, deferred
tax assets and liabilities are recognized using enacted tax rates and reflect
the effect of "temporary differences" between the recorded amounts of assets and
liabilities for financial reporting purposes and the tax basis of such assets
and liabilities.

The tax effects of temporary differences and carryforwards which give rise to
significant portions of deferred tax assets and liabilities at December 31, 1994
and 1993 were as follows:


<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
December 31 (Millions)                                    1994       1993
- ----------------------------------------------------------------------------
<S>                                                     <C>        <C> 
Deferred tax assets:             
Tax loss carryforwards                                  $  470.7   $  379.5
Foreign tax credit carryforwards                           287.4      334.8
Other tax credit carryforwards                              81.2       93.0
Capitalized R&D                                            134.6      171.4
Depreciation                                               113.7      115.2
Postretirement benefits                                    122.9      112.8
Employee benefits                                           81.4       91.5
Restructuring                                               82.3       60.3
Other                                                      255.2      239.0
- ----------------------------------------------------------------------------
                                                         1,629.4    1,597.5
Valuation allowance                                       (326.8)    (350.1)
- ----------------------------------------------------------------------------
Total deferred tax assets                               $1,302.6   $1,247.4
- ----------------------------------------------------------------------------
Deferred tax liabilities:        
Pensions                                                $  305.4   $  281.4
Other                                                      168.8      193.4
- ----------------------------------------------------------------------------
Total deferred tax liabilities                          $  474.2   $  474.8
- ----------------------------------------------------------------------------
</TABLE>


SFAS 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.  During 1994, the net decrease in the valuation allowance
was $23.3 million.

Cumulative undistributed earnings of foreign subsidiaries, for which no U.S.
income or foreign withholding taxes have been recorded, approximated $600
million at December 31, 1994.  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 plans to distribute the undistributed earnings in the
immediate future, where economically appropriate to do so, such earnings may be
remitted.

Cash paid during 1994, 1993, and 1992 for income taxes was $87.6, $118.1, and
$157.5 million, respectively.

At December 31, 1994, 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 $470.7 million.  These
carryforwards will expire as follows (in millions): 1995, $31.5; 1996, $16.7;


                                      15

<PAGE>
 
1997, $11.5; 1998, $16.9; 1999, $35.7; and $358.4 thereafter.  The Company also
has available tax credit carryforwards of approximately $368.6 million, which
will expire as follows (in millions): 1995, $96.6; 1996, $2.6; 1997, $2.1; 1998,
$114.6; 1999, $94.4; and $58.3 thereafter.

In 1992, the Company recorded, in accordance with AICPA Opinion No. 11, an
extraordinary item of $65.0 million, or $.36 per fully diluted common share,
related to the tax benefit of book operating loss carryforwards.  Since these
tax benefits were not previously recognized in the Company's financial
statements, accounting rules followed by the Company at that time required that
they be reported as an extraordinary item in the results of operations in the
period when they were realized.

In 1994, the Internal Revenue Service continued its audit of Sperry Corporation
for the years ended March 31, 1985 and 1986 and for the short period ended
September 16, 1986.  The audit of Timeplex, Inc. for the period July 1, 1984 to
January 22, 1988 was completed in 1994, with agreements reached on all
outstanding issues.  The Company is currently contesting issues in connection
with Sperry Corporation for the years ended March 31, 1980-1984, and for
Convergent, Inc. for the years 1981-1988.  In management's opinion, adequate
provisions for income taxes have been made for all years.

5  Current and long-term receivables, net

Current and long-term receivables, net comprise the following:


<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
December 31 (Millions)                                          1994      1993
- ------------------------------------------------------------------------------
<S>                                                         <C>       <C>  
Accounts receivable, net                                    $1,029.4  $1,052.9
Sales-type leases, net                                          83.9     112.5
Installment accounts, net                                       25.6      27.1
- ------------------------------------------------------------------------------
Total, net                                                   1,138.9   1,192.5
Less - Current receivables, net                              1,063.8   1,088.2
- ------------------------------------------------------------------------------
Long-term receivables, net                                  $   75.1  $  104.3
- ------------------------------------------------------------------------------
</TABLE>
 
 
6  Inventories

Inventories comprise the following:

<TABLE> 
<CAPTION> 
- ------------------------------------------------------------------------------
December 31 (Millions)                                          1994      1993
- ------------------------------------------------------------------------------
<S>                                                         <C>       <C>  
Finished equipment and supplies                             $  355.0  $  354.1
Work in process and raw materials                              418.0     399.8
- ------------------------------------------------------------------------------
Total inventories                                           $  773.0  $  753.9
- ------------------------------------------------------------------------------
</TABLE>


At December 31, 1994 and 1993, inventories included $297.4 and $288.0 million,
respectively, of costs related to long-term contracts or programs.  Progress
payments applied against inventories at December 31, 1994 and 1993 amounted to
$83.9 and $108.5 million, respectively.


                                      16

<PAGE>
 
7  Properties and rental equipment

Properties and rental equipment comprise the following:


<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31 (Millions)                                         1994      1993
- -------------------------------------------------------------------------------
<S>                                                          <C>       <C> 
Land                                                         $  101.2  $  105.6
Buildings                                                       343.6     362.7
Machinery and equipment                                       1,511.0   1,489.3
Tools and test equipment                                        334.2     362.4
Unamortized leasehold improvements                               51.9      51.8
Construction in progress                                         33.3      25.6
Rental equipment                                                339.1     378.6
- -------------------------------------------------------------------------------
Total properties and rental equipment                        $2,714.3  $2,776.0
- -------------------------------------------------------------------------------
</TABLE>
 

8  Other accrued liabilities                         
                                                     
Other accrued liabilities comprise the following:    


<TABLE> 
<CAPTION> 
- -------------------------------------------------------------------------------
December 31 (Millions)                                           1994      1993
- -------------------------------------------------------------------------------
<S>                                                          <C>       <C> 
Payrolls and commissions                                     $  337.0  $  360.0
Customers' deposit and prepayments                              436.0     353.8
Taxes other than income taxes                                   157.5     143.7
Restructuring                                                   209.3     111.1
Other                                                            39.1      47.5
- -------------------------------------------------------------------------------
Total other accrued liabilities                              $1,178.9  $1,016.1
- -------------------------------------------------------------------------------
</TABLE>
 

9  Long-term debt                                    
                                                     
Long-term debt comprises:                            


<TABLE> 
<CAPTION> 
- -------------------------------------------------------------------------------
December 31 (Millions)                                           1994      1993
- -------------------------------------------------------------------------------
<S>                                                          <C>       <C> 
10 5/8% senior notes due 1999                                $  330.1  $  400.0
8 1/4% convertible subordinated                      
   notes due 2000                                               345.0     345.0
9 3/4% senior notes due 1996                                    238.1     250.0
Credit sensitive notes due 1997                                 291.8     300.0
9 3/4% senior sinking fund                           
   debentures due 2016                                          190.0     190.0
9 1/2% notes due 1998                                           197.5     200.0
8 7/8% notes due 1997                                           135.0     135.0
6 3/4% bonds due 1995                                            17.1      16.8
Japanese yen, 5.52% due 1996                                    100.3     100.3
11 3/8% subordinated notes due 1995                              50.0      50.0
8.2% sinking fund debentures                                               20.0
Other                                                            40.4      42.9
- -------------------------------------------------------------------------------
Total                                                         1,935.3   2,050.0
Less - Current maturities                                        71.2      25.0
- -------------------------------------------------------------------------------
Total long-term debt                                         $1,864.1  $2,025.0
- -------------------------------------------------------------------------------
</TABLE>



                                      17

<PAGE>
 
Total long-term debt maturities in 1995, 1996, 1997, 1998, and 1999 are $71.2,
$342.3, $427.8, $208.4, and $341.5 million, respectively.

Cash paid during 1994, 1993, and 1992 for interest was $208.9, $256.7, and
$324.7 million, respectively.

The Company has a $300 million revolving credit agreement with a syndicate of
banks which expires on May 31, 1995.  This agreement provides for short-term
borrowings and up to $100 million of letters of credit.  The terms of the
agreement, which were revised to adjust for the 1994 special charge, provide for
a minimum net worth requirement and interest coverage ratio, as defined therein.
Additional terms include a limitation on the payment of dividends, prepayment of
debt, and amount of outstanding debt.  The Company is required to have no
borrowings outstanding under the revolving credit agreement for thirty
consecutive days, or fifteen consecutive days during each half, of each calendar
year.  During 1994, there were no borrowings under this agreement, and at
December 31, 1994, the Company was in compliance with all of its terms.

The Company pays commitment fees on the unused amount of the revolving credit
agreement; there are no compensating balance requirements.  Revolving credit
borrowings, at the Company's option, are at the agent bank's base rate or the
London Interbank Offered Rate, plus a margin depending on the Company's debt
rating on its outstanding senior unsecured long-term debt securities.
Commissions for letters of credit also vary depending on such debt rating.  In
addition, international subsidiaries maintain short-term credit arrangements
with banks in accordance with local customary practice.

10  Leases

Rental expense, less income from subleases, for 1994, 1993, and 1992 was $210.2,
$228.1, and $253.0 million, respectively.

Minimum net rental commitments under noncancelable operating leases outstanding
at December 31, 1994, substantially all of which relate to real properties, were
as follows: 1995, $186.6 million; 1996, $164.4 million; 1997, $135.3 million;
1998, $107.9 million; 1999, $89.0 million; and thereafter, $546.1 million.

11  Business segment information

The Company operates primarily in one business segment-information systems and
related services and supplies.  This segment represents more than 90% of
consolidated revenue, operating profit and identifiable assets.  The Company's
operations are structured to achieve consolidated objectives.  As a result,
significant interdependencies and overlaps exist among the Company's operating
units.  Accordingly, the revenue, operating profit and identifiable assets shown
for each geographic area may not be indicative of the amounts which would have
been reported if the operating units were independent of one another.

Sales and transfers between geographic areas are generally priced to recover
cost plus an appropriate mark-up for profit.  Operating profit is revenue less
related costs and direct and allocated operating expenses, excluding interest
and the unallocated portion of corporate expenses.  Corporate assets are those
assets maintained for general purposes, principally cash and cash equivalents,
marketable securities, costs in excess of net assets acquired, prepaid pension
assets, deferred taxes, investments at equity, and corporate facilities.


                                      18

<PAGE>
 
No single customer accounts for more than 10% of revenue.  Revenue from various
agencies of the U.S. Government approximated $1,628, $2,287, and $2,424 million
in 1994, 1993, and 1992, respectively.

A summary of the Company's operations by geographic area is presented below:


<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(Millions)                                       1994        1993        1992
- ------------------------------------------------------------------------------
<S>                                         <C>         <C>         <C> 
United States                         
  Customer revenue                          $ 3,634.5   $ 4,072.5   $ 4,149.7
  Affiliate revenue                             772.3     1,054.4     1,396.2
- ------------------------------------------------------------------------------
  Total                                     $ 4,406.8   $ 5,126.9   $ 5,545.9
- ------------------------------------------------------------------------------
  Operating profit                          $   129.7   $   461.6   $   303.4
  Identifiable assets                         1,698.5     1,880.3     2,455.9
- ------------------------------------------------------------------------------
Europe                                
  Customer revenue                          $ 1,940.1   $ 1,930.8   $ 2,477.8
  Affiliate revenue                              47.2       107.5       163.7
- ------------------------------------------------------------------------------
  Total                                     $ 1,987.3   $ 2,038.3   $ 2,641.5
- ------------------------------------------------------------------------------
  Operating profit (loss)                   $   (82.0)  $  (164.3)  $    58.2
  Identifiable assets                           758.2       702.4     1,043.0
- ------------------------------------------------------------------------------
Americas/Pacific                      
  Customer revenue                          $ 1,825.1   $ 1,739.2   $ 1,794.4
  Affiliate revenue                             186.7       182.9       231.6
- ------------------------------------------------------------------------------
  Total                                     $ 2,011.8   $ 1,922.1   $ 2,026.0
- ------------------------------------------------------------------------------
  Operating profit                          $   434.3   $   488.3   $   511.7
  Identifiable assets                           653.8       636.8       726.6
- ------------------------------------------------------------------------------
Adjustments and eliminations          
  Affiliate revenue                         $(1,006.2)  $(1,344.8)  $(1,791.5)
  Operating profit                               18.4        17.1         9.3
  Identifiable assets                           (50.7)      (66.6)     (136.8)
- ------------------------------------------------------------------------------
Consolidated                          
  Revenue                                   $ 7,399.7   $ 7,742.5   $ 8,421.9
- ------------------------------------------------------------------------------
  Operating profit                          $   500.4   $   802.7   $   882.6
  General corporate expenses                   (143.5)      (57.6)     (106.4)
  Interest expense                             (203.7)     (241.7)     (340.6)
- ------------------------------------------------------------------------------
  Income before income taxes                $   153.2   $   503.4   $   435.6
- ------------------------------------------------------------------------------
  Identifiable assets                       $ 3,059.8   $ 3,152.9   $ 4,088.7
  Corporate assets                            4,264.1     4,366.3     3,460.0
- ------------------------------------------------------------------------------
  Total assets                              $ 7,323.9   $ 7,519.2   $ 7,548.7
- ------------------------------------------------------------------------------
</TABLE>


                                      19


<PAGE>
 
12  Employee plans

Retirement benefits
- -------------------

Defined benefit retirement income plans cover the majority of domestic employees
and certain employees in countries outside the United States.  In the U.S., the
Company has retirement plans under which funds are deposited with a trustee.
Major subsidiaries outside the United States provide for employee pensions in
accordance with local requirements and customary practices, and several maintain
funded defined benefit plans.

For plans covered by the Employee Retirement Income Security Act ("ERISA"), the
Company's funding policy is to fund in accordance with ERISA funding standards.
The various benefit formulas and the funding methods used in the international
plans are in accordance with local requirements.  Plan assets generally are
invested in common stocks, fixed-income securities, insurance contracts, and
real estate.  At December 31, 1994, the assets of the Company's U.S. pension
plans included approximately 2.2 million shares of the Company's common stock
valued at approximately $19 million.

Net curtailment gains of $11.3, $5.8, and $18.2 million have been recognized in
1994, 1993, and 1992, respectively.

Other postretirement benefits
- -----------------------------

The Company provides certain health care benefits for U.S. employees who retired
or terminated after qualifying for such benefits.  Most international employees
are covered by government-sponsored programs and the cost to the Company is not
significant.  The Company expects to fund its share of such benefit costs
principally on a pay-as-you-go basis.

The Company adopted SFAS 106 effective January 1, 1993.  Prior years' financial
statements have not been restated.  SFAS 106 required the Company to change from
the cash basis of accounting for such benefits by requiring the accrual, during
the years that the employee renders services, of the estimated cost of providing
such benefits.

In November 1992, the Company announced changes to its postretirement benefit
plans, effective January 1, 1993, whereby the Company's current subsidy will be
phased out, ending as of January 1, 1996.  Several lawsuits have been brought by
plan participants challenging the announced changes to the plans, and the
Company is defending them vigorously.  In 1994, several of these lawsuits were
resolved which resulted in the Company recognizing income of $13.8 million ($8.0
million amortization of prior service benefit and $5.8 million settlement).

Amounts included in expense for 1992, under the previous cash basis of
accounting, was $60.5 million.  The adoption of SFAS 106 had the effect of
decreasing 1993 postretirement benefit expense by $28.1 million, or $.07 per
fully diluted common share.

Net periodic postretirement benefit cost for 1994 and 1993 includes the
following components:

                                      20

<PAGE>
 

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Year ended December 31 (Millions)                                 1994    1993
- -------------------------------------------------------------------------------
<S>                                                              <C>     <C> 
Service cost -                                          
  benefits earned during the period                              $ 1.0   $ 1.2
Interest cost on accumulated                            
  postretirement benefit obligation                               22.1    26.1
Amortization of prior service benefit                             (8.0)
Net amortization and deferral                                     (2.5)     .5
Return on plan assets                                               .5    (3.3)
- -------------------------------------------------------------------------------
Net periodic postretirement benefit cost                         $13.1   $24.5
- -------------------------------------------------------------------------------
</TABLE>


The status of the plan and amounts recognized in the Company's consolidated
balance sheet at December 31, 1994 and 1993 were as follows:


<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Year ended December 31 (Millions)                                1994     1993
- -------------------------------------------------------------------------------
<S>                                                            <C>      <C> 
Actuarial present value of accumulated postretirement
 benefit obligation:
  Retirees                                                     $240.2   $290.7
  Fully eligible active plan participants                        16.7     15.1
  Other active plan participants                                 12.3     19.1
- -------------------------------------------------------------------------------
                                                                269.2    324.9
Less plan assets at fair value                                  (26.5)   (30.2)
- -------------------------------------------------------------------------------
Accrued postretirement benefit liability
  in excess of plan assets                                      242.7    294.7
Unrecognized net loss                                           (27.9)    (9.9)
Unrecognized prior service benefit                               39.2
- -------------------------------------------------------------------------------
Accrued postretirement benefit obligation
recognized in the consolidated balance sheet                   $254.0   $284.8
- -------------------------------------------------------------------------------
</TABLE>


As of December 31, 1994, $225.3 million of this liability was classified as
long-term and $28.7 million was classified as a current liability.

The assumed rate of return on plan assets was 8% and 10% in 1994 and 1993,
respectively, and the weighted average discount rate used to measure the
accumulated postretirement benefit obligation was 8.75% at December 31, 1994 and
7.35% at December 31, 1993.  The assumed health care cost trend rate used in
measuring the expected cost of benefits covered by the plan was 11% for 1995,
gradually declining to 6.5% in 2004 and thereafter.  A one-percentage point
increase in the assumed health care cost trend rate would increase the
accumulated postretirement benefit obligation at December 31, 1994 by $13.9
million and increase the aggregate of the service and interest cost components
of net periodic postretirement health care benefit cost by $2.4 million.

Stock plans
- -----------

Under plans approved by the stockholders, stock options, stock appreciation
rights, restricted stock and performance 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 

                                      21

<PAGE>
 
of ten years and become exercisable in annual installments over a two, three or
four year period following date of grant.

Retirement benefits
- -------------------

The plans' funded status and amounts recognized in the Company's consolidated
balance sheet at December 31, 1994 and 1993 were as follows:

                                      22


<PAGE>
 

<TABLE>
<CAPTION>
                                           Assets Exceed Accumulated Benefits          Accumulated Benefits Exceed Assets
                                    -------------------------------------------------------------------------------------
(Millions)                                 U.S. Plans           Int'l  Plans         U.S. Plans            Int'l Plans      
                                    --------------------    -----------------   ------------------   --------------------
                                        1994        1993      1994       1993      1994       1993       1994        1993 
- -------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>        <C>         <C>       <C>        <C>       <C>        <C>        <C> 
Actuarial present value of benefit                                      
 obligations:                                                           
 Vested benefit obligation          $2,893.5   $ 3,188.5   $ 519.7   $  476.7   $  40.5   $   44.6    $  44.9   $    26.7
- -------------------------------------------------------------------------------------------------------------------------
 Accumulated benefit                                                                                              
  obligation                        $2,975.3   $ 3,306.8   $ 536.0   $  502.7   $  42.1   $   46.9    $  67.6   $    42.1
- -------------------------------------------------------------------------------------------------------------------------
 Projected benefit obligation       $3,016.1   $ 3,372.0   $ 603.8   $  566.6   $  45.1   $   51.6    $  75.7   $    48.3
Plan assets at fair value            3,211.2     3,431.2     652.8      659.3                            42.5        26.2
- -------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation
  less than (in excess of)
  plan assets                          195.1        59.2      49.0       92.7     (45.1)     (51.6)     (33.2)      (22.1) 
Unrecognized net loss (gain)           561.9       697.0      37.9      (16.7)      4.2       11.6        7.7          .8 
Unrecognized prior service  
 (benefit) cost                       (143.8)     (172.1)      4.7       12.5       2.2        1.5        2.0         1.7 
Unrecognized net (asset)  
 obligation at date of adoption          (.6)        (.8)     (1.8)      (3.2)      4.8        5.7        3.5         4.5 
- ------------------------------------------------------------------------------------------------------------------------- 
Prepaid pension cost
 (pension liability)
 recognized in the
 consolidated
 balance sheet                      $  612.6   $   583.3   $  89.8    $  85.3   $ (33.9)  $  (32.8)   $ (20.0)   $  (15.1)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
 


<TABLE> 
<CAPTION> 
Net periodic pension cost for 1994, 1993, and 1992 includes the following components:
- --------------------------------------------------------------------------------------------------------------------------
(Millions)                                                           U.S. Plans                 International Plans
- --------------------------------------------------------------------------------------------------------------------------
                                                              1994       1993      1992       1994       1993        1992
- --------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>       <C>        <C>       <C>         <C>       <C>  
Service cost - benefits earned during the period           $  60.6   $   58.9   $  33.4   $   22.2    $  18.4   $    21.7 
Interest cost on projected benefit obligation                249.6      246.8     239.0       42.7       42.3        47.3 
Return on assets                                               6.0     (372.8)   (153.6)      33.8     (116.1)      (49.5)         
Net amortization and deferral                               (327.6)      41.6    (170.8)     (86.8)      58.2       (10.6)  
- --------------------------------------------------------------------------------------------------------------------------
Net periodic pension (income) cost                         $ (11.4)  $  (25.5)  $ (52.0)  $   11.9    $   2.8   $     8.9 
- --------------------------------------------------------------------------------------------------------------------------
The assumptions used to determine the above data were as follows:
- --------------------------------------------------------------------------------------------------------------------------
Discount rate                                                 8.75%      7.38%     8.50%      7.48%      6.93%       8.53%
Rate of increase in compensation levels                       5.40%      5.13%     6.25%      4.43%      4.27%       6.25%
Expected long-term rate of return on assets                  10.00%     10.00%    10.00%      8.40%      9.15%       9.49%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
 


<TABLE> 
<CAPTION> 
Stock plans
A summary of the changes in shares under option for all plans follows:
- --------------------------------------------------------------------------------------------------------------------------
Year ended December 31,                                           1994                                          1993
- --------------------------------------------------------------------------------------------------------------------------
(Shares in thousands)                        Shares             Price Range               Shares               Price Range
- --------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                  <C>                    <C>                    <C> 
Outstanding at beginning    
 of year                                   15,402.2             $3 3/4-44 1/2           14,048.3           $ 3 3/4-44 1/2
Granted                                     4,499.2             $8 5/8-14 3/8            3,501.2           $10 1/8-13 5/8
Exercised                                    (654.0)            $3 3/4-14 7/8           (1,566.6)          $ 3 3/4- 9 7/8
Canceled                                   (1,773.9)                                      (580.7)
- --------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year                 17,473.5             $3 3/4-44 1/2           15,402.2           $ 3 3/4-44 1/2
- --------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year                  9,619.9                                      8,987.2
- --------------------------------------------------------------------------------------------------------------------------
Shares available for granting options
 at end of year                             2,104.5                                      2,157.7
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                      23


<PAGE>
 
13  Stockholders' equity

The Company has 360,000,000 authorized shares of common stock, par value $.01
per share.  The Company has 40,000,000 shares of authorized preferred stock, par
value $1 per share, issuable in series.

In 1993, the Company contributed seven million shares of its common stock,
valued at $89.2 million, to its U.S. pension plan.

The Company has authorization to issue up to 30,000,000 shares of Series A
Cumulative Convertible Preferred Stock ("Series A Preferred Stock"), 10 shares
of Series B Cumulative Convertible Preferred Stock ("Series B Preferred Stock")
and 20 shares of Series C Cumulative Convertible Preferred Stock ("Series C
Preferred Stock").

In 1992, the Company resumed the payment of dividends on preferred stock, which
had been suspended in February 1991.  During 1994, all cumulative preferred
dividend arrearages were paid.

Each share of Series A Preferred Stock (i) accrues quarterly cumulative
dividends of $3.75 per share per annum, (ii) has a liquidation preference of
$50.00 plus accrued and unpaid dividends, (iii) is convertible into 1.67 shares
of the Company's common stock, subject to customary anti-dilution adjustments,
and (iv) is redeemable at the option of the Company under certain circumstances
and at varying prices.  If, on the date used to determine stockholders of record
for a meeting of stockholders at which directors are to be elected, preferred
stock dividends are in arrears in an amount equal to at least six quarterly
dividends, the number of members of the Board of Directors will be increased by
two as of the date of such stockholders' meeting and the holders of shares of
Series A Preferred Stock will be entitled to vote for and elect such two
additional directors.

Mitsui & Co., Ltd. ("Mitsui") owns $150 million of convertible preferred stock,
which includes 10 shares of Series B Preferred Stock and 20 shares of Series C
Preferred Stock.  The Series B Preferred Stock and the Series C Preferred Stock
are convertible at the option of the holder into the Company's common stock at
conversion prices of $20.00 and $21.00 per share, respectively, subject to
customary anti-dilution adjustments. Both Series B Preferred Stock and Series C
Preferred Stock (i) have a stated value of $5 million per share, (ii) accrue
quarterly cumulative dividends based on such stated value at 8 7/8% per annum
until June 28, 1995 and 9 1/2% per annum from June 28, 1995 to June 28, 1997,
(iii) accrue dividends on the amount of any unpaid dividends, (iv) are
redeemable at the option of the Company at a premium which is determined by
reference to interest rates then in effect and the amount of time then remaining
to June 28, 1997, and (v) are entitled to receive upon liquidation the stated
value plus accrued and unpaid dividends. In the event that the Series B
Preferred Stock and Series C Preferred Stock have not been previously redeemed
by the Company or converted by the holder, the Company will be required to
convert both series into the Company's common stock based on the then-current
market price after June 28, 1996 (or after June 28, 1995 if so requested by
Mitsui, the original holder of the Series B Preferred Stock and Series C
Preferred Stock), or earlier under certain extraordinary circumstances, and
conduct a managed sale program of the common stock.  Such conversions and sales
must, in general, be completed by June 28, 1997.  To the extent that the
proceeds received by Mitsui from such managed sale program are less than the
stated value of the shares so converted, plus accrued and unpaid dividends and a
present valued premium amount if such conversion takes place before June 28,
1997, the Company has agreed to issue additional shares of capital stock to
Mitsui which will be sold in a manner approved by the Company until Mitsui
receives proceeds equal to the sum of 

                                      24

<PAGE>
 
such amounts. Shares of Series B Preferred Stock and Series C Preferred Stock
rank pari passu with each other and with Series A Preferred Stock, and the
holders of Series A, B and C Preferred Stock have priority as to dividends over
holders of the Company's common stock and other series or classes of the
Company's stock which rank junior with regard to dividends. Each series of
Cumulative Convertible Preferred Stock is non-voting except with respect to
certain matters relating to the rights and preferences of such series. With
respect to such matters, each of the Series B Preferred Stock and Series C
Preferred Stock votes separately as a class. The Series A Preferred Stock also
votes as a class on these matters, but its class includes the Series B Preferred
Stock and Series C Preferred Stock, as well as any other series of preferred
stock having equal rank as to dividends and liquidation rights.

Each outstanding share of common stock has attached to it one preferred share
purchase right (a "Right").  Each Right entitles the registered holder to
purchase for $75, under certain circumstances, one three-hundredth of a share of
Junior Participating Preferred Stock, par value $1 per share.  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.  If the Company is acquired (or survives in a reverse merger
transaction) or 50% or more of its consolidated assets or earning power are
sold, each Right will entitle its holder to purchase a number of the acquiring
company's common shares (or the Company's common shares) having a market value
of $150.  The Company will be entitled to redeem the Rights at one and two-
thirds cents per Right prior to the earlier of the expiration of the Rights at
March 17, 1996, or the time that a 20% position has been acquired.  Until the
Rights become exercisable, they have no dilutive effect on net income per common
share.

At December 31, 1994, 111.2 million shares of unissued common stock of the
Company were reserved for the following: 57.2 million for convertible preferred
stock, 33.7 million for the 8 1/4% convertible subordinated debentures and 20.3
million for stock options, stock purchase and savings plans.

Changes in stockholders' equity during the three years ended December 31, 1994
were as follows:

                                      25

<PAGE>
 

<TABLE>
<CAPTION>
                                                                                                           Other Capital
                                                                                                    -----------------------------
                                                                                       Retained                Trans-
                                                 Preferred Stock                       Earnings                lation
                                           -----------------------------    Common   (Accumulated   Treasury   Adjust-   Paid-in
(Millions)                                  Series A  Series B  Series C     Stock     Deficit)       Stock    ments     Capital
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>      <C>         <C>      <C>          <C>       <C>       <C> 
   Balance at December 31, 1991             $1,428.0     $50.0    $100.0      $1.6     $(497.0)     $ (9.3)   $(295.8)  $1,236.9
   Issuance of stock under stock
    purchase, option and
    other plans                                                                                        (.2)                  1.7
   Restricted stock                                                                                   (5.6)                  5.6
   Issuance of stock under
    license agreement                                                                                  1.5                   (.7)
   Net income                                                                            361.2    
   Dividends                                                                             (92.2)    
   Translation adjustments                                                                                      (41.7)
   Other                                                                                                                      .1
- ----------------------------------------------------------------------------------------------------------------------------------
   Balance at December 31, 1992              1,428.0      50.0     100.0       1.6      (228.0)      (13.6)    (337.5)   1,243.6
   Issuance of stock under stock
    purchase, option and
    other plans                                                                                       (1.7)                  7.1
   Contribution to pension plan                                                 .1                                          89.2
   Net income                                                                            565.4
   Dividends                                                                            (177.6)
   Translation adjustments                                                                                      (23.3)
   Other                                        (7.8)
- ----------------------------------------------------------------------------------------------------------------------------------
   Balance at December 31, 1993              1,420.2      50.0    100.0        1.7       159.8       (15.3)    (360.8)   1,339.9
   Issuance of stock under stock
    purchase, option and
    other plans                                                                                        (.7)                  3.6
   Net income                                                                            100.5
   Dividends                                                                            (214.6)
   Translation adjustments                                                                                       20.0
   Other                                          .1                                                                          .1
- ------------------------------------------------------------------------------------------------------------------------------------
   Balance at December 31, 1994             $1,420.3     $50.0   $100.0       $1.7     $  45.7      $(16.0)   $(340.8)  $1,343.6
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


   Changes in issued shares during the three years ended December 31, 1994 were
   as follows:

<TABLE>
<CAPTION>
                                                                Preferred Stock
                                                ---------------------------------------       Common     Treasury
                                                 Series A      Series B     Series C          Stock       Stock
- ------------------------------------------------------------------------------------------------------------------
   <S>                                         <C>                   <C>          <C>      <C>          <C> 
   Balance at December 31, 1991                28,560,889            10           20       162,196,687  (505,671)
   Issuance of stock under stock
      purchase, option and other plans                                                         405,115   (26,249)
   Restricted stock                                                                                     (216,522)
   Issuance of stock under license agreement                                                              75,887
   Other                                           (1,291)                                       2,234
- -------------------------------------------------------------------------------------------------------------------
   Balance at December 31, 1992                28,559,598            10           20       162,604,036  (672,555)
   Issuance of stock under stock
      purchase, option and other plans                                                       1,566,568  (133,628)
   Contribution to pension plan                                                              7,000,000
   Other                                         (155,159)                                         423
- -------------------------------------------------------------------------------------------------------------------
   Balance at December 31, 1993                28,404,439            10           20       171,171,027  (806,183)
   Issuance of stock under stock
      purchase, option or other plans                                                          654,024   (58,861)
   Other                                              747                                        2,298
- -------------------------------------------------------------------------------------------------------------------
   Balance at December 31, 1994                28,405,186            10           20       171,827,349  (865,044)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      26

<PAGE>
 
14  Financial instruments

The Company uses derivative financial instruments to reduce its exposure to
market risks from changes in foreign exchange rates and interest rates.  The
Company does not hold or issue financial instruments for speculative trading
purposes.  The derivative instruments used are foreign exchange forward
contracts and options, and interest rate and foreign currency swap agreements.
These derivatives, which are over-the-counter instruments, are non-leveraged and
involve little complexity.

The Company monitors and controls its risks in the derivative transactions
referred to above 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 counterparty's financial condition.

Due to its foreign operations, the Company is exposed to the effects of foreign
exchange rate fluctuations on the U.S. dollar.  Foreign exchange forward
contracts and options generally having maturities of less than nine months are
entered into for the sole purpose of hedging long-term investments in foreign
subsidiaries and certain transactional exposures.

The cost of foreign currency options is recorded in prepaid expenses in the
consolidated balance sheet.  At December 31, 1994, such prepaid expense was $5.1
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 and any gains
thereon are reported in income when the related transactions being hedged
(generally within twelve months) are recognized.

The Company also enters into foreign exchange forward contracts.  Gains and
losses on such contracts hedging transactional exposures are deferred and
included in other liabilities until the corresponding transaction is recognized.
At December 31, 1994, the Company had a total of $1,483.7 million (of notional
value) of foreign exchange forward contracts, $811.2 million to sell foreign
currencies and $672.5 million to buy foreign currencies.  At December 31, 1993,
the Company had a total of $511.5 million of such contracts, $330.2 million to
sell foreign currencies and $181.3 million to buy foreign currencies.  At
December 31, 1994, a realized net gain of approximately $12.9 million was
deferred and included in other liabilities on such contracts.  Gains or losses
on foreign exchange forward contracts which hedge foreign currency transactions
are reported in income when the related transactions being hedged (generally
within twelve months) are recognized. Gains or losses on those contracts which
hedge long-term investments in foreign subsidiaries are reported in a separate
component of stockholders' equity for translation adjustments.

The Company uses interest rate swap agreements to effectively convert variable
rate obligations to a fixed rate basis, and uses foreign currency swaps to
effectively convert foreign currency denominated debt to U.S. dollar denominated
debt in order to reduce the impact of interest rate and foreign currency rate
changes on future income.  The differential to be paid or received under these
agreements is recognized as an adjustment to interest expense related to the
debt.  The related amount payable to or receivable from counterparties is
included in other liabilities or current receivables.  At December 31, 1994, the
weighted average fixed rate paid by the Company was 

                                      27


<PAGE>
 
9.1%. The fair values of the swap agreements are not recognized in the financial
statements. At December 31, 1994, the Company had three interest rate swap
contracts with a total notional value of $63.8 million, of which $13.6 million
expires in 1995 and $50.2 million expires in 1996, and one foreign currency swap
for $50.1 million expiring in 1996. During the three years ended December 31,
1994, there were no terminations of swap contracts. Accordingly, there were no
deferred gains or losses related to such swaps as of December 31, 1994.

Financial instruments comprise the following:


<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31 (millions)                                         1994       1993
- -------------------------------------------------------------------------------
<S>                                                        <C>        <C> 
Outstanding:                            
   Long-term debt                                          $1,935.3   $2,050.0
   Foreign exchange forward contracts*                      1,483.7      511.5
   Foreign exchange options*                                  373.9      392.3
   Interest rate swaps*                                        63.8      296.3
   Foreign currency swaps*                                     50.1       50.1
- -------------------------------------------------------------------------------
Estimated fair value:                   
   Long-term debt                                           1,935.6    2,273.2
   Foreign exchange forward contracts                       1,484.1      505.1
   Foreign exchange options                                     4.8       11.5
   Interest rate swaps                                          (.9)     (13.9)
   Foreign currency swaps                                      22.1       12.3
- -------------------------------------------------------------------------------
</TABLE>


*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.  The
Company's cash equivalents and marketable securities are classified as
available-for-sale and at December 31, 1994 principally have maturities of less
than one month.  Due to the short maturities of these instruments, they are
carried in the balance sheet at cost plus accrued interest, which approximates
market value.  Realized gains or losses during 1994, as well as unrealized gains
or losses at December 31, 1994, were immaterial.  Receivables are due from a
large number of customers which are dispersed worldwide across many industries.
At December 31, 1994 and 1993, the Company had no significant concentrations of
credit risk.

For foreign currency contracts and options, no impact on financial position or
results of operations would result from a change in the level of the underlying
rate, price or index.  All of the Company's foreign currency contracts and
options are hedges against specific exposures and have been accounted for as
such.  Therefore, a change in the derivative's value would be offset with an
equal but opposite change in the hedged item.

The carrying amount of cash, cash equivalents, and marketable securities
approximates fair value because of the short maturity of these instruments. The
fair value of the Company's long-term debt was based on the quoted market prices
for publicly traded issues.  For debt which is not publicly traded, the fair
value was estimated 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.

                                      28

<PAGE>
 
15  Litigation

The "Ill Wind" global settlement agreement between the Company and the U.S.
Government requires, among other things, that the Company make contingency
payments, through 1997, not to exceed a total of $90 million, subject to annual
caps, based upon the amount of asset sales and net income reported by the
Company during such period.  Through December 31, 1994, the Company has expensed
$24.5 million of such contingency payments.

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 presently determinable, management does not
expect that these matters will have a material adverse effect on the Company's
consolidated financial position, consolidated statement of income, or liquidity.

                                      29

<PAGE>
 
 

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, 1994 and 1993 and the related consolidated
statements of income and cash flows for each of the three years in the period
ended December 31, 1994.  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 generally accepted auditing
standards.  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 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, 1994 and 1993, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1994 in conformity with generally accepted accounting principles.

As discussed in Note 3 to the consolidated financial statements, in 1993 the
Company changed its method of accounting for postretirement benefits other than
pensions and income taxes.

Ernst & Young LLP

Philadelphia, Pennsylvania
January 25, 1995


                                      30


<PAGE>
 
 
Supplemental Financial Data (Unaudited)
Unisys Corporation


<TABLE> 
<CAPTION> 
 
Quarterly financial information

- ---------------------------------------------------------------------------------------------------
                                                   First     Second     Third    Fourth
(Millions, except per share data)                Quarter    Quarter   Quarter   Quarter       Year
- ---------------------------------------------------------------------------------------------------
1994
- ---------------------------------------------------------------------------------------------------
<S>                                             <C>        <C>       <C>       <C>        <C> 
Revenue                                         $1,688.9   $1,799.2  $1,788.1  $2,123.5   $7,399.7
Gross profit                                       597.6      628.0     610.2     622.9    2,458.7
Income (loss) before income taxes                   95.3       70.2      60.5     (72.8)     153.2
Income (loss) before extraordinary item             67.7       49.9      42.9     (52.3)     108.2
Net income (loss)                                   60.0       49.9      42.9     (52.3)     100.5
Dividends on preferred shares                       30.1       30.0      30.0      30.0      120.1
Earnings (loss) on common shares                    29.9       19.9      12.9     (82.3)     (19.6)
Earnings (loss) per common share - primary
 and fully diluted
 Before extraordinary item                           .21        .12       .08      (.48)      (.07)
 Extraordinary item                                 (.04)                                     (.04)
- ---------------------------------------------------------------------------------------------------
 Total                                               .17        .12       .08      (.48)      (.11)
- ---------------------------------------------------------------------------------------------------
Market price per common share - high              16 1/2     15 1/4    11 1/4    12 1/8     16 1/2
                              - low               12 1/2      8 5/8     8 5/8     8 1/4      8 1/4
- ---------------------------------------------------------------------------------------------------
<CAPTION>  
1993
- ---------------------------------------------------------------------------------------------------
<S>                                             <C>        <C>       <C>       <C>        <C> 
Revenue                                         $1,907.5   $1,927.2  $1,806.7  $2,101.1   $7,742.5
Gross profit                                       689.1      752.1     662.9     794.1    2,898.2
Income before income taxes                          83.5      151.5      95.4     173.0      503.4
Income before extraordinary item
  and changes in accounting principles              56.8      103.0      84.1     117.7      361.6
Net income                                         260.6      103.0      84.1     117.7      565.4
Dividends on preferred shares                       30.4       30.6      30.3      30.3      121.6
Earnings on common shares                          230.2       72.4      53.8      87.4      443.8
Earnings per common share - primary
  Before extraordinary item
   and changes in accounting principles              .16        .44       .33       .53       1.46
  Extraordinary item                                (.16)                                     (.16)
  Effect of changes in accounting principles        1.39                                      1.39
- ---------------------------------------------------------------------------------------------------
  Total                                             1.39        .44       .33       .53       2.69
- ---------------------------------------------------------------------------------------------------
Earnings per common share - fully diluted
  Before extraordinary item
   and changes in accounting principles              .23        .39       .29       .46       1.48
  Extraordinary item                                (.11)                                     (.11)
  Effect of changes in accounting principles         .94                                       .94
- ---------------------------------------------------------------------------------------------------
  Total                                             1.06        .39       .29       .46       2.31
- ---------------------------------------------------------------------------------------------------
Market price per common share - high              13 7/8     13 3/4    12 1/4    13 1/8     13 7/8
                              - low                9 7/8     10 3/4     9 7/8    10 3/4      9 7/8
- ---------------------------------------------------------------------------------------------------
</TABLE>



In the fourth quarter of 1994, the Company recorded a special charge of $186.2
million, or $.78 per fully diluted common share.  See Note 2 to the Notes to
Consolidated Financial Statements.

In the first quarter of 1993, the Company adopted SFAS 106 and 109.  See Note 3
to 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.

                                      31

<PAGE>
 
 

<TABLE>
<CAPTION>
 
Eight-year summary of selected financial data
- ------------------------------------------------------------------------------------------------------------------------------------

                                 
(Millions, except per share data)            1994       1993      1992       1991        1990        1989        1988     1987##
- ------------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>        <C>       <C>       <C>         <C>         <C>         <C>        <C> 
Results of operations                   
Revenue                                  $7,399.7   $7,742.5  $8,421.9  $ 8,696.1   $10,111.3   $10,096.9   $ 9,935.2  $ 9,732.0
Operating income (loss)                     306.0      734.1     720.7     (578.9)       44.0      (210.2)    1,106.1    1,117.7
Income (loss) before                    
 income taxes                               153.2      503.4     435.6   (1,288.3)     (337.3)     (554.3)      958.6      951.3
Income (loss) before                    
 extraordinary items and                
 changes in accounting                  
 principles                                 108.2      361.6     296.2   (1,393.3)     (436.7)     (639.3)      680.6      578.0
Net income (loss)                           100.5      565.4     361.2   (1,393.3)     (436.7)     (639.3)      680.6      578.0
Dividends on preferred                  
 shares                                     120.1      121.6     122.1      121.2       114.3       107.2       107.1      106.9
Earnings (loss) on common               
 shares                                     (19.6)     443.8     239.1   (1,514.5)     (551.0)     (746.5)      573.5      471.1
Earnings (loss) per common              
 share*                                 
 Primary                                     (.11)      2.69      1.46      (9.37)      (3.45)      (4.71)       3.58       3.15
 Fully diluted                               (.11)      2.31      1.40      (9.37)      (3.45)      (4.71)       3.27       2.93
Dividends declared per                  
 common share                                                                             .50        1.00         .98     90 2/3
Financial position                      
Working capital                          $  632.1   $  834.2  $  646.3  $   557.7   $   597.5   $ 1,540.0   $ 2,438.6  $ 1,752.6
Total assets                              7,323.9    7,519.2   7,548.7    8,473.0    10,319.8    10,779.6    11,561.0   10,601.8
Long-term debt                            1,864.1    2,025.0   2,172.8    2,694.6     2,494.6     3,247.8     3,078.1    2,377.1
Common stockholders'                    
 equity#                                  1,034.2    1,057.3     541.8      342.1     1,907.0     2,452.9     3,526.1    3,118.3
Common stockholders'                    
 equity per share                            6.05       6.21      3.35       2.12       11.79       15.49       22.24      20.90
- ------------------------------------------------------------------------------------------------------------------------------------
Other data                              
Engineering, research and               
 development**                           $  870.9   $  934.7  $  980.7  $ 1,147.4   $ 1,274.8   $ 1,445.2   $ 1,419.5  $ 1,318.5
Capital additions of                    
 properties and rental                  
 equipment                                  225.7      196.8     251.7      248.3       460.1       615.4       669.9      720.9
Investment in marketable                
 software                                   121.3      118.7     110.2      167.7       210.5       195.0       183.6      114.7
Depreciation                                258.3      290.8     357.0      459.4       528.9       533.5       593.2      590.8
Amortization                            
 Marketable software                        150.5      144.6     131.8      241.0       161.6       111.5        64.2       30.7
 Cost in excess of net                   
 assets acquired                             41.4       41.3      41.4      251.2        61.7        59.2        35.0       26.9
Common shares outstanding               
 (millions)                                 171.0      170.4     161.9      161.7       161.8       158.4       158.6      149.2
Stockholders of record                  
 (thousands)                                 45.3       47.8      51.7       54.6        52.3        45.6        42.4       38.6
Employees (thousands)                        46.3       49.0      54.3       60.3        75.3        82.3        93.0       92.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


   *Includes in 1994 an extraordinary item of $(.04) primary and fully diluted;
   in 1993, the effect of changes in accounting principles and extraordinary
   item of $1.23 primary and $.83 fully diluted; and in 1992, an extraordinary
   item of $.40 primary and $.36 fully diluted.

   # After deduction of cumulative preferred dividends in arrears.

   ** Includes company and customer-funded research and development.

   # # Years prior to 1987 are not comparable with those presented here due to
   the merger of Sperry Corporation and Burroughs Corporation in 1986.

                                      32


<PAGE>


<TABLE>
<CAPTION>

Revenue by similar classes of  products and services
- -------------------------------------------------------------------------------------------------
Year ended December 31 (Millions)            1994                 1993                  1992
- -------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>      <C>          <C>      <C>         <C>
Enterprise systems and servers        $1,415.3     19%     $1,648.4      21%     $1,966.1     23%
Departmental servers and                                                                  
 desktop systems                         749.6     10         750.3      10       1,083.6     13
Software                                 712.2     10         779.9      10         712.2      8
Custom defense systems                 1,200.7     16       1,526.8      20       1,637.6     20
- -------------------------------------------------------------------------------------------------
Total sales                            4,077.8     55       4,705.4      61       5,399.5     64
Information services and                                                                  
 systems integration                   1,980.2     27       1,593.1      21       1,336.4     16
Equipment maintenance                  1,341.7     18       1,444.0      18       1,686.0     20
- -------------------------------------------------------------------------------------------------
Total                                 $7,399.7    100%     $7,742.5     100%     $8,421.9    100%
- -------------------------------------------------------------------------------------------------
</TABLE>
                                                                   

Enterprise systems and servers comprise a complete line of small to large
processors and related communications and peripheral products, such as printers,
storage devices, and document handling processors and equipment. Departmental
servers and desktop systems include UNIX servers, workstations, personal
computers, and terminals. Software consists of application and systems software.
Custom defense systems include specialized information processing systems,
software, and services marketed primarily to government defense agencies.
Information services and systems integration includes systems integration,
outsourcing services, application development, information planning, and
education.  Equipment maintenance results from charges for preventive
maintenance, spare parts, and other repair activities.

Individual products have been assigned to a specific class based on a variety of
factors.  Over time, reclassification of products may be necessary because of
changing technology, Company strategy, and market conditions.  Such evolution
from year to year must be kept in mind when using this table for trend analysis.


                                      33

<PAGE>
 
Common Stock Information
- --------------------------------------------------------------------------------
Unisys common stock (trading symbol "UIS") is listed for trading on the New York
Stock Exchange and on exchanges in Amsterdam, Antwerp, Basel, Brussels, Geneva, 
Lausanne, London, and Zurich.

At December 31, 1994, there were 171 million shares outstanding and about 45,000
stockholders of record.





                                      34





<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:



<TABLE> 
<CAPTION> 

                                                       State    
                                                      or Other  
                                                    Jurisdiction
                                                     Under the  
                                                    Laws of Which
      Name of Company                                 Organized
      ---------------                               -------------   
   <S>                                              <C> 
   Unisys Canada Inc.                               Canada
   Unisys GSG Canada, Inc.                          Canada
   Convergent Technologies, Inc.                    California
   Unisys Finance Corporation                       Michigan
   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 Eletronica Ltda.                          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
</TABLE>
 


  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 25, 1995, included in the 1994
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 the Company'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-8 No. 33-20588) pertaining to the
Unisys Savings Plan, (2) Registration Statement (Form S-8 No. 33-7893) 
pertaining to the Burroughs LTIP, (3) Registration Statement (Form S-8 
No.2-76948) pertaining to Burroughs Employees 1972 Payroll Deduction Stock 
Purchase Plans (4) Registration Statement (Form S-8 No. 33-4317) pertaining to
the Burroughs 1985 Payroll Deduction Stock Purchase Plans,
 (5) Registration
Statement (Form S-8 No. 33-20204) pertaining to the Unisys Retirement Investment
Plan, (6) Registration Statement (Form S-8 No. 33-20205) pertaining to the
Unisys Retirement Investment Plan II, (7) Registration Statement (Form S-3 No.
33-25715) of Unisys Corporation, (8) Registration Statement (Form S-8 No. 33-
3937) pertaining to the Burroughs LTIP, (9) Registration Statement (Form S-8 No.
2-63842) pertaining to the Burroughs LTIP, (10) Registration Statement (Form S-8
No. 33-34771) pertaining to the Unisys Retirement Investment Plan, (11)
Registration Statement (Form S-8 No. 33-38711) pertaining to the Unisys Savings
Plan, (12) Registration Statement (Form S-8 No. 33-38712) pertaining to the
Unisys Retirement Investment Plan II, (13) Registration Statement (Form S-8 No.
33-38713) pertaining to the Unisys Retirement Investment Plan, (14) Registration
Statement (Form S-8 No. 33-40259) pertaining to the Unisys LTIP, (15)
Registration Statement (Form S-3 No. 33-35437) of Unisys Corporation, (16)
Registration Statement (Form S-3 No. 33-64396) of Unisys Corporation, and (17)
Registration Statement (Form S-3 No. 33-51747) of Unisys Corporation; of our
report dated January 25, 1995, with respect to the financial statements
incorporated herein by reference and our report included in the preceding
paragraph with respect to the financial statement schedule included in the 1994
Annual Report (Form 10-K) of Unisys Corporation for the year ended December 31,
1994.


                                                               ERNST & YOUNG LLP


Philadelphia, Pennsylvania
March 13, 1995



<PAGE>
 
                                                                      EXHIBIT 24

                               POWER OF ATTORNEY
                              Unisys Corporation
                          Annual Report on Form 10-K
                     for the year ended December 31, 1994


     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears 
below does hereby make, constitute and appoint JAMES A. UNRUH, HAROLD S. BARRON 
AND GEORGE T. ROBSON, and each one of them severally, his true and lawful 
attorneys-in-fact and agents, for such persons 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, 1994, 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 23, 1995



/s/ J.P. Bolduc                                /s/ Kenneth A. Macke
- -----------------------------                  ------------------------------
J.P. Bolduc                                    Kenneth A. Macke
Director                                       Director


/s/ James J. Duderstadt                        /s/
 Robert McClements, Jr.
- -----------------------------                  ------------------------------
James J. Duderstadt                            Robert McClements, Jr.
Director                                       Director


/s/ Gail D. Fosler                             /s/ Alan E. Schwartz
- -----------------------------                  ------------------------------
Gail D. Fosler                                 Alan E. Schwartz
Director                                       Director


/s/ Melvin R. Goodes                           /s/ Donald V. Seibert
- -----------------------------                  ------------------------------
Melvin R. Goodes                               Donald V. Seibert
Director                                       Director


/s/ Edwin A. Huston                            /s/ James A. Unruh
- -----------------------------                  ------------------------------
Edwin A. Huston                                James A. Unruh
Director                                       Chairman of the Board, Chief
                                               Executive Officer and Director



<TABLE> <S> <C>


<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-K FOR THE ANNUAL PERIOD ENDED DECEMER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1994
<PERIOD-END>                               DEC-31-1994
<CASH>                                             868
<SECURITIES>                                        16
<RECEIVABLES>                                    1,167
<ALLOWANCES>                                      (87)
<INVENTORY>                                        773
<CURRENT-ASSETS>                                 3,141
<PP&E>                                           2,714
<DEPRECIATION>                                 (1,781)
<TOTAL-ASSETS>                                   7,324
<CURRENT-LIABILITIES>                            2,509
<BONDS>                                          1,864
<COMMON>                                             2
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                      1,570
<OTHER-SE>                                       1,032
<TOTAL-LIABILITY-AND-EQUITY>                     7,324
<SALES>                                          4,078
<TOTAL-REVENUES>                                 7,400
<CGS>                                            2,507
<TOTAL-COSTS>                                    4,941
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                    10
<INTEREST-EXPENSE>                                 203
<INCOME-PRETAX>                                    153
<INCOME-TAX>                                        45
<INCOME-CONTINUING>                                108
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                    (8)
<CHANGES>                                            0
<NET-INCOME>                                       100
<EPS-PRIMARY>                                   (0.11)
<EPS-DILUTED>                                   (0.11)
        

</TABLE>