SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549
                    __________________________________

                                FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2005

[ ]   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             (I.R.S. Employer
       of incorporation or organization)        Identification No.)

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

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


     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 whether the registrant is an accelerated filer (as 
defined in Rule 12b-2 of the Exchange Act).  YES [X]    NO [ ]

     Number of shares of Common Stock outstanding as of June 30, 2005
340,550,107.




<PAGE>2


Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

                             UNISYS CORPORATION
                         CONSOLIDATED BALANCE SHEETS
                                (Millions)

                                          June 30,     
                                            2005       December 31,
                                         (Unaudited)       2004
                                         -----------   ------------
Assets
------
Current assets
Cash and cash equivalents                 $  398.9       $  660.5
Accounts and notes receivable, net         1,073.1        1,136.8
Inventories:
   Parts and finished equipment               87.6           93.7
   Work in process and materials             118.1          122.4
Deferred income taxes                        292.4          291.8
Prepaid expenses and other current assets    153.9          112.4
                                          --------       --------
Total                                      2,124.0        2,417.6
                                          --------       --------

Properties                                 1,331.7        1,305.5
Less-Accumulated depreciation and
  amortization                               922.8          881.4
                                          --------       --------
Properties, net                              408.9          424.1
                                          --------       --------
Outsourcing assets, net                      432.2          431.9
Marketable software, net                     337.1          336.8
Investments at equity                        213.9          197.1
Prepaid pension cost                          45.3           52.5
Deferred income taxes                      1,394.6        1,394.6
Goodwill                                     188.8          189.9
Other long-term assets                       160.2          176.4
                                          --------       --------
Total                                     $5,305.0       $5,620.9
                                          ========       ========
Liabilities and stockholders' equity
------------------------------------
Current liabilities
Notes payable                             $    1.4       $    1.0

Current maturities of long-term debt         400.5          151.7
Accounts payable                             431.6          487.4
Other accrued liabilities                  1,189.1        1,382.7
                                          --------       --------
Total                                      2,022.6        2,022.8
                                          --------       --------
Long-term debt                               499.4          898.4
Accrued pension liabilities                  610.6          537.9
Other long-term liabilities                  694.2          655.3

Stockholders' equity
Common stock, shares issued: 2005, 342.5;
   2004, 339.4                                 3.4            3.4
Accumulated deficit                       (  448.8)      (  376.2)
Other capital                              3,907.0        3,883.8
Accumulated other comprehensive loss      (1,983.4)      (2,004.5)
                                          --------       --------
Stockholders' equity                       1,478.2        1,506.5
                                          --------       --------
Total                                     $5,305.0       $5,620.9
                                          ========       ========

See notes to consolidated financial statements.



<PAGE> 3

                              UNISYS CORPORATION
                CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                     (Millions, except per share data)


                            Three Months             Six Months
                            Ended June 30           Ended June 30
                            -------------           -------------
                           2005        2004       2005         2004
                           ----        ----       ----         ----
                                                                     
Revenue                                                              
  Services              $1,236.0      $1,158.8    $2,343.7    $2,323.8
  Technology               199.5         229.3       458.4       527.2
                        --------      --------    --------    --------
                         1,435.5       1,388.1     2,802.1     2,851.0
Costs and expenses
   Cost of revenue:
     Services            1,063.4         930.2     2,044.8     1,855.9
     Technology             94.7          90.8       219.6       236.5
                        --------       -------    --------     -------
                         1,158.1       1,021.0     2,264.4     2,092.4

Selling, general                                                      
and administrative         267.4         272.9       529.0       534.1
Research and development    66.6          71.3       131.5       142.8
                        --------       -------    --------     -------
                         1,492.1       1,365.2     2,924.9     2,769.3
                        --------       -------    --------     -------
                                                                      
Operating income (loss)    (56.6)         22.9      (122.8)       81.7
                                                                      
Interest expense            15.2          18.2        27.8        35.2
Other income (expense),
 net                        32.0          24.0        32.5        24.6
                        --------       -------     -------     -------
Income (loss) before 
  income taxes             (39.8)         28.7      (118.1)       71.1
Provision (benefit)
  for income taxes         (12.7)          9.3       (45.5)       22.8
                        --------      --------    --------    --------
Net income (loss)       $  (27.1)     $   19.4    $  (72.6)   $   48.3
                        ========      ========    ========    ========
Earnings (loss) per share
   Basic                $   (.08)     $    .06    $  ( .21)   $    .14
                        ========      ========    ========    ========
   Diluted              $   (.08)     $    .06    $  ( .21)   $    .14
                        ========      ========    ========    ========


See notes to consolidated financial statements.






<PAGE> 4



                           UNISYS CORPORATION
               CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                (Millions)

                                                    Six Months Ended
                                                        June 30
                                                    ----------------
                                                      2005      2004
                                                      ----      ----

Cash flows from operating activities
Net income (loss)                                  $ (72.6)    $  48.3
Add (deduct) items to reconcile net income (loss)
   to net cash provided by operating activities:
Equity income                                        (11.6)      (14.3)
Depreciation and amortization of properties           61.8        68.9
Depreciation and amortization of outsourcing assets   65.6        59.0
Amortization of marketable software                   59.2        62.9
Increase in deferred income taxes, net               (  .6)      ( 2.4)
Decrease in receivables, net                          73.6       185.3
Decrease in inventories                               10.4         6.4
Decrease in accounts payable and other
  accrued liabilities                               (249.3)     (194.1)
Increase in other liabilities                        122.6         3.5
Increase in other assets                             (24.8)     (  7.8)
Other                                                 56.4        21.6
                                                    ------      ------
Net cash provided by operating activities             90.7       237.3
                                                    ------      ------
Cash flows from investing activities
   Proceeds from investments                       3,709.4     2,878.8
   Purchases of investments                       (3,698.8)   (2,879.0)
   Investment in marketable software                 (63.3)     ( 60.5)
   Capital additions of properties                   (59.4)     ( 74.5)
   Capital additions of outsourcing assets           (86.3)     ( 92.3)
   Purchases of businesses                             (.5)     ( 12.6)
                                                    ------      ------
Net cash used for investing activities              (198.9)   (  240.1)
                                                    ------      ------
Cash flows from financing activities
   Net proceeds from (reduction in) 
     short-term borrowings                              .5       (10.6)
   Proceeds from employee stock plans                 12.8        24.0 
   Payments of long-term debt                       (150.7)     (  1.7)
                                                    ------      ------
Net cash (used for) provided by financing 
   activities                                       (137.4)       11.7
                                                    ------      ------
Effect of exchange rate changes on
   cash and cash equivalents                         (16.0)       (1.4)
                                                    ------      ------

(Decrease) increase in cash and cash equivalents    (261.6)        7.5
Cash and cash equivalents, beginning of period       660.5       635.9
                                                    ------     -------
Cash and cash equivalents, end of period            $398.9     $ 643.4
                                                    ======     =======



See notes to consolidated financial statements.






<PAGE> 5

Unisys Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

In the opinion of management, the financial information furnished
herein reflects all adjustments necessary for a fair presentation of
the financial position, results of operations and cash flows for the
interim periods specified.  These adjustments consist only of normal
recurring accruals except as disclosed herein.  Because of seasonal and other 
factors, results for interim periods are not necessarily indicative of the 
results to be expected for the full year.

a.  The following table shows how earnings (loss) per share were computed for 
    the three and six months ended June 30, 2005 and 2004 (dollars in millions, 
    shares in thousands):

                        Three Months Ended June 30,   Six Months Ended June 30,
                        --------------------------    ------------------------
                               2005        2004           2005            2004
                               ----        ----           ----            ----
    Basic Earnings (Loss) 
       per Share                                                              
    Net income (loss)         $ (27.1)    $ 19.4         $ (72.6)        $ 48.3
                              =======    =======         =======        =======
    Weighted average shares   340,047    334,411         339,147        333,567
                              =======    =======         =======        =======
                                                                              
    Basic earnings (loss) 
       per share              $(  .08)    $  .06         $(  .21)       $   .14
                              =======    =======         =======        =======
    Diluted Earnings (loss) 
       per Share                                                               
    Net income (loss)         $ (27.1)    $ 19.4         $ (72.6)          48.3
                              =======    =======         =======        =======
    Weighted average shares   340,047    334,411         339,147        333,567
    Plus incremental shares 
    from assumed conversions 
    of employee stock plans      -         4,356            -             4,840
                              --------   -------         --------      --------
    Adjusted weighted average 
       shares                 340,047    338,767         339,147        338,407
                              =======    =======         =======        =======
    Diluted earnings (loss) 
       per share              $  (.08)   $   .06         $  (.21)      $    .14
                              ========   =======         ========      ========

    At June 30, 2005, no shares related to employee stock plans 
    were included in the computation of diluted earnings per share since 
    inclusion of these shares would be antidilutive because of the net loss 
    incurred in the three and six months ended June 30, 2005.

b.  The company has two business segments:  Services and Technology.  Revenue
    classifications by segment are as follows:  Services - consulting and 
    systems integration, outsourcing, infrastructure services and core
    maintenance; Technology - enterprise-class servers and specialized
    technologies.  


<PAGE> 6


    The accounting policies of each business segment are the same 
    as those followed by the company as a whole.  Intersegment sales and 
    transfers are priced as if the sales or transfers were to third parties.  
    Accordingly, the Technology segment recognizes intersegment revenue and 
    manufacturing profit on hardware and software shipments to customers under 
    Services contracts.  The Services segment, in turn, recognizes customer 
    revenue and marketing profits on such shipments of company hardware and 
    software to customers.  The Services segment also includes the sale of 
    hardware and software products sourced from third parties that are sold to 
    customers through the company's Services channels.  In the company's 
    consolidated statements of income, the manufacturing costs of products 
    sourced from the Technology segment and sold to Services customers are 
    reported in cost of revenue for Services.  

    Also included in the Technology segment's sales and operating profit are 
    sales of hardware and software sold to the Services segment for internal 
    use in Services engagements.  The amount of such profit included in 
    operating income of the Technology segment for the three and six months 
    ended June 30, 2005 and 2004 was $4.8 million and $1.3 million and $9.7 
    million and $2.6 million, respectively.  The profit on these transactions 
    is eliminated in Corporate.  

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

    A summary of the company's operations by business segment for the three 
    and six month periods ended June 30, 2005 and 2004 is presented below (in 
    millions of dollars):

                               Total    Corporate    Services    Technology
                               -----    ---------    --------    ----------
    Three Months Ended 
      June 30, 2005
    ------------------
    Customer revenue         $1,435.5                $1,236.0     $ 199.5
    Intersegment                        $  (75.7)         4.9        70.8
                             --------   --------     --------     -------
    Total revenue            $1,435.5   $  (75.7)    $1,240.9     $ 270.3
                             ========   ========     ========     =======
    Operating loss           $  (56.6)  $    2.7     $  (46.4)    $ (12.9)
                             ========   ========     ========     =======

    Three Months Ended 
      June 30, 2004  
    ------------------  

    Customer revenue         $1,388.1                $1,158.8     $ 229.3
    Intersegment                         $( 57.3)         4.5        52.8
                              --------   --------    --------     -------
    Total revenue            $1,388.1    $( 57.3)    $1,163.3     $ 282.1
                             ========    =======     ========     =======
    Operating income         $   22.9    $ (  .4)    $    8.2     $  15.1
                             ========    =======     ========     =======


    Six Months Ended 
      June 30, 2005
    ------------------
    Customer revenue         $2,802.1                $2,343.7     $ 458.4
    Intersegment                        $( 135.6)         9.7       125.9
                             --------   --------     --------     -------
    Total revenue            $2,802.1   $( 135.6)    $2,353.4     $ 584.3
                             ========   ========     ========     =======
    Operating loss           $ (122.8)  $   (7.7)    $ (121.5)    $   6.4
                             ========   ========     ========     =======

    Six Months Ended 
      June 30, 2004
    ------------------
    Customer revenue         $2,851.0                $2,323.8     $ 527.2
    Intersegment                        $(103.0)          9.3        93.7
                             --------   --------     --------     -------
    Total revenue            $2,851.0   $(103.0)     $2,333.1     $ 620.9
                             ========   ========     ========     =======
    Operating income         $   81.7   $    -       $   37.4     $  44.3
                             ========   ========     ========     =======




<PAGE> 7

    Presented below is a reconciliation of total business segment operating
    income (loss) to consolidated income (loss) before income taxes (in 
    millions of dollars):

                               Three Months Ended           Six Months Ended 
                                    June 30,                     June 30,
                               -------------------      -----------------------
                                  2005      2004            2005       2004
                                  ----      ----            ----       ----

    Total segment operating                                             
      income (loss)             $ (59.3)  $ 23.3          $(115.1)   $ 81.7
    Interest expense              (15.2)   (18.2)           (27.8)    (35.2)
    Other income (expense), net    32.0     24.0             32.5      24.6
    Corporate and eliminations      2.7    (  .4)            (7.7)      -
                                -------   -------         -------    ------
    Total income (loss) before  
      income taxes              $ (39.8)  $ 28.7          $(118.1)   $ 71.1
                                =======   ======          =======    ======


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

                               Three Months Ended           Six Months Ended 
                                    June 30,                     June 30,
                               -------------------      -----------------------
                                  2005      2004          2005         2004
                                  ----      ----          ----         ----
    Services                                                                 
      Consulting and systems                                                 
        integration           $  443.5    $  413.9      $  813.3     $  791.0
      Outsourcing                472.9       419.4         893.6        862.4
      Infrastructure services    191.8       180.0         378.0        379.5
      Core maintenance           127.8       145.5         258.8        290.9
                               -------     -------       -------      -------
                               1,236.0     1,158.8       2,343.7      2,323.8
    Technology                                                               
      Enterprise-class servers   165.7       185.5         363.9        387.3
      Specialized technologies    33.8        43.8          94.5        139.9
                               -------    --------        -------     -------
                                 199.5       229.3         458.4        527.2
                               -------     -------       -------      -------
    Total                     $1,435.5    $1,388.1      $2,802.1     $2,851.0
                               =======    ========       =======      =======


c.  Outsourcing assets include fixed assets acquired in connection with 
    outsourcing contracts, capitalized software used in outsourcing 
    arrangements, and costs incurred upon initiation of an outsourcing contract 
    that have been deferred, which consist principally of initial customer 
    setup and employment obligations related to employees assumed. 
    Recoverability of outsourcing assets is dependent on various factors, 
    including the timely completion and ultimate cost of the outsourcing 
    solution, realization of expected profitability of existing outsourcing 


<PAGE> 8

    contracts and obtaining additional outsourcing customers.  The company 
    quarterly compares the carrying value of the outsourcing assets with the 
    undiscounted future cash flows expected to be generated by the outsourcing 
    assets to determine if there is an impairment.  If impaired, the 
    outsourcing assets are reduced to an estimated fair value on a discounted 
    cash flow approach.  The company prepares its cash flow estimates based on 
    assumptions that it believes to be reasonable but are also inherently 
    uncertain.  Actual future cash flows could differ from these estimates.

    At June 30, 2005, total outsourcing assets, net were $432.2 million, 
    approximately $235.3 million of which relate to iPSL, a 51% owned U.K.-
    based company which generates annual revenue of approximately $200 
    million.  As a result of incurred losses, the company began discussions 
    during the second quarter of 2005 with the minority shareholders to address 
    alternative proposed revisions to the existing iPSL corporate structure and 
    services agreements.  These alternative proposed revisions could include 
    the sale of the company's ownership interest in iPSL and changes to the 
    current outsourcing services agreements.  Recoverability of recorded iPSL 
    outsourcing assets depends on the successful completion of one or a 
    combination of the alternatives.  While the company believes that these 
    discussions and any resulting amended contractual agreements will provide 
    sufficient future cash flows that will result in the recovery of all iPSL 
    outsourcing assets, the final outcome of these negotiations could differ 
    from current expectations, which may impact the recoverability of the iPSL 
    outsourcing assets, and may result in a write down of those assets.

d.  Comprehensive income (loss) for the three and six months ended June 30, 
    2005 and 2004 includes the following components (in millions of dollars):

                                 Three Months Ended           Six Months Ended 
                                      June 30,                     June 30,
                                 -------------------      ---------------------
                                      2005      2004        2005        2004
                                      ----      ----        ----        ----

    Net income (loss)               $(27.1)   $ 19.4       $(72.6)     $ 48.3 

    Other comprehensive income
       (loss)
      Cash flow hedges
       Income, net of tax of
        $1.4, $1.4, $2.7 and $.4       2.6       2.5          4.9          .9
       Reclassification adjustments,
        net of tax of $(1.3), $(.1), 
         $(.6) and $1.6               (2.4)      (.2)        (1.0)        2.9
       Foreign currency translation
        adjustments                    1.4     (13.2)        17.2         7.0
                                    ------      ------      ------      -----
    Total other comprehensive
       income (loss)                   1.6     (10.9)        21.1        10.8
                                    -------   ------        ------     ------
    Comprehensive income (loss)     $(25.5)   $  8.5     $  (51.5)     $ 59.1
                                    =======   ======     =========     ======



<PAGE> 9


    Accumulated other comprehensive income (loss) as of December 31, 2004 and
    June 30, 2005 is as follows (in millions of dollars):

                                                          Cash    Minimum
                                            Translation   Flow    Pension
                                     Total  Adjustments  Hedges  Liability
                                     -----  -----------  ------  ---------
    Balance at December 31, 2003  $(2,011.9)  $(679.7)   $( 6.6) $(1,325.6)
    Change during period                7.4      43.5       3.1      (39.2)
                                   --------   -------    ------  ---------
    Balance at December 31, 2004   (2,004.5)   (636.2)    ( 3.5)  (1,364.8)
    Change during period               21.1      17.2       3.9       -   
                                   --------   -------    ------  ---------
    Balance at June 30, 2005      $(1,983.4)  $(619.0)   $   .4  $(1,364.8)
                                   ========   =======    ======  =========

e.  The amount credited to stockholders' equity for the income tax benefit
    related to the company's stock plans for the six months ended June 30,
    2005 and 2004 was $.8 million and $2.9 million, respectively. The company
    expects to realize these tax benefits on future Federal income tax returns.

f.  For equipment manufactured by the company, the company warrants that it 
    will substantially conform to relevant published specifications for 12 
    months after shipment to the customer.  The company will repair or replace, 
    at its option and expense, items of equipment that do not meet this 
    warranty.  For company software, the company warrants that it will conform 
    substantially to then-current published functional specifications for 90 
    days from customer's receipt.  The company will provide a workaround or 
    correction for material errors in its software that prevents its use in a 
    production environment.

    The company estimates the costs that may be incurred under its warranties
    and records a liability in the amount of such costs at the time revenue is
    recognized.  Factors that affect the company's warranty liability include
    the number of units sold, historical and anticipated rates of warranty
    claims and cost per claim.  The company quarterly assesses the adequacy of
    its recorded warranty liabilities and adjusts the amounts as necessary.
    Presented below is a reconciliation of the aggregate product warranty
    liability (in millions of dollars):




<PAGE> 10


                               Three Months Ended           Six Months Ended 
                                    June 30,                     June 30,
                               -------------------      ---------------------
                                    2005      2004         2005          2004
                                    ----      ----         ----          ----

    Balance at beginning                                                    
       of period                   $ 11.0    $ 17.9      $ 11.6       $ 20.8
    Accruals for warranties issued
       during the period              1.9       2.1         4.3          7.1
    Settlements made during the
       period                        (2.6)     (4.2)       (5.5)        (8.9)
    Changes in liability for
       pre-existing warranties
        during the period, 
        including expirations         (.9)     (.8)        (1.0)        (4.0)
                                   ------   -------     ---------     -------
    Balance at June 30             $  9.4   $ 15.0       $  9.4       $ 15.0
                                   ======   =======     ========      =======


g.  The company applies the recognition and measurement principles of APB
    Opinion No. 25, "Accounting for Stock Issued to Employees," and related
    interpretations in accounting for its stock-based employee compensation
    plans.  For stock options, no compensation expense is reflected in net
    income as all stock options granted had an exercise price equal to or
    greater than the market value of the underlying common stock on the 
    date of grant.  In addition, no compensation expense was recognized for 
    common stock purchases under the Employee Stock Purchase Plan.  Pro 
    forma information regarding net income and earnings per share is 
    required by Statement of Financial Accounting Standards (SFAS) No. 123, 
    "Accounting for Stock-Based Compensation," and has been determined as 
    if the company had accounted for its stock plans under the fair value 
    method of SFAS No.123.  For purposes of the pro forma disclosures, the 
    estimated fair value of the options are amortized to expense over the 
    options' vesting period.  
    
    The company's stock option grants include a provision that if  
    termination of employment occurs after the participant has attained age 
    55 and completed five years of service with the company, the 
    participant shall continue to vest in each of his or her stock options 
    in accordance with the vesting schedule set forth in the applicable 
    stock option award agreement.  For purposes of the pro forma 
    information required to be disclosed by SFAS No. 123, the company has 
    recognized compensation cost over the vesting period. Under SFAS No. 
    123R, which the company currently expects to adopt on January 1, 2006 
     (see note k), compensation cost must be recognized over the period 
    through the date that the employee first becomes eligible to retire and 
    is no longer required to provide service to earn the award.  For awards 
    granted prior to adoption of SFAS 123R, compensation expense 
    continues to be recognized under the prior attribution method; 
    compensation cost for awards granted after the adoption of SFAS No.  
    123R will be recognized over the period to the date the employee first 
    becomes eligible for retirement.  The company is currently in the 


<PAGE> 11

    process of computing the impact on recognized compensation cost in its 
    pro forma disclosures had it applied the provisions of SFAS No. 123R.  
    The company does not expect that this amount will be material.  

    The following table illustrates the effect on net income and earnings 
    per share if the company had applied the fair value recognition 
    provisions of SFAS No. 123 (in millions of dollars):


                               Three Months Ended           Six Months Ended 
                                    June 30,                     June 30,
                               -------------------      ---------------------
                                  2005        2004         2005          2004
                                  ----        ----         ----          ----

Net income (loss)               $(27.1)     $ 19.4       $(72.6)        $ 48.3 
Deduct total stock-based
   employee compensation
   expense determined under
   fair value method for all
   awards, net of tax             (5.4)       (7.7)       (11.1)         (17.7)
                                --------     ------      --------      -------
Pro forma net income (loss)     $(32.5)      $ 11.7      $(83.7)        $ 30.6
                                =======      ======      =======       =======
Earnings (loss) per shares
   Basic - as reported          $(  .08)     $  .06      $(  .21)      $  .14
   Basic - pro forma            $(  .10)     $  .03      $(  .25)      $  .09
   Diluted - as reported        $(  .08)     $  .06      $(  .21)      $  .14
   Diluted - pro forma          $(  .10)     $  .03      $(  .25)      $  .09

h.  Net periodic pension expense for the three and six months ended 
    June 30, 2005 and 2004 is presented below (in millions of dollars):

                              Three Months                   Three Months
                          Ended June 30, 2005            Ended June 30, 2004
                          -------------------            ----------------------
                                  U.S.    Int'l.                 U.S.    Int'l.
                          Total   Plans   Plans          Total   Plans   Plans
                          -----   -----   ------         -----   -----   ------
    Service cost         $ 28.1  $15.6    $ 12.5       $ 28.6  $ 16.5  $ 12.1
    Interest cost          93.0   66.2      26.8         90.7    66.7    24.0
    Expected return on
       plan assets       (119.8) (90.2)    (29.6)      (123.3)  (94.7)  (28.6)
    Amortization of prior
       service (benefit)
       cost                (1.7) ( 1.9)       .2         (1.6)   (1.9)     .3
    Recognized net 
       actuarial loss      46.2   36.0      10.2         30.4    24.3     6.1
                         ------  ------   ------       ------   -----  ------
    Net periodic pension
       expense           $ 45.8  $25.7    $ 20.1       $ 24.8  $ 10.9  $ 13.9
                         ======  ======   ======       ======  ======  ======


<PAGE> 12

                               Six Months                     Six Months
                          Ended June 30, 2005            Ended June 30, 2004
                          -------------------            ----------------------
                                  U.S.    Int'l.                 U.S.    Int'l.
                          Total   Plans   Plans          Total   Plans   Plans
                          -----   -----   ------         -----   -----   ------
    Service cost         $ 59.8  $ 34.7   $ 25.1       $ 57.9   $ 33.6  $ 24.3
    Interest cost         186.1   131.5     54.6        180.2    132.3    47.9
    Expected return on
       plan assets       (240.8) (180.5)   (60.3)      (246.8)  (189.5)  (57.3)
    Amortization of prior
       service (benefit)
       cost                (3.0)   (3.8)      .8        (3.0)     (3.8)     .8
    Recognized net 
       actuarial loss      90.5    70.1     20.4        58.7      46.5    12.2
                         ------  ------   ------       ------    -----  ------
    Net periodic pension
       expense           $ 92.6  $ 52.0   $ 40.6      $ 47.0    $ 19.1  $ 27.9
                         ======  ======   ======      ======    ======  ======

    The company currently expects to make cash contributions of approximately 
    $70 million to its worldwide defined benefit pension plans in 2005 compared
    with $62.8 million in 2004.  For the six months ended June 30, 2005 and
    2004, $30.1 million and $27.5 million, respectively of cash contributions 
    have been made.  In accordance with regulations governing contributions to 
    U.S. defined benefit pension plans, the company is not required to fund its 
    U.S. qualified defined benefit pension plan in 2005.

    Net periodic postretirement benefit expense for the three and six months 
    ended June 30, 2005 and 2004 is presented below (in millions of dollars):

                               Three Months Ended           Six Months Ended 
                                    June 30,                     June 30,
                               -------------------      -----------------------
                                  2005        2004         2005          2004
                                  ----        ----         ----          ----

    Interest cost                  $ 3.4      $  3.5      $ 6.9         $  7.0 
    Expected return on plan
       assets                        (.1)         -         (.2)            -
    Amortization of prior service
       benefit                       (.5)        (.5)      (1.0)          (1.0)
    Recognized net actuarial loss    1.6         1.0        3.2            2.0
                                    -----      -----      -----         ------
    Net periodic postretirement 
       benefit expense              $4.4       $ 4.0      $ 8.9         $  8.0
                                    =====      =====      =====         ======
    The company expects to make cash contributions of approximately $27 million 
    to its postretirement benefit plan in 2005.  For the six months ended 
    June 30, 2005 and 2004, $12.4 million and $14.0 million, respectively of 
    cash contributions have been made.

i.  Cash paid during the six months ended June 30, 2005 and 2004 for income
    taxes was $24.5 million and $35.7 million, respectively.


<PAGE> 13

    Cash paid during the six months ended June 30, 2005 and 2004 for interest
    was $41.7 million and $42.7 million, respectively.

j.  Following is a breakdown of the individual components of the 2004 cost 
    reduction action charge (in millions of dollars):

                                                       Work Force
                                                       Reductions*   
                                                      -----------       Idle
                                                                       Lease
                               Headcount   Total    U.S.      Int'l.    Cost
    ------------------------------------------------------------------------
    Balance at
      Dec. 31, 2004               851      $81.1   $22.5      $52.9     $5.7
    Utilized                     (645)     (30.2)  (13.4)     (15.1)    (1.7)
    Changes in
      estimates and
      revisions                             (7.6)   (1.6)      (6.7)      .7
    Translation                             (3.2)              (3.2)        
      adjustments                 ------------------------------------------
    Balance at
      June 30, 2005               206      $40.1    $7.5      $27.9     $4.7
                                  ==========================================
    Expected future
      utilization:
    2005 remaining 
      six months                  206      $25.8    $7.5      $16.6     $1.7
    2006 and thereafter                     14.3               11.3      3.0

    ------------------------------------------------------------------------
    * Includes severance, notice pay, medical and other benefits.

    Cash expenditures related to the above actions, as well as cost 
    reduction actions taken in years prior to 2004, for the six months 
    ended June 30, 2005 and 2004 were approximately $33.6 million and $7.0 
    million, respectively.

k.  In May 2005, the Financial Accounting Standards Board (FASB) issued 
    statement of Financial Accounting Standards (SFAS) No. 154, "Accounting 
    Changes and Error Corrections" (SFAS No. 154).  SFAS No. 154 provides 
    guidance on the accounting for and reporting of accounting changes and 
    error corrections.  It establishes, unless impracticable, retrospective 
    application as the required method for reporting a change in accounting 
    principle in the absence of explicit transition requirements specific to 
    the newly adopted accounting principle.  SFAS No. 154 is effective for 
    accounting changes and corrections of errors made in fiscal years 
    beginning after December 15, 2005.  The company does not expect that 
    adoption of SFAS No. 154 will have a material effect on its consolidated 
    financial position, consolidated results of operations, or liquidity.

    In December 2004, the FASB issued FASB Staff Position No. FAS 109-2 
    (FSP No. 109-2), "Accounting and Disclosure Guidance for the Foreign 
    Earnings Repatriation Provisions within the American Jobs Creation Act 
    of 2004" (the Jobs Act).  FSP No. 109-2 provides guidance with respect 
    to reporting the potential impact of the repatriation provisions of the 


<PAGE> 14

    Jobs Act on an enterprise's income tax expense and deferred tax liability.  
    The Jobs Act was enacted on October 22, 2004, and provides for a temporary 
    85% dividends received deduction on certain foreign earnings repatriated 
    during a one-year period.  The deduction would result in an approximate 
    5.25% federal tax rate on the repatriated earnings.  To qualify for the 
    deduction, the earnings must be reinvested in the United States pursuant 
    to a domestic reinvestment plan established by a company's chief executive 
    officer and approved by a company's board of directors.  Certain other 
    criteria in the Jobs Act must be satisfied as well.  FSP No. 109-2 states 
    that an enterprise is allowed time beyond the financial reporting period 
    to evaluate the effect of the Jobs Act on its plan for reinvestment or 
    repatriation of foreign earnings.  The company does not expect that these 
    provisions will have a material impact on its consolidated financial 
    position, consolidated results of operations, or liquidity.  Accordingly, 
    the company has not adjusted its tax expense or deferred tax liability to 
    reflect the repatriation provisions of the Jobs Act.

    In December 2004, the FASB issued SFAS No. 123 (revised 2004), 
    "Share-Based Payment" (SFAS No. 123R), which replaces SFAS No. 123 and 
    supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees."  
    SFAS No. 123R requires all share-based payments to employees, including 
    grants of employee stock options, to be recognized in the financial 
    statements based on their fair values.  The pro forma disclosures 
    previously permitted under SFAS No. 123 will no longer be an alternative 
    to financial statement recognition.  In accordance with a recently-issued 
    Securities and Exchange Commission rule, companies will be allowed to 
    implement SFAS No. 123R as of the beginning of the first interim or annual 
    period that begins after June 15, 2005.  The company currently expects that 
    it will adopt SFAS No. 123R on January 1, 2006.  Under SFAS No. 123R, the 
    company must determine the appropriate fair value model to be used for 
    valuing share-based payments, the amortization method for compensation cost 
    and the transition method to be used at date of adoption.  The permitted 
    transition methods include either retrospective or prospective adoption.  
    Under the retrospective method, prior periods may be restated either as 
    of the beginning of the year of adoption or for all periods presented.  
    The prospective method requires that compensation expense be recorded for 
    all unvested stock options at the beginning of the first quarter of 
    adoption of SFAS No. 123R, while the retrospective methods would record 
    compensation expense for all unvested stock options beginning with the 
    first period presented.  The company is currently evaluating the 
    requirements of SFAS No. 123R and expects that adoption of SFAS No. 123R 
    may have a material impact on the company's consolidated financial 
    position and consolidated results of operations.  The company has not yet 
    determined the method of adoption or the effect of adopting SFAS No. 123R, 
    and it has not determined whether the adoption will result in amounts that 
    are similar to the current pro forma disclosures under SFAS No. 123.  See 
    note g.

    In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary 
    Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary 
    Transactions" (SFAS No. 153).  SFAS No. 153 eliminates the exception from 
    fair value measurement for nonmonetary exchanges of similar productive 
    assets in paragraph 21 (b) of APB Opinion No. 29, "Accounting for 
    Nonmonetary Transactions," and replaces it with an exception for exchanges 
    that do not have commercial substance.  SFAS No. 153 specifies that a 


<PAGE> 15

    nonmonetary exchange has commercial substance if the future cash flows of 
    the entity are expected to change significantly as a result of the 
    exchange.  SFAS No. 153 is effective for periods beginning after June 15, 
    2005.  The company does not expect that adoption of SFAS No. 153 will have 
    a material effect on its consolidated financial position, consolidated 
    results of operations, or liquidity.

    In November 2004, the FASB issued SFAS No. 151, "Inventory Costs an 
    amendment of ARB No. 43, Chapter 4" (SFAS No. 151).  SFAS No. 151 amends 
    the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the 
    accounting for abnormal amounts of idle facility expense, handling costs 
    and wasted material (spoilage).  Among other provisions, the new rule 
    requires that such items be recognized as current-period charges, 
    regardless of whether they meet the criterion of "so abnormal" as stated in 
    ARB No. 43.  SFAS No. 151 is effective for fiscal years beginning after 
    June 15, 2005.  The company does not expect that adoption of SFAS No. 151 
    will have a material effect on its consolidated financial position, 
    consolidated results of operations, or liquidity.

    In May 2004, the FASB issued Staff Position No. FAS 106-2 (FSP No. 106-2), 
    "Accounting and Disclosure Requirements Related to the Medicare 
    Prescription Drug, Improvement and Modernization Act of 2003" (the Act).  
    The Act introduces a prescription drug benefit under Medicare, as well as 
    a federal subsidy to sponsors of retiree health care benefit plans that 
    provide a benefit that is at least actuarially equivalent to Medicare Part 
    D.  FSP No. 106-2 is effective for the first interim period beginning after 
    June 15, 2004, and provides that an employer shall measure the accumulated 
    plan benefit obligation (APBO) and net periodic postretirement benefit 
    cost, taking into account any subsidy received under the Act.  As of 
    June 30, 2005, the company's measurements of both the APBO and the net 
    Postretirement benefit cost do not reflect any amounts associated with the 
    subsidy.  Final regulations implementing the Act were issued on January 21, 
    2005.  The final regulations clarify how a company should determine 
    actuarial equivalency and the definition of a plan for purposes of 
    determining actuarial equivalency.  The company is currently evaluating 
    these regulations and has not yet determined what effect adoption of FSP 
    No. 106-2 will have on its consolidated financial position, consolidated 
    results of operations, or liquidity.


<PAGE> 16


I
tem 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.

Overview
--------

The company's financial results for the second quarter of 2005 were impacted 
by a number of factors that resulted in lower earnings compared with the 
year-ago period.  First, the company continued to be impacted by operational 
issues in several of its large, transformational business process 
outsourcing engagements.  These contracts involve transitioning from the 
client's legacy environment to a new, state-of-the-art environment with new 
processes and software.  It has taken the company longer than anticipated to 
develop the new software and transition to the new processes.  This has 
resulted in higher-than-expected costs on the contracts, not only in terms 
of creating the new technology and processes, but also in the operational 
costs involved in the legacy operation.  The company is addressing these 
execution issues as well as discussing renegotiations of the contracts, but 
expects the issues to continue to negatively impact its 2005 results.  Second, 
in the Technology segment, revenues declined 13% primarily driven by an 11% 
decline in sales of large enterprise servers.  Lower sales of these systems, 
which are highly profitable, contributed to the lower earnings in the quarter.  
Finally, the company continues to be impacted by significantly higher pension 
expense.  Pretax pension expense in the second quarter of 2005 increased to 
$45.8 million compared with $24.8 million in the year-ago quarter.  The company 
expects the challenges in the outsourcing engagements and the higher pension 
expense to continue to negatively impact its financial results in 2005.


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

For the three months ended June 30, 2005, the company reported a net loss of 
$27.1 million, or $.08 per share, compared with net income of $19.4 million, 
or $.06 per share, for the three months ended June 30, 2004.

Total revenue for the quarter ended June 30, 2005 was $1.44 billion, up 3% 
from revenue of $1.39 billion for the quarter ended June 30, 2004.  Foreign 
currency translations had a 3% positive impact on revenue in the quarter when 
compared with the year-ago period.  In the current quarter, Services revenue 
increased 7% and Technology revenue decreased 13%.

U.S. revenue increased 6% in the second quarter compared with the year-ago 
period driven by growth in the Federal business, and revenue in international 
markets grew 1% as increases in Pacific/Asia and Latin America were partially 
offset by decreases in Europe and Japan.  On a constant currency basis, 
international revenue declined 4% in the three months ended June 30, 2005.

Pension expense for the three months ended June 30, 2005 was $45.8 million 
compared with $24.8 million of pension expense for the three months ended June 
30, 2004.  The increase in pension expense was due to the following:  (a) a 
decline in the discount rate used for the U.S. pension plan to 5.88% at 
December 31, 2004 from 6.25% at December 31, 2003, (b) an increase in 
amortization of net unrecognized losses for the U.S. plan, and (c) for 
international plans, declines in discount rates and currency translation.  The 


<PAGE> 17

company records pension expense, as well as other employee-related costs such 
as payroll taxes and medical insurance costs, in operating income in the 
following income statement categories: cost of sales; selling, general and 
administrative expenses; and research and development expenses.  The amount 
allocated to each category is based on where the salaries of the active 
employees are charged.  The company currently expects to report pension expense 
of approximately $182.0 million in 2005 compared with pension expense of $93.6 
million in 2004.

Total gross profit margin was 19.3% in the second quarter of 2005 compared with 
26.4% in the year-ago period.  The change principally reflects higher pension 
expense of $32.0 million in the current quarter compared with pension expense 
of $17.8 million in the year-ago quarter, operational issues in several 
outsourcing contracts and lower sales of high-margin enterprise servers.

For the three months ended June 30, 2005, selling, general and administrative 
expenses were $267.4 million (18.6% of revenue) compared with $272.9 million 
(19.7% of revenue) for the three months ended June 30, 2004.  The three months 
ended June 30, 2005 includes $8.9 million of pension expense compared with $4.8
million in the year-ago period.  Excluding the effects of higher pension 
expense, selling, general and administrative expenses declined due to the 
company's continuing efforts to control and reduce costs.

Research and development (R&D) expense was $66.6 million compared with $71.3 
million a year ago.  The company continues to invest in high-end Cellular 
MultiProcessing server technology and in key programs within its industry 
practices.  R&D in the current period includes $4.9 million of pension expense 
compared with pension expense of $2.2 million in the year-ago period.  

For the second quarter of 2005, the company reported a pretax operating loss of 
$56.6 million compared with income of $22.9 million a year ago.  The 
change resulted principally from (a) pension expense of $45.8 million 
in the current quarter compared with pension expense of $24.8 million in the 
year-ago period, (b) execution issues in several outsourcing contracts, and (c) 
a decline in sales of large enterprise servers.

Interest expense for the three months ended June 30, 2005 was $15.2 million 
compared with $18.2 million for the three months ended June 30, 2004.  The 
decrease was principally due to the January 2005 retirement at maturity of all 
of the company's $150 million 7 1/4% senior notes.

Other income (expense), net was income of $32.0 million in the current quarter 
compared with income of $24.0 million in the year-ago quarter.  The increase in 
income was principally due to foreign exchange gains of $6.0 million in the 
current year compared with gains of $1.5 million in the year-ago period as well 
as equity income of $15.9 million in the current period compared with $9.0 
million last year.

Income (loss) before income taxes was a loss of $39.8 million in the second 
quarter of 2005 compared with income of $28.7 million last year.  The provision 
for income taxes was a benefit of $12.7 million in the current period compared 
with a provision of $9.3 million in the year-ago period.  

For the six months ended June 30, 2005, the company reported a net loss of 
$72.6 million, or $ .21 per share, compared with net income of $48.3 million, 


<PAGE> 18

or $.14 per share, for the six months ended June 30, 2004.

Total revenue for the six months ended June 30, 2005 was $2.80 billion, down 2% 
from revenue of $2.85 billion for the six months ended June 30, 2004.  Foreign 
currency translations had a 3% positive impact on revenue in the six months 
when compared with the year-ago period.  In the current six-month period, 
Services revenue increased 1% and Technology revenue decreased 13%.

U.S. revenue decreased 2% in the current six-month period compared with the 
year-ago period and revenue in international markets decreased 2% driven by a 
decrease in Europe which was partially offset by increases in other 
international regions.  On a constant currency basis, international revenue 
declined 6% in the six months ended June 30, 2005.

Pension expense for the six months ended June 30, 2005 was $92.6 million 
compared with $47.0 million of pension expense for the six months ended 
June 30, 2004.  

Total gross profit margin was 19.2% in the six months ended June 30, 2005 
compared with 26.6% in the year-ago period.  The change principally reflected 
higher pension expense ($64.8 million in the current period compared with 
pension expense of $33.3 million in the year-ago period), transformational 
outsourcing contract issues and lower sales of high-margin enterprise servers.

For the six months ended June 30, 2005, selling, general and administrative 
expenses were $529.0 million (18.9% of revenue) compared with $534.1 million 
(18.7% of revenue) for the six months ended June 30, 2004.  Selling, general 
and administrative expense in the current six-month period includes $18.0 
million of pension expense compared with pension expense of $9.7 million in 
the year-ago period.

R&D expense for the six months ended June 30, 2005 was $131.5 million compared 
with $142.8 million a year ago.  R&D in the current period includes $9.8 
million of pension expense compared with pension expense of $4.0 million in 
the year-ago period.

For the six months ended June 30, 2005, the company reported an operating 
loss of $122.8 million compared with operating income of $81.7 million for 
the six months ended June 30, 2004.  The change principally reflected pension 
expense of $92.6 million in the current period compared with pension expense 
of $47.0 million in the year-ago period, transformational outsourcing contract 
issues and lower technology revenue.

Interest expense for the six months ended June 30, 2005 was $27.8 million 
compared with $35.2 million for the six months ended June 30, 2004.  The 
decrease was principally due to the debt repayment discussed above.

Other income (expense), net was income of $32.5 million in the current six-
month period compared with income of $24.6 million in the year-ago period.  
The increase in income was principally due to income of $16.6 million in the 
current period compared with income of $3.5 million a year ago related to 
minority shareholders' portion of losses of iPSL, a 51% owned subsidiary which 
is fully consolidated by the company.

Income before income taxes was a loss of $118.1 million in the six months 


<PAGE> 19

ended June 30, 2005 compared with income of $71.1 million last year.  The 
provision for income taxes was a benefit of $45.5 million in the current 
period compared with a provision of $22.8 million in the year-ago period.  
In the current period tax benefit, the company recorded a tax benefit of 
$7.8 million related to a favorable decision in a foreign tax litigation 
matter.

Outsourcing assets include fixed assets acquired in connection with  
outsourcing contracts, capitalized software used in outsourcing     
arrangements, and costs incurred upon initiation of an outsourcing contract 
that have been deferred, which consist principally of initial customer setup 
and employment obligations related to employees assumed. Recoverability of 
outsourcing assets is dependent on various factors, including the timely 
completion and ultimate cost of the outsourcing solution, realization of 
expected profitability of existing outsourcing contracts and obtaining 
additional outsourcing customers.  The company quarterly compares the carrying 
value of the outsourcing assets with the undiscounted future cash flows 
expected to be generated by the outsourcing assets to determine if there is an 
impairment.  If impaired, the outsourcing assets are reduced to an estimated 
fair value on a discounted cash flow approach.  The company prepares its cash 
flow estimates based on assumptions that it believes to be reasonable but are 
also inherently uncertain.  Actual future cash flows could differ from these 
estimates.  

At June 30, 2005, total outsourcing assets, net were $432.2 million, 
approximately $235.3 million of which relate to iPSL, a 51% owned U.K.-
based company which generates annual revenue of approximately $200 million.  
As a result of incurred losses, the company began discussions during the second 
quarter of 2005 with the minority shareholders to address alternative proposed 
revisions to the existing iPSL corporate structure and services agreements.  
These alternative proposed revisions could include the sale of the company's 
ownership interest in iPSL and changes to the current outsourcing services 
agreements.  Recoverability of recorded iPSL outsourcing assets depends on the 
successful completion of one or a combination of the alternatives.  While the 
company believes that these discussions and any resulting amended contractual 
agreements will provide sufficient future cash flows that will result in the 
recovery of all iPSL outsourcing assets, the final outcome of these 
negotiations could differ from current expectations, which may impact the 
recoverability of the iPSL outsourcing assets, and may result in a write down 
of those assets.


Segment results
---------------

The company has two business segments:  Services and Technology.  Revenue 
classifications are as follows:  Services - consulting and systems integration, 
outsourcing, infrastructure services, and core maintenance; Technology - 
enterprise-class servers and specialized technologies.  The accounting policies 
of each business segment are the same as those followed by the company as a 
whole.  Intersegment sales and transfers are priced as if the sales or 
transfers were to third parties.  Accordingly, the Technology segment 
recognizes intersegment revenue and manufacturing profit on hardware and 
software shipments to customers under Services contracts.  The Services 
segment, in turn, recognizes customer revenue and marketing profit on such 


<PAGE> 20

shipments of company hardware and software to customers.  The Services segment 
also includes the sale of hardware and software products sourced from third 
parties that are sold to customers through the company's Services channels.  In 
the company's consolidated statements of income, the manufacturing costs of 
products sourced from the Technology segment and sold to Services customers are 
reported in cost of revenue for Services.  

Also included in the Technology segment's sales and operating profit are sales 
of hardware and software sold to the Services segment for internal use in 
Services engagements.  The amount of such profit included in operating income 
of the Technology segment for the three and six months ended June 30, 2005 and 
2004, was $4.8 million and $1.3 million and $9.7 million and $2.6 million, 
respectively.  The profit on these transactions is eliminated in Corporate.  

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

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

                                       Elimi-    
                            Total      nations      Services    Technology
                           -------     -------      --------    ----------


Three Months Ended
June 30, 2005
------------------
Customer revenue          $1,435.5                  $1,236.0     $199.5
Intersegment                           $( 75.7)          4.9       70.8
                           -------     -------      --------    -------
Total revenue             $1,435.5     $( 75.7)     $1,240.9     $270.3
                          ========     =======      ========     ======
Gross profit percent          19.3%                     12.2%      44.6%
                          ========                  ========     ======

Operating loss percent        (3.9)%                    (3.7)%     (4.8)%
                          ========                   ========    =======

Three Months Ended
June 30, 2004
------------------
Customer revenue          $1,388.1                  $1,158.8     $229.3
Intersegment                           $( 57.3)          4.5       52.8
                          --------     -------      --------     ------
Total revenue             $1,388.1     $( 57.3)     $1,163.3     $282.1
                          ========     =======      ========     ====== 

Gross profit percent          26.4%                     18.5%      53.3%
                          ========                  ========     ======
Operating income
     percent                   1.6%                       .7%       5.4%
                          ========                  ========     ======


<PAGE> 21

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

In the Services segment, customer revenue was $1.24 billion for the three 
months ended June 30, 2005, up 7% compared with $1.16 billion for the three 
months ended June 30, 2004.  Foreign currency translations had about a 3% 
positive impact on Services revenue in the quarter when compared with the year-
ago period.  The increase in Services revenue was due to a 13% increase in 
outsourcing ($473 million in 2005 compared with $419 million in 2004), a 7% 
increase in consulting and systems integration ($443 million compared with 
$414 million in 2004), and a 7% increase in infrastructure services revenue 
($192 million in 2005 compared with $180 million in 2004) partially offset by 
a 12% decrease in core maintenance revenue ($128 million in 2005 compared with 
$146 million in 2004).  Services gross profit was 12.2% for the three months 
ended June 30, 2005 compared with 18.5% in the year-ago period.  Included in 
gross profit was the impact of pension expense of $31.1 million in the current 
period compared with pension expense of $17.4 million in the year-ago period.  
Services operating income (loss) percent was (3.7)% for the three months ended 
June 30, 2005 compared with .7% last year.  Included in operating income (loss) 
was the impact of pension expense of $38.5 million in the current quarter 
compared with pension expense of $21.1 million in the year-ago period.  In 
addition, the current year gross profit and operating profit margins were 
negatively impacted by operational issues in several outsourcing contracts.

In the Technology segment, customer revenue was $200 million for the three 
months ended June 30, 2005, down 13% compared with $229 million for the three 
months ended June 30, 2004.  Foreign currency translations had about a 3% 
positive impact on Technology revenue in the quarter when compared with the 
year-ago period.  The decrease in revenue was due to an 11% decline in sales of 
enterprise-class servers ($166 million in 2005 compared with $185 million in 
2004) and a 23% decrease in sales of specialized technology products ($34 
million in 2005 compared with $44 million in 2004).  Technology gross profit 
was 44.6% for the three months ended June 30, 2005 compared with 53.3% in the 
year-ago period, and Technology operating income (loss) percent was (4.8)% for 
the three months ended June 30, 2005 compared with 5.4% last year.  The margin 
declines primarily reflected a lower proportion of high-end, higher-margin 
ClearPath products as well as pension expense of $7.3 million in the current 
period compared with pension expense of $3.7 million in the prior-year period.


New Accounting Pronouncements
-----------------------------

In May 2005, the Financial Accounting Standards Board (FASB) issued Statement 
of Financial Accounting Standards (SFAS) No. 154, "Accounting Changes and Error 
Corrections" (SFAS No. 154).  SFAS No. 154 provides guidance on the accounting 
for and reporting of accounting changes and error corrections.  It establishes, 
unless impracticable, retrospective application as the required method for 
reporting a change in accounting principle in the absence of explicit 
transition requirements specific to the newly adopted accounting principle.  
SFAS No. 154 is effective for accounting changes and corrections of errors made 
in fiscal years beginning after December 15, 2005.  The company does not expect 
that adoption of SFAS No. 154 will have a material effect on its consolidated 
financial position, consolidated results of operations, or liquidity.


<PAGE> 22

In December 2004, the FASB issued FASB Staff Position No. FAS 109-2 (FSP No. 
109-2), "Accounting and Disclosure Guidance for the Foreign Earnings 
Repatriation Provisions within the American Jobs Creation Act of 2004" (the 
Jobs Act).  FSP No. 109-2 provides guidance with respect to reporting the 
potential impact of the repatriation provisions of the Jobs Act on an 
enterprise's income tax expense and deferred tax liability.  The Jobs Act was 
enacted on October 22, 2004, and provides for a temporary 85% dividends 
received deduction on certain foreign earnings repatriated during a 
one-year period.  The deduction would result in an approximate 5.25% federal 
tax rate on the repatriated earnings.  To qualify for the deduction, the 
earnings must be reinvested in the United States pursuant to a domestic 
reinvestment plan established by a company's chief executive officer and 
approved by a company's board of directors.  Certain other criteria in the Jobs 
Act must be satisfied as well.  FSP No. 109-2 states that an enterprise is 
allowed time beyond the financial reporting period to evaluate the effect of 
the Jobs Act on its plan for reinvestment or repatriation of foreign earnings.  
The company does not expect that these provisions will have a material impact 
on its consolidated financial position, consolidated results of operations, or 
liquidity.  Accordingly, the company has not adjusted its tax expense or 
deferred tax liability to reflect the repatriation provisions of the Jobs Act.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based 
Payment" (SFAS No. 123R), which replaces SFAS No. 123 and supersedes APB 
Opinion No. 25, "Accounting for Stock Issued to Employees."  SFAS No. 123R 
requires all share-based payments to employees, including grants of employee 
stock options, to be recognized in the financial statements based on their fair 
values.  The pro forma disclosures previously permitted under SFAS No. 123 no 
longer will be an alternative to financial statement recognition.  In 
accordance with a recently-issued Securities and Exchange Commission rule, 
companies will be allowed to implement SFAS No. 123R as of the beginning of the 
first interim or annual period that begins after June 15, 2005.  The company 
currently expects that it will adopt SFAS No. 123R on January 1, 2006.  Under 
SFAS No. 123R, the company must determine the appropriate fair value model to 
be used for valuing share-based payments, the amortization method for 
compensation cost and the transition method to be used at date of adoption.  
The permitted transition methods include either retrospective or prospective 
adoption.  Under the retrospective method, prior periods may be restated either 
as of the beginning of the year of adoption or for all periods presented.  The 
prospective method requires that compensation expense be recorded for all 
unvested stock options at the beginning of the first quarter of adoption of 
SFAS No. 123R, while the retrospective methods would record compensation 
expense for all unvested stock options beginning with the first period 
presented.  The company is currently evaluating the requirements of 
SFAS No. 123R and expects that adoption of SFAS No. 123R may have a material 
impact on the company's consolidated financial position and consolidated 
results of operations.  The company has not yet determined the method of 
adoption or the effect of adopting SFAS No. 123R, and it has not determined 
whether the adoption will result in amounts that are similar to the current pro 
forma disclosures under SFAS No. 123.  See note g.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary 
Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary 
Transactions" (SFAS No. 153).  SFAS No. 153 eliminates the exception from fair 
value measurement for nonmonetary exchanges of similar productive assets in 
paragraph 21 (b) of APB Opinion No. 29, "Accounting for Nonmonetary 


<PAGE> 23

Transactions," and replaces it with an exception for exchanges that do not have 
commercial substance.  SFAS No. 153 specifies that a nonmonetary exchange has 
commercial substance if the future cash flows of the entity are expected to 
change significantly as a result of the exchange.  SFAS No. 153 is effective 
for periods beginning after June 15, 2005.  The company does not expect that 
adoption of SFAS No. 153 will have a material effect on its consolidated 
financial position, consolidated results of operations, or liquidity. 

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs an amendment 
of ARB No. 43, Chapter 4" (SFAS No. 151).  SFAS No. 151 amends the guidance in 
ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for 
abnormal amounts of idle facility expense, handling costs and wasted material 
(spoilage).  Among other provisions, the new rule requires that such items be 
recognized as current-period charges, regardless of whether they meet the 
criterion of "so abnormal" as stated in ARB No. 43.  SFAS No. 151 is effective 
for fiscal years beginning after June 15, 2005.  The company does not expect 
that adoption of SFAS No. 151 will have a material effect on its consolidated 
financial position, consolidated results of operations, or liquidity.

In May 2004, the FASB issued Staff Position No. FAS 106-2 (FSP No. 106-2), 
"Accounting and Disclosure Requirements Related to the Medicare Prescription 
Drug, Improvement and Modernization Act of 2003" (the Act).  The Act introduces 
a prescription drug benefit under Medicare, as well as a federal subsidy to 
sponsors of retiree health care benefit plans that provide a benefit that is at 
least actuarially equivalent to Medicare Part D.  FSP No. 106-2 is effective 
for the first interim period beginning after June 15, 2004, and provides that 
an employer shall measure the accumulated plan benefit obligation (APBO) and 
net periodic postretirement benefit cost, taking into account any subsidy 
received under the Act.  As of June 30, 2005, the company's measurements of 
both the APBO and the net postretirement benefit cost do not reflect any 
amounts associated with the subsidy.  Final regulations implementing the Act 
were issued on January 21, 2005.  The final regulations clarify how a company 
should determine actuarial equivalency and the definition of a plan for 
purposes of determining actuarial equivalency.  The company is currently 
evaluating these regulations and has not yet determined what effect adoption of 
FSP No. 106-2 will have on its consolidated financial position, consolidated 
results of operations, or liquidity.


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

Cash and cash equivalents at June 30, 2005 were $398.9 million compared with 
$660.5 million at December 31, 2004.  

During the six months ended June 30, 2005, cash provided by operations was 
$90.7 million compared with cash provided by operations of $237.3 million for 
six months ended June 30, 2004.  Operating cash flow decreased principally due 
to lower earnings.  Cash expenditures in the current period related to prior-
year restructuring charges (which are included in operating activities) were 
approximately $33.6 million compared with $7.0 million for the prior-year, and 
are expected to be approximately $26 million for the remainder of 2005 and $14 
million in total for all subsequent years, principally for work-force 
reductions and idle lease costs.  In the second quarter of 2005, the company 
received an income tax refund of approximately $39 million from the U.S. 


<PAGE> 24

Internal Revenue Service (IRS) tax audit settlement in 2004.

Cash used for investing activities for the six months ended June 30, 2005 was 
$198.9 million compared with $240.1 million during the six months ended June 
30, 2004.  The decrease in cash used was principally due to net proceeds of 
investments of $10.6 million in the current quarter compared with net purchases 
of $.2 million in the prior-year period.  In addition, the current period 
investment in marketable software was $63.3 million compared with $60.5 million 
in the prior-year.  Capital additions of properties were $59.4 million for the 
six months ended June 30, 2005 compared with $74.5 million in the prior-year 
period.  Capital additions of outsourcing assets were $86.3 million for the 
six months ended June 30, 2005 compared with $92.3 million in the prior-year 
period. 

Cash used for financing activities during the current period was $137.4 
million compared with $11.7 million of net cash provided in the prior year.  
The current period includes cash expenditures of $150.0 million to retire at 
maturity all of the company's 7 1/4% senior notes. 

At June 30, 2005, total debt was $901.3 million, a decrease of $149.8 million 
from December 31, 2004, principally due to the January 2005 retirement at 
maturity of all of the company's $150 million 7 1/4% senior notes.

The company has a $500 million credit agreement that expires in May 2006.  As 
of June 30, 2005, there were no borrowings under this facility, and the entire 
$500 million was available for borrowings.   Borrowings under the agreement 
bear interest based on the then-current LIBOR or prime rates and the company's 
credit rating.  The credit agreement contains financial and other covenants, 
including maintenance of certain financial ratios, a minimum level of net worth 
and limitations on certain types of transactions, which could reduce the amount 
the company is able to borrow.  Events of default under the credit agreement 
include failure to perform covenants, material adverse change, change of 
control and default under other debt aggregating at least $25 million.  If an 
event of default were to occur under the credit agreement, the lenders would be 
entitled to declare all amounts borrowed under it immediately due and payable.  
The occurrence of an event of default under the credit agreement could also 
cause the acceleration of obligations under certain other agreements and the 
termination of the company's U.S. trade accounts receivable facility, described 
below. 

In addition, the company and certain international subsidiaries have access to 
uncommitted lines of credit from various banks.  Other sources of short-term 
funding are operational cash flows, including customer prepayments, and the 
company's U.S. trade accounts receivable facility.  Using this facility, the 
company sells, on an on-going basis, up to $225 million of its eligible U.S. 
trade accounts receivable through a wholly owned subsidiary, Unisys Funding 
Corporation I.  This facility requires maintenance of certain ratios related 
to the sold receivables.  The company requested and obtained a waiver and 
amendment of certain of these requirements in the second quarter of 2005.  The 
facility is renewable annually at the purchasers' option and expires in 
December 2006.  At June 30, 2005 and at December 31, 2004, the company had 
sold $217 million and $225 million of eligible receivables, respectively.

At June 30, 2005, the company has met all covenants and conditions under its 
various lending and funding agreements.  Since the company expects to continue 


<PAGE> 25

to meet these covenants and conditions, the company believes that it has 
adequate sources and availability of short-term funding to meet its expected 
cash requirements.

The company may, from time to time, redeem, tender for, or repurchase its 
securities in the open market or in privately negotiated transactions depending 
upon availability, market conditions and other factors.

The company has on file with the Securities and Exchange Commission a 
registration statement covering $1.2 billion of debt or equity securities, 
which enables the company to be prepared for future market opportunities.

The company accounts for income taxes in accordance with SFAS No. 109, 
"Accounting for Income Taxes," which requires that deferred tax assets and 
liabilities be recognized using enacted tax rates for the effect of temporary 
differences between the book and tax bases of recorded assets and liabilities.  
SFAS No. 109 also requires that deferred tax assets be reduced by a valuation 
allowance if it is more likely than not that some portion or the entire 
deferred tax asset will not be realized.

At June 30, 2005, the company had deferred tax assets in excess of deferred tax
liabilities of $2,135 million.  For the reasons cited below, management 
determined that it is more likely than not that $1,625 million of such assets 
will be realized, therefore resulting in a valuation allowance of $510 million.

The company evaluates quarterly the realizability of its deferred tax assets by 
assessing its valuation allowance and by adjusting the amount of such 
allowance, if necessary.  The factors used to assess the likelihood of 
realization are the company's forecast of future taxable income and available 
tax planning strategies that could be implemented to realize the net deferred 
tax assets.  The company has used tax-planning strategies to realize or renew 
net deferred tax assets to avoid the potential loss of future tax benefits.  

In addition to the repatriation provisions discussed above, the Jobs Act 
extends the excess foreign tax credit carry forward period from five to 10 
years and limits the carry back period to one year.  The company's deferred tax 
asset included approximately $183 million of foreign tax credit carry forwards.
The Jobs Act should provide the company with additional opportunities to fully 
utilize this portion of the deferred tax asset. 

Approximately $4.9 billion of future taxable income (predominately U.S.) 
ultimately is needed to realize the net deferred tax assets at June 30, 2005.  
Failure to achieve forecasted taxable income might affect the ultimate 
realization of the net deferred tax assets.  Factors that may affect the 
company's ability to achieve sufficient forecasted taxable income include, but 
are not limited to, the following:  increased competition, a continuing decline 
in sales or margins, loss of market share, delays in product availability or 
technological obsolescence.  See "Factors that may affect future results" 
below.

The company's provision for income taxes and the determination of the 
resulting deferred tax assets and liabilities involve a significant amount of 
management judgment and are based on the best information available at the 
time.  The company operates within federal, state and international taxing 
jurisdictions and is subject to audit in these jurisdictions.  These audits can 


<PAGE> 26

involve complex issues, which may require an extended period of time to 
resolve.

As a result, the actual income tax liabilities to the jurisdictions with 
respect to any fiscal year are ultimately determined long after the financial 
statements have been published. The company maintains reserves for estimated 
tax exposures.  Income tax exposures include potential challenges of research 
and development credits and intercompany pricing. Exposures are settled 
primarily through the settlement of audits within these tax jurisdictions, but 
can also be affected by changes in applicable tax law or other factors, which 
could cause management of the company to believe a revision of past estimates 
is appropriate. Management believes that an appropriate liability has been 
established for estimated exposures; however, actual results may differ 
materially from these estimates.  The liabilities are reviewed quarterly for 
their adequacy and appropriateness.  As of June 30, 2005, the IRS was in the 
process of examining Unisys U.S. Federal Income tax returns for the fiscal 
years 1997 through 1999.  The company anticipates the examination of these 
years will be completed in 2005.  The company expects that the audit of 2000 
through 2003 will commence in 2005.  The liabilities, if any, associated with 
these years will ultimately be resolved when events such as the completion of 
audits by the taxing jurisdictions occur.  To the extent the audits or other 
events result in a material adjustment to the accrued estimates, the effect 
would be recognized in the provision for income taxes line in the company's 
Consolidated Statement of Income in the period of the event.

Stockholders' equity decreased $28.3 million during the six months ended 
June 30, 2005, principally reflecting the net loss of $72.6 million, offset in 
part by $22.4 million for issuance of stock under stock option and other plans, 
$.8 million of tax benefits related to employee stock plans and currency 
translation of $17.2 million.

Effective April 1, 2005, the company discontinued its Employee Stock Purchase 
Plan, which enabled employees to purchase shares of the company's common stock 
through payroll deductions at 85% of the market price at the beginning or end 
of a calendar quarter, whichever was lower.  For the period from January 1, 
2005 to April 1, 2005, employees had purchased 1.8 million shares for $12.5 
million.

At December 31 of each year, accounting rules require a company to recognize a 
liability on its balance sheet for each defined benefit pension plan if the 
fair value of the assets of that pension plan is less than the present value of 
the pension obligation (the accumulated benefit obligation, or ABO).  This 
liability is called a "minimum pension liability." Concurrently, any existing 
prepaid pension asset for the pension plan must be removed.  These adjustments 
are recorded as a charge in "accumulated other comprehensive income (loss)" in 
stockholders' equity.  If at any future year-end, the fair value of the pension 
plan assets exceeds the ABO, the charge to stockholders' equity would be 
reversed for such plan.  Alternatively, if the fair market values of pension 
plan assets experience further declines or the discount rate is reduced, 
additional charges to accumulated other comprehensive income (loss) may be 
required at a future year-end.

At December 31, 2004, the difference between the ABO and the fair value of 
pension plan assets increased from the amount at December 31, 2003.  As a 
result at December 31, 2004, the company adjusted its minimum pension liability 


<PAGE> 27

adjustment as follows:  increased its pension plan liabilities by approximately 
$95 million, increased its investments at equity by approximately $27 million 
relating to the company's share of the change in NUL's minimum pension 
liability, increased prepaid pension asset by $13 million, and offset these 
changes by an increase in other comprehensive loss of approximately $55 
million, or $39 million net of tax.  

This accounting treatment has no effect on the company's net income, liquidity 
or cash flows.  Financial ratios and net worth covenants in the company's 
credit agreements and debt securities are unaffected by charges or credits to 
stockholders' equity caused by adjusting a minimum pension liability.  

In accordance with regulations governing contributions to U.S. defined benefit 
pension plans, the company is not required to fund its U.S. qualified defined 
benefit plan in 2005.  The company expects to make cash contributions of 
approximately $70 million to its other defined benefit pension plans during 
2005.

Factors That May Affect Future Results
--------------------------------------

From time to time, the company provides information containing "forward-
looking" statements, as defined in the Private Securities Litigation Reform Act 
of 1995.  Forward-looking statements provide current expectations of future 
events and include any statement that does not directly relate to any 
historical or current fact. Words such as "anticipates," "believes," "expects," 
"intends," "plans," "projects" and similar expressions may identify such 
forward-looking statements.  All forward-looking statements rely on assumptions 
and are subject to risks, uncertainties and other factors that could cause the 
company's actual results to differ materially from expectations.  Factors that 
could affect future results include, but are not limited to, those discussed 
below. Any forward-looking statement speaks only as of the date on which that 
statement is made.  The company assumes no obligation to update any forward-
looking statement to reflect events or circumstances that occur after the date 
on which the statement is made.

The company's business is affected by changes in general economic and business 
conditions. The company continues to face a highly competitive business 
environment and economic weakness in certain geographic regions.  In this 
environment, many organizations continue to delay planned purchases of 
information technology products and services. If the level of demand for the 
company's products and services declines in the future, the company's business 
could be adversely affected. The company's business could also be affected by 
acts of war, terrorism or natural disasters. Current world tensions could 
escalate, and this could have unpredictable consequences on the world economy 
and on the company's business.

The information services and technology markets in which the company operates 
include a large number of companies vying for customers and market share both 
domestically and internationally.  The company's competitors include consulting 
and other professional services firms, systems integrators, outsourcing 
providers, infrastructure services providers, computer hardware manufacturers 
and software providers. Some of the company's competitors may develop competing 
products and services that offer better price-performance or that reach the 
market in advance of the company's offerings. Some competitors also have or may 


<PAGE> 28

develop greater financial and other resources than the company, with enhanced 
ability to compete for market share, in some instances through significant 
economic incentives to secure contracts. Some also may be better able to 
compete for skilled professionals. Any of these factors could have an adverse 
effect on the company's business. Future results will depend on the company's 
ability to mitigate the effects of aggressive competition on revenues, pricing 
and margins and on the company's ability to attract and retain talented people.

The company operates in a highly volatile industry characterized by rapid 
technological change, evolving technology standards, short product life cycles 
and continually changing customer demand patterns. Future success will depend 
in part on the company's ability to anticipate and respond to these market 
trends and to design, develop, introduce, deliver or obtain new and innovative 
products and services on a timely and cost-effective basis. The company may not 
be successful in anticipating or responding to changes in technology, industry 
standards or customer preferences, and the market may not demand or accept its 
services and product offerings. In addition, products and services developed by 
competitors may make the company's offerings less competitive.

The company's future results will depend in part on its ability to grow 
outsourcing and infrastructure services.  The company's outsourcing contracts 
are multiyear engagements under which the company takes over management of a 
client's technology operations, business processes or networks.  The company 
will need to maintain a strong financial position to grow its outsourcing 
business.  In a number of these arrangements, the company hires certain of its 
clients' employees and may become responsible for the related employee 
obligations, such as pension and severance commitments.  In addition, system 
development activity on outsourcing contracts may require the company to make 
significant upfront investments.

Recoverability of outsourcing assets is dependent on various factors, including 
the timely completion and ultimate cost of the outsourcing solution, 
realization of expected profitability of existing outsourcing contracts and 
obtaining additional outsourcing customers.  These risks could result in an 
impairment of a portion of the associated assets, which are tested for 
recoverability quarterly.

As long-term relationships, outsourcing contracts provide a base of recurring 
revenue.  However, outsourcing contracts are highly complex and can involve the 
design, development, implementation and operation of new solutions and the 
transitioning of clients from their existing business processes to the new 
environment.  In the early phases of these contracts, gross margins may be 
lower than in later years when an integrated solution has been implemented, the 
duplicate costs of transitioning from the old to the new system have been 
eliminated and the work force and facilities have been rationalized for 
efficient operations.  Future results will depend on the company's ability to 
effectively and timely complete these implementations, transitions and 
rationalizations.  Future results will also depend on the company's ability to 
effectively address its challenging outsourcing operations through negotiations 
or operationally and to fully recover the associated outsourcing assets.

Future results will also depend in part on the company's ability to drive 
profitable growth in consulting and systems integration.  The company's ability 
to grow profitably in this business will depend in part on an improvement in 
economic conditions and a pick-up in demand for systems integration projects.  


<PAGE> 29

It will also depend on the success of the actions the company has taken to 
enhance the skills base and management team in this business and to refocus 
parts of the business on integrating best-of-breed, standards-based solutions 
to solve client needs. In addition, profit margins in this business are largely 
a function of the rates the company is able to charge for services and the 
chargeability of its professionals. If the company is unable to maintain the 
rates it charges or appropriate chargeability for its professionals, profit 
margins will suffer.  The rates the company is able to charge for services are 
affected by a number of factors, including clients' perception of the company's 
ability to add value through its services; introduction of new services or 
products by the company or its competitors; pricing policies of competitors; 
and general economic conditions. Chargeability is also affected by a number of 
factors, including the company's ability to transition employees from completed 
projects to new engagements, and its ability to forecast demand for services 
and thereby maintain an appropriate head count.

Future results will also depend, in part, on market demand for the company's 
high-end enterprise servers. In its technology business, the company continues 
to focus its resources on creating and enhancing a common high-performance 
platform for both its proprietary operating environments and open standards-
based operating environments such as Microsoft Windows and Linux.  In addition, 
the company continues to apply its resources to develop value-added software 
capabilities and optimized solutions for these server platforms which provide 
competitive differentiation.  The high-end enterprise server platforms are 
based on its Cellular MultiProcessing (CMP) architecture. The company's CMP 
servers are designed to provide mainframe-class capabilities with compelling 
price performance by making use of standards-based technologies such as Intel 
chips and supporting industry standard software. The company has transitioned 
both its legacy ClearPath servers and its Intel-based ES7000s to the CMP 
platform. Future results will depend, in part, on customer acceptance of the 
CMP-based ClearPath Plus systems and the company's ability to maintain its 
installed base for ClearPath and to develop next-generation ClearPath products 
that are purchased by the installed base. In addition, future results will 
depend, in part, on the company's ability to generate new customers and 
increase sales of the Intel-based ES7000 line. The company believes there is 
significant growth potential in the developing market for high-end, Intel-based 
servers running Microsoft and Linux operating system software. However, 
competition in these new markets is likely to intensify in coming years, and 
the company's ability to succeed will depend on its ability to compete 
effectively against enterprise server competitors with more substantial 
resources and its ability to achieve market acceptance of the ES7000 technology 
by clients, systems integrators and independent software vendors.

A number of the company's long-term contracts for infrastructure services, 
outsourcing, help desk and similar services do not provide for minimum 
transaction volumes. As a result, revenue levels are not guaranteed. In 
addition, some of these contracts may permit customer termination or may impose 
other penalties if the company does not meet the performance levels specified 
in the contracts.

Some of the company's systems integration contracts are fixed-price contracts 
under which the company assumes the risk for delivery of the contracted 
services and products at an agreed-upon fixed price. At times the company has 
experienced problems in performing some of these fixed-price contracts on a 
profitable basis and has provided periodically for adjustments to the estimated 


<PAGE> 30

cost to complete them.  Future results will depend on the company's ability to 
perform these services contracts profitably.

The company frequently enters into contracts with governmental entities.  Risks 
and uncertainties associated with these government contracts include the 
availability of appropriated funds and contractual provisions that allow 
governmental entities to terminate agreements at their discretion before the 
end of their terms.

The success of the company's business is dependent on strong, long-term client 
relationships and on its reputation for responsiveness and quality. As a 
result, if a client is not satisfied with the company's services or products, 
its reputation could be damaged and its business adversely affected. In 
addition, if the company fails to meet its contractual obligations, it could be 
subject to legal liability, which could adversely affect its business, 
operating results and financial condition.

The company has commercial relationships with suppliers, channel partners and 
other parties that have complementary products, services or skills.  Future 
results will depend, in part, on the performance and capabilities of these 
third parties, on the ability of external suppliers to deliver components at 
reasonable prices and in a timely manner, and on the financial condition of, 
and the company's relationship with, distributors and other indirect channel 
partners. 

More than half of the company's total revenue derives from international 
operations. The risks of doing business internationally include foreign 
currency exchange rate fluctuations, changes in political or economic 
conditions, trade protection measures, import or export licensing requirements, 
multiple and possibly overlapping and conflicting tax laws, new tax 
legislation, and weaker intellectual property protections in some 
jurisdictions.

The company cannot be sure that its services and products do not infringe on 
the intellectual property rights of third parties, and it may have infringement 
claims asserted against it or against its clients. These claims could cost the 
company money, prevent it from offering some services or products, or damage 
its reputation.



I
tem 4.  Controls and Procedures
--------------------------------

The Company's management, with the participation of the Company's Chief 
Executive Officer and Chief Financial Officer, has evaluated the effectiveness 
of the Company's disclosure controls and procedures as of June 30, 2005.  Based
on this evaluation, the Company's Chief Executive Officer and Chief Financial 
Officer concluded that the Company's disclosure controls and procedures are 
effective for gathering, analyzing and disclosing the information the Company 
is required to disclose in the reports it files under the Securities Exchange 
Act of 1934, within the time periods specified in the SEC's rules and forms.  
Such evaluation did not identify any change in the Company's internal controls 
over financial reporting that occurred during the quarter ended June 30, 2005 
that has materially affected, or is reasonably likely to materially affect, the 
Company's internal control over financial reporting.  


<PAGE> 31


Part II - OTHER INFORMATION
-------   -----------------


Item 4.   Submission of Matters to a Vote of Security Holders
-------   ---------------------------------------------------

(a)    The company's 2005 Annual Meeting of Stockholders (the "Annual 
       Meeting") was held on April 21, 2005 in Philadelphia, Pennsylvania.

(b)    The following matters were voted upon at the Annual Meeting and received 
       the following votes:

   (1) Election of Directors as follows:

   J.P. Bolduc - 285,750,808 votes for; 20,869,526 votes withheld

   James J. Duderstadt - 288,795,255 votes for; 17,825,079 votes withheld

   Matthew J. Espe - 295,448,859 votes for; 11,171,475 votes withheld

   Denise K. Fletcher - 295,616,420 votes for; 11,003,914 votes withheld

   (2) Ratification of the selection of the company's independent registered 
       public accounting firm for 2005 - 296,473,868 votes for; 7,633,167 
       votes against; 2,513,299 abstentions.



Item 6.   Exhibits 
-------   --------

(a)       Exhibits

          See Exhibit Index





<PAGE>



                               SIGNATURES
                               ----------



     Pursuant to the requirements 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

Date: July 22, 2005                         By: /s/ Janet Brutschea Haugen
                                                -----------------------------
                                                Janet Brutschea Haugen
                                                Senior Vice President and 
                                                Chief Financial Officer 
                                                (Principal Financial Officer)


                                             By: /s/ Carol S. Sabochick
                                                 ----------------------
                                                 Carol S. Sabochick
                                                 Vice President and 
                                                 Corporate Controller
                                                 (Chief Accounting Officer)










<PAGE>



                             EXHIBIT INDEX

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

3.2      Bylaws of Unisys Corporation, as amended through April 22, 2004 
         (incorporated by reference to Exhibit 3 to the registrant's Quarterly 
         Report on Form 10-Q for the quarterly period ended March 31, 2004)

12       Statement of Computation of Ratio of Earnings to Fixed Charges

31.1     Certification of Joseph W. McGrath required by Rule 13a-14(a)
         or Rule 15d-14(a)

31.2     Certification of Janet Brutschea Haugen required by Rule 13a-14(a)
         or Rule 15d-14(a)

32.1     Certification of Joseph W. McGrath required by Rule 13a-14(b)
         or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002,
         18 U.S.C. Section 1350

32.2     Certification of Janet Brutschea Haugen required by Rule 13a-14(b)
         or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002,
         18 U.S.C. Section 1350











                                                                   Exhibit 12

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

                                

                                  Six             
                                  Months     
                                  Ended          Years Ended December 31
                                  June 30,  -----------------------------------
                                  2005      2004   2003   2002   2001   2000  
                                  --------  ----   ----   ----   ----   ----  
Fixed charges
Interest expense                 $  27.8   $ 69.0 $ 69.6 $ 66.5 $ 70.0 $ 79.8 
Interest capitalized during 
  the period                         9.1     16.3   14.5   13.9   11.8   11.4 
Amortization of debt issuance
  expenses                           1.7      3.5    3.8    2.6    2.7    3.2 
Portion of rental expense
  representative of interest        30.8     61.6   55.2   53.0   53.9   42.2 
                                   ------  ------ ------ ------ ------  ----- 
    Total Fixed Charges             69.4    150.4  143.1  136.0  138.4  136.6 
                                   ------  ------ ------ ------ ------  -----
Earnings                             
Income (loss) from continuing
 operations before income taxes   (118.1)   (76.0) 380.5  332.8  (73.0) 348.5 
Add (deduct) the following:
 Share of loss (income) of
  associated companies             (10.5)   (14.0) (16.2)  14.2  ( 8.6) (20.5) 
 Amortization of capitalized
  interest                           6.4     11.7   10.2    8.8    5.4    2.2 
                                   ------  ------ ------ ------ ------  -----
    Subtotal                      (122.2)   (78.3) 374.5  355.8  (76.2) 330.2  
                                   ------  ------ ------ ------ ------  -----

Fixed charges per above             69.4    150.4  143.1  136.0  138.4  136.6 
Less interest capitalized during
  the period                        (9.1)   (16.3) (14.5) (13.9) (11.8) (11.4) 
                                   ------  ------ ------ ------ ------ ------
Total earnings (loss)            $( 61.9)  $ 55.8 $503.1 $477.9 $ 50.4 $455.4 
                                   ======  ====== ====== ====== ====== ======

Ratio of earnings to fixed 
  charges                             *       *     3.52   3.51    *     3.33 
                                   ======  ====== ====== ====== ======  =====

* Earnings for the six months ended June 30, 2005 and for the years ended 
December 31, 2004 and 2001 were inadequate to cover fixed charges by $131.3 
million, $94.6 million and $88.0 million, respectively.








Exhibit 31.1

                             CERTIFICATION

I, Joseph W. McGrath, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Unisys Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of 
a material fact or omit to state a material fact necessary to make the 
statements made, in light of the circumstances under which such statements were 
made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial 
information included in this report, fairly present in all material respects 
the financial condition, results of operations and cash flows of the registrant 
as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer and I are responsible for 
establishing and maintaining disclosure controls and procedures (as defined in 
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over 
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 
for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure 
controls and procedures to be designed under our supervision, to ensure that 
material information relating
 to the registrant, including its consolidated 
subsidiaries, is made known to us by others within those entities, particularly 
during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such 
internal control over financial reporting to be designed under our supervision, 
to provide reasonable assurance regarding the reliability of financial 
reporting and the preparation of financial statements for external purposes in 
accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and 
procedures and presented in this report our conclusions about the effectiveness 
of the disclosure controls and procedures, as of the end of the period covered 
by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control 
over financial reporting that occurred during the registrant's most recent 
fiscal quarter that has materially affected, or is reasonably likely to 
materially affect, the registrant's internal control over financial reporting; 
and 

5.  The registrant's other certifying officer and I have disclosed, based on 
our most recent evaluation of internal control over financial reporting, to the 
registrant's auditors and the audit committee of the registrant's board of 
directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or 
operation of internal control over financial reporting which are reasonably 
likely to adversely affect the registrant's ability to record, process, 
summarize and report financial information; and 

b. Any fraud, whether or not material, that involves management or other 
employees who have a significant role in the registrant's internal control over 
financial reporting.

Date: July 22, 2005


                                /s/ Joseph W. McGrath 
                                    -------------------------
                            Name:   Joseph W. McGrath
                           Title:   President and Chief
                                    Executive Officer








Exhibit 31.2

                             CERTIFICATION


I, Janet Brutschea Haugen, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Unisys Corporation;

2.  Based on my knowledge, this report does not contain any untrue statement of 
a material fact or omit to state a material fact necessary to make the 
statements made, in light of the circumstances under which such statements were 
made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial 
information included in this report, fairly present in all material respects 
the financial condition, results of operations and cash flows of the registrant 
as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer and I are responsible for 
establishing and maintaining disclosure controls and procedures (as defined in 
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over 
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 
for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure 
controls and procedures to be designed under our supervision, to ensure that 
material information
 relating to the registrant, including its consolidated 
subsidiaries, is made known to us by others within those entities, particularly 
during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such 
internal control over financial reporting to be designed under our supervision, 
to provide reasonable assurance regarding the reliability of financial 
reporting and the preparation of financial statements for external purposes in 
accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and 
procedures and presented in this report our conclusions about the effectiveness 
of the disclosure controls and procedures, as of the end of the period covered 
by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control 
over financial reporting that occurred during the registrant's most recent 
fiscal quarter that has materially affected, or is reasonably likely to 
materially affect, the registrant's internal control over financial reporting; 
and 

5.  The registrant's other certifying officer and I have disclosed, based on 
our most recent evaluation of internal control over financial reporting, to the 
registrant's auditors and the audit committee of the registrant's board of 
directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or 
operation of internal control over financial reporting which are reasonably 
likely to adversely affect the registrant's ability to record, process, 
summarize and report financial information; and 

b. Any fraud, whether or not material, that involves management or other 
employees who have a significant role in the registrant's internal control over 
financial reporting.

Date: July 22, 2005

                                /s/ Janet Brutschea Haugen 
                                    -------------------------
                            Name:   Janet Brutschea Haugen
                           Title:   Senior Vice President and
                                    Chief Financial Officer







Exhibit 32.1


                  CERTIFICATION OF PERIODIC REPORT

I, Joseph W. McGrath, President and Chief Executive Officer of Unisys 
Corporation (the "Company"), certify, pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)   the Quarterly Report on Form 10-Q of the Company for the quarterly period 
ended June 30, 2005 (the "Report") fully complies with the requirements of 
Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and 

(2)   the information contained in the Report fairly presents, in all material 
respects, the financial condition and results of operations of the Company.


Dated: July 22, 2005



/s/ Joseph W. McGrath
------------------------
Joseph W. McGrath
President and Chief Executive Officer



A signed original of this written statement required by Section 906 has been 
provided to the Company and will be retained by the Company and furnished to 
the Securities and Exchange Commission or its staff upon request.













Exhibit 32.2


                  CERTIFICATION OF PERIODIC REPORT

I, Janet Brutschea Haugen, Senior Vice President and Chief Financial Officer of 
Unisys Corporation (the "Company"), certify, pursuant to Section 906 of the 
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)   the Quarterly Report on Form 10-Q of the Company for the quarterly period 
ended June 30, 2005 (the "Report") fully complies with the requirements of 
Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and 

(2)   the information contained in the Report fairly presents, in all material 
respects, the financial condition and results of operations of the Company.


Dated: July 22, 2005



/s/ Janet Brutschea Haugen
------------------------
Janet Brutschea Haugen
Senior Vice President and 
Chief Financial Officer



A signed original of this written statement required by Section 906 has been 
provided to the Company and will be retained by the Company and furnished to 
the Securities and Exchange Commission or its staff upon request.