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 September 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 September 30, 2005
341,271,970.












<PAGE> 2

Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

                             UNISYS CORPORATION
                         CONSOLIDATED BALANCE SHEETS
                                (Millions)

                                        September 30,     
                                            2005        December 31,
                                        (Unaudited)        2004
                                         -----------   ------------
Assets
------
Current assets
Cash and cash equivalents                 $  466.1       $  660.5
Accounts and notes receivable, net         1,118.2        1,136.8
Inventories:
   Parts and finished equipment               86.9           93.7
   Work in process and materials             109.1          122.4
Deferred income taxes                         24.9          291.8
Prepaid expenses and other current assets    142.6          112.4
                                          --------       --------
Total                                      1,947.8        2,417.6
                                          --------       --------

Properties                                 1,326.8        1,305.5
Less-Accumulated depreciation and
  amortization                               928.9          881.4
                                          --------       --------
Properties, net                              397.9          424.1
                                          --------       --------
Outsourcing assets, net                      428.3          431.9
Marketable software, net                     335.3          336.8
Investments at equity                        197.1          197.1
Prepaid pension cost                          43.3           52.5
Deferred income taxes                        187.1        1,394.6
Goodwill                                     193.1          189.9
Other long-term assets                       158.3          176.4
                                          --------       --------
Total                                     $3,888.2       $5,620.9
                                          ========       ========
Liabilities and stockholders' equity
------------------------------------
Current liabilities
Notes payable                             $    4.7       $    1.0

Current maturities of long-term debt          60.5          151.7
Accounts payable                             413.0          487.4
Other accrued liabilities                  1,151.7        1,382.7
                                          --------       --------
Total                                      1,629.9        2,022.8
                                          --------       --------
Long-term debt                             1,052.2          898.4
Accrued pension liabilities                  638.9          537.9
Other long-term liabilities                  708.2          655.3

Stockholders' equity (deficit)
Common stock, shares issued: 2005, 343.3                         
   2004, 339.4                                 3.4            3.4
Accumulated deficit                       (2,077.0)      (  376.2)
Other capital                              3,911.7        3,883.8
Accumulated other comprehensive loss      (1,979.1)      (2,004.5)
                                          --------       --------
Stockholders' equity (deficit)              (141.0)       1,506.5
                                          --------       --------
Total                                     $3,888.2       $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            Nine Months
                         Ended September 30        Ended September 30
                         ------------------        ------------------
                           2005        2004          2005      2004
                           ----        ----          ----      ----
                                                                     
Revenue                                                              
  Services              $1,174.0      $1,147.1    $3,517.7    $3,470.9
  Technology               213.1         298.6       671.5       825.8
                        --------      --------    --------    --------
                         1,387.1       1,445.7     4,189.2     4,296.7
Costs and expenses
   Cost of revenue:
     Services            1,036.0         965.7     3,080.8     2,821.6
     Technology            105.1         139.0       324.7       375.5
                        --------       -------    --------     -------
                         1,141.1       1,104.7     3,405.5     3,197.1

Selling, general                                                      
and administrative         261.0         303.7       790.0       837.8
Research and development    61.2          75.3       192.7       218.1
                        --------       -------    --------     -------
                         1,463.3       1,483.7     4,388.2     4,253.0
                        --------       -------    --------     -------
                                         
Operating income (loss)    (76.2)        (38.0)     (199.0)       43.7
                                                                      
Interest expense            17.1          16.2        44.9        51.4
Other income (expense),
 net                        13.3          (3.0)       45.8        21.6
                        --------       -------     -------     -------
Income (loss) before 
  income taxes             (80.0)        (57.2)     (198.1)       13.9
Provision (benefit)
  for income taxes       1,548.2         (82.4)    1,502.7       (59.6)
                        --------      --------    --------    --------
Net income (loss)      $(1,628.2)     $   25.2   $(1,700.8)   $   73.5
                        ========      ========    ========    ========
Earnings (loss) per share
   Basic                $  (4.78)     $    .08    $  (5.01)   $    .22
                        ========      ========    ========    ========
   Diluted              $  (4.78)     $    .07    $  (5.01)   $    .22
                        ========      ========    ========    ========


See notes to consolidated financial statements.



<PAGE> 4

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

                                                   Nine Months Ended
                                                      September 30
                                                   -----------------
                                                      2005      2004
                                                      ----      ----

Cash flows from operating activities
Net income (loss)                                $(1,700.8)    $  73.5
Add (deduct) items to reconcile net income (loss)
   to net cash provided by operating activities:
Equity income                                         (3.8)      ( 7.2)
Depreciation and amortization of properties           89.7        99.9
Depreciation and amortization of outsourcing assets   96.0        88.6
Amortization of marketable software                   91.6        96.6
Gain on sale of facility                             (15.8)         - 
Loss on the tender of debt                            10.7          - 
Decrease (increase) in deferred income taxes, net  1,474.5       (25.3)
Decrease in receivables, net                          20.7        97.2
Decrease in inventories                               19.6        19.1
Decrease in accounts payable and other
  accrued liabilities                               (245.9)     (260.1)
Increase in other liabilities                        199.4        19.8
Increase in other assets                             (48.8)     (  9.8)
Other                                                 35.4        50.6
                                                    ------      ------
Net cash provided by operating activities             22.5       242.9
                                                    ------      ------
Cash flows from investing activities
   Proceeds from investments                       5,758.9     4,423.4
   Purchases of investments                       (5,746.2)   (4,427.4)
   Investment in marketable software                 (93.7)     ( 88.8)
   Capital additions of properties                   (84.9)     ( 95.5)
   Capital additions of outsourcing assets          (115.7)     (126.6)
   Purchases of businesses                             (.5)     ( 18.6)
   Proceeds from sales of properties                  23.4         -  
                                                    ------      ------
Net cash used for investing activities              (258.7)   (  333.5)
                                                    ------      ------
Cash flows from financing activities
   Net proceeds from (reduction in) 
     short-term borrowings                             3.8       ( 1.0)
   Proceeds from employee stock plans                 12.8        30.9 
   Payments of long-term debt                       (500.2)     (  2.3)
   Proceeds from issuance of long-term debt          541.5          -  
                                                    ------      ------

Net cash provided by financing 
   activities                                         57.9        27.6
                                                    ------      ------
Effect of exchange rate changes on
   cash and cash equivalents                         (16.1)         .8
                                                    ------      ------

Decrease in cash and cash equivalents               (194.4)      (62.2)
Cash and cash equivalents, beginning of period       660.5       635.9
                                                    ------     -------
Cash and cash equivalents, end of period            $466.1     $ 573.7
                                                    ======     =======

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 nine months ended September 30, 2005 and 2004 (dollars in 
    millions, shares in thousands):

                             Three Months Ended            Nine Months Ended
                                September 30,               September 30,
                             ------------------            -----------------
                               2005        2004           2005            2004
                               ----        ----           ----            ----
    Basic Earnings (Loss) 
       per Share                                                              
    Net income (loss)       $(1,628.2)    $ 25.2       $(1,700.8)        $ 73.5
                              =======    =======        ========        =======
    Weighted average shares   340,914    335,576         339,736        334,236
                              =======    =======        ========        =======
                                                                              
    Basic earnings (loss) 
       per share              $ (4.78)    $  .08        $  (5.01)       $   .22
                              =======    =======        ========        =======
    Diluted Earnings (Loss) 
       per Share                                                               
    Net income (loss)       $(1,628.2)    $ 25.2       $(1,700.8)       $  73.5
                              =======    =======        ========        =======
    Weighted average shares   340,914    335,576         339,736        334,236
    Plus incremental shares 
    from assumed conversions 
    of employee stock plans      -         1,786            -             3,823
                              --------   -------         --------      --------
    Adjusted weighted average 
       shares                 340,914    337,362         339,736        338,059
                              =======    =======         =======        =======
    Diluted earnings (loss) 
       per share              $ (4.78)   $   .07         $ (5.01)      $    .22
                              ========   =======         ========      ========

    At September 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 nine months ended September 30, 2005.

b.  During the financial close for the quarter ended September 30, 2005, the 
    company performed its quarterly assessment of its net deferred tax assets.  
    Up to this point in time, as previously disclosed in the company's critical 
    accounting policies section of its Form 10-K, the company has principally 
    relied on its ability to generate future taxable income (predominately in 
    the U.S.) in its assessment of the realizability of its net deferred tax 


<PAGE> 6
    assets.  Statement of Financial Accounting Standards (SFAS) No. 109, 
    "Accounting for Income Taxes" (SFAS No. 109), limits the ability to use 
    future taxable income to support the realization of deferred tax assets 
    when a company has experienced recent losses even if the future taxable 
    income is supported by detailed forecasts and projections.  After 
    considering the company's pretax losses in 2004 and for the nine months 
    ended September 30, 2005, the expectation of a pre-tax loss for the full 
    year of 2005, and the impact over the short term of the company's 
    recently-announced plans to restructure its business model by divesting 
    non-core assets, reducing its cost structure and shifting its focus to 
    high growth core markets, the company concluded that it could no longer 
    rely on future taxable income as the basis for realization of its net 
    deferred tax asset.

    Accordingly, the company recorded a non-cash charge in the third quarter 
    of 2005 of $1,573.9 million to increase the valuation allowance against 
    deferred tax assets.  With this increase, the company has a full valuation 
    allowance against its deferred tax assets for all of its U.S. operations 
    and certain foreign subsidiaries.  This non-cash charge does not affect 
    the company's compliance with the financial covenants under its credit 
    agreements.  It has been recorded in provision for income taxes in the 
    accompanying consolidated statement of income.  The company expects to 
    continue to record a full valuation allowance on future tax benefits in 
    such jurisdictions until other positive evidence is sufficient to justify 
    realization.

    The realization of the remaining deferred tax assets of approximately 
    $150 million is primarily dependent on forecasted future taxable income 
    within certain foreign jurisdictions. Any reduction in estimated 
    forecasted future taxable income may require the company to record an 
    additional valuation allowance against the remaining deferred tax assets. 
    Any increase or decrease in the valuation allowance would result in 
    additional or lower income tax expense in such period and could have a 
    significant impact on that period's earnings.

c.  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.

    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 




<PAGE> 7

    use in Services engagements.  The amount of such profit included in 
    operating income of the Technology segment for the three and nine months 
    ended September 30, 2005 and 2004 was $3.3 million and $7.2 million and 
    $13.0 million and $9.8 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 nine month periods ended September 30, 2005 and 2004 is presented below 
    (in millions of dollars):

                               Total    Corporate    Services    Technology
                               -----    ---------    --------    ----------
    Three Months Ended 
    September 30, 2005
    ------------------
    Customer revenue         $1,387.1                $1,174.0     $ 213.1
    Intersegment                        $(57.1)           4.5        52.6
                             --------   --------     --------     -------
    Total revenue            $1,387.1   $(57.1)      $1,178.5     $ 265.7
                             ========   ========     ========     =======
    Operating loss           $  (76.2)  $  (.4)      $  (60.2)    $ (15.6)
                             ========   ========     ========     =======

    Three Months Ended 
    September 30, 2004  
    ------------------  

    Customer revenue         $1,445.7                $1,147.1     $ 298.6
    Intersegment                         $(63.6)          5.2        58.4
                              -------    -------     --------     -------
    Total revenue            $1,445.7    $(63.6)     $1,152.3     $ 357.0
                             ========    =======     ========     =======
    Operating income (loss)  $  (38.0)   $(85.4)     $   (2.3)    $  49.7
                             ========    =======     ========     =======


    Nine Months Ended 
    September 30, 2005
    ------------------
    Customer revenue         $4,189.2                $3,517.7     $ 671.5
    Intersegment                        $(192.7)         14.2       178.5
                             --------   --------     --------     -------
    Total revenue            $4,189.2   $(192.7)     $3,531.9     $ 850.0
                             ========   ========     ========     =======
    Operating loss           $ (199.0)  $  (8.1)     $ (181.7)    $  (9.2)
                             ========   ========     ========     =======

    



<PAGE> 8

    Nine Months Ended
    September 30, 2004
    ------------------
    Customer revenue         $4,296.7                $3,470.9     $ 825.8
    Intersegment                        $(166.6)         14.5       152.1
                             --------   --------     --------     -------
    Total revenue            $4,296.7   $(166.6)     $3,485.4     $ 977.9
                             ========   ========     ========     =======
    Operating income (loss)  $   43.7   $ (85.4)     $   35.1     $  94.0
                             ========   ========     ========     =======

    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                  Nine Months 
                               Ended September 30           Ended September 30,
                               -------------------      -----------------------
                                  2005      2004            2005       2004
                                  ----      ----            ----       ----

    Total segment operating                                             
      income (loss)             $ (75.8)  $ 47.4          $(190.9)   $129.1
    Interest expense              (17.1)   (16.2)          ( 44.9)    (51.4)
    Other income (expense), net    13.3     (3.0)            45.8      21.6
    Corporate and eliminations      (.4)     1.3             (8.1)      1.3
    Cost reduction charge                  (86.7)                     (86.7)
                                -------   -------         -------    ------
    Total income (loss) before  
      income taxes              $ (80.0)  $(57.2)         $(198.1)   $ 13.9
                                =======   ======          ========   ======

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

                                  Three Months                Nine Months
                               Ended September 30,        Ended September 30,
                               -------------------        -------------------
                                  2005      2004          2005         2004
                                  ----      ----          ----         ----
    Services                                                                 
      Consulting and systems                                                 
        integration           $  392.2    $  403.3      $1,205.5     $1,194.3
      Outsourcing                455.6       411.8       1,349.2      1,274.2
      Infrastructure services    204.4       193.1         582.4        572.6
      Core maintenance           121.8       138.9         380.6        429.8
                               -------     -------       -------      -------
                               1,174.0     1,147.1       3,517.7      3,470.9
    Technology                                                               
      Enterprise-class servers   170.9       249.6         534.8        636.9
      Specialized technologies    42.2        49.0         136.7        188.9
                               -------    --------        -------     -------
                                 213.1       298.6         671.5        825.8
                               -------     -------       -------      -------
    Total                     $1,387.1    $1,445.7      $4,189.2     $4,296.7
                               =======    ========       =======      =======



<PAGE> 9

d.  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 September 30, 2005, total outsourcing assets, net were $428.3 million, 
    approximately $213.2 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 revise the iPSL 
    corporate structure and the services agreements.  On October 7, 2005, 
    the company and the minority shareholders executed a memorandum of 
    understanding whereby the company will retain its current 51% ownership 
    in iPSL and the fees charged under the outsourcing services agreements 
    will be increased beginning January 1, 2006.  The memorandum of 
    understanding also addresses changes in the governance of iPSL and 
    shareholder responsibilities for funding iPSL.  The estimated increase 
    in iPSL revenue resulting from the amended outsourcing services 
    agreements, together with its existing revenue, is expected to provide 
    the company with sufficient cash flow to recover all of iPSL's outsourcing 
    assets as of September 30, 2005.  The parties have undertaken to complete, 
    in the fourth quarter of 2005, definitive agreements relating to the 
    matters covered by the memorandum of understanding.  While the company 
    believes that the iPSL outsourcing assets at September 30, 2005 will be 
    recovered, significant revisions in the final agreements or failure to 
    reach a final agreement could result in an impairment of a portion or all 
    of the iPSL outsourcing assets.

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



<PAGE> 10

                                    Three Months              Nine Months
                                 Ended September 30,      Ended September 30,
                                 -------------------      -------------------
                                      2005      2004        2005        2004
                                      ----      ----        ----        ----

    Net income (loss)            $(1,628.2)   $ 25.2     $(1,700.8)    $ 73.5

    Other comprehensive income
       (loss)
      Cash flow hedges
       Income, net of tax of $(.8),
        $(.1), $1.9 and $.3           (1.6)      (.2)          3.3         .7
       Reclassification adjustments,
        net of tax of $.6, $.6, 
         $ - and $2.2                  1.3       1.3            .3        4.2
       Foreign currency translation
        adjustments                    4.6       6.1          21.8       13.1
                                    ------    ------        ------      -----
    Total other comprehensive
       income                          4.3       7.2          25.4       18.0
                                   -------    ------        ------     ------
    Comprehensive income (loss)  $(1,623.9)   $ 32.4     $(1,675.4)    $ 91.5
                                   =======    ======       =======     ======

    Accumulated other comprehensive income (loss) 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               25.4      21.8       3.6       -   
                                   --------   -------    ------  ---------
    Balance at September 30, 2005 $(1,979.1)  $(614.4)  $    .1  $(1,364.8)
                                   ========   =======    ======  =========

f.  The amount credited to stockholders' equity (deficit) for the income tax 
    benefit related to the company's stock plans for the nine months ended 
    September 30, 2005 and 2004 was $.8 million and $3.6 million, respectively.

g.  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



<PAGE> 11

    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):


                                  Three Months                Nine Months 
                               Ended September 30,        Ended September 30,
                               -------------------        -------------------
                                    2005      2004         2005          2004
                                    ----      ----         ----          ----

    Balance at beginning                                                    
       of period                   $  9.4    $ 15.0      $  11.6      $ 20.8
    Accruals for warranties issued
       during the period              2.1       2.0          6.4         9.1
    Settlements made during the
       period                        (2.6)     (3.8)        (8.1)      (12.7)
    Changes in liability for
       pre-existing warranties
        during the period, 
        including expirations         (.5)     (.4)         (1.5)       (4.4)
                                   ------   -------     --------      -------
    Balance at September 30        $  8.4   $ 12.8       $   8.4      $ 12.8
                                   ======   =======      =======      =======

h.  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, at date of grant 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 is 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 will adopt on January 1, 2006 (see note n), 
    compensation cost must be recognized over the period through the date 
    that the employee first becomes eligible to retire and is no longer 


<PAGE 12

    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.

    On September 23, 2005, the Compensation Committee of the Board of 
    Directors of the company approved the acceleration of vesting of all of 
    the company's unvested stock options awarded to officers, directors and 
    employees.  The acceleration of vesting was effective for stock 
    options outstanding as of the close of business on September 23, 2005.  
    Options to purchase approximately 13 million shares of common stock were 
    accelerated.  The weighted average exercise price of the options 
    accelerated was $10.80.  The acceleration will enable the company to 
    avoid recognizing compensation expense associated with these options in 
    future periods upon the company's adoption of SFAS No. 123R.  The future 
    pretax expense that was eliminated was $33.7 million.  This amount is 
    reflected in the pro forma footnote disclosure presented below.

    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           Nine Months
                               Ended September 30,       Ended September 30,
                               -------------------       --------------------
                                  2005        2004         2005          2004
                                  ----        ----         ----          ----

Net income (loss)              $(1,628.2)   $ 25.2      $(1,700.8)     $ 73.5
Deduct total stock-based
   employee compensation
   expense determined under
   fair value method for all
   awards, net of tax              (54.1)     (7.6)         (65.2)       (25.3)
                                --------     ------      --------      -------
Pro forma net income (loss)    $(1,682.3)    $ 17.6     $(1,766.0)      $ 48.2
                                ========     ======      ========      =======

Earnings (loss) per share
   Basic - as reported          $  (4.78)    $  .08      $  (5.01)     $  .22
   Basic - pro forma            $  (4.93)    $  .05      $  (5.20)     $  .14
   Diluted - as reported        $  (4.78)    $  .07      $  (5.01)     $  .22
   Diluted - pro forma          $  (4.93)    $  .05      $  (5.20)     $  .14



<PAGE> 13

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

                              Three Months                   Three Months
                          Ended September 30, 2005      Ended September 30, 2004
                          ------------------------      ------------------------

                                  U.S.    Int'l.                 U.S.    Int'l.
                          Total   Plans   Plans          Total   Plans   Plans
                          -----   -----   ------         -----   -----   ------
    Service cost         $ 28.4  $17.3    $ 11.1       $ 29.2  $ 16.8  $ 12.4
    Interest cost          91.9   65.8      26.1         90.3    66.0    24.3
    Expected return on
       plan assets       (119.1) (90.3)    (28.8)      (123.9)  (94.7)  (29.2)
    Amortization of prior
       service (benefit)
       cost                (1.7)  (1.9)       .2         (1.6)   (1.9)     .3
    Recognized net 
       actuarial loss      44.7   35.1       9.6         29.5    23.3     6.2
                         ------  ------   ------       ------   -----  ------
    Net periodic pension
       expense           $ 44.2  $26.0    $ 18.2       $ 23.5  $  9.5  $ 14.0
                         ======  ======   ======       ======  ======  ======


                                Nine Months                  Nine Months
                          Ended September 30, 2005     Ended September 30, 2004
                          ------------------------     ------------------------
                                  U.S.    Int'l.                 U.S.    Int'l.
                          Total   Plans   Plans          Total   Plans   Plans
                          -----   -----   ------         -----   -----   ------
    Service cost         $ 88.2  $52.0    $ 36.2       $ 87.1   $ 50.4  $ 36.7
    Interest cost         278.0  197.3      80.7        270.5    198.3    72.2
    Expected return on
       plan assets       (359.9)(270.8)    (89.1)      (370.7)  (284.2)  (86.5)
    Amortization of prior
       service (benefit)
       cost                (4.7)  (5.7)      1.0        (4.6)     (5.7)    1.1
    Recognized net 
       actuarial loss     135.2  105.2      30.0        88.2      69.8    18.4
                         ------  ------   ------       ------    -----  ------
    Net periodic pension
       expense           $136.8  $78.0    $ 58.8      $ 70.5    $ 28.6  $ 41.9
                         ======  ======   ======      ======    ======  ======

    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 nine months ended September 30, 2005 
    and 2004, $49.3 million and $41.4 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 nine months 
    ended September 30, 2005 and 2004 is presented below (in millions of 
    dollars):



<PAGE> 14

                                  Three Months                  Nine Months
                               Ended September 30,          Ended September 30,
                               -------------------          -------------------
                                  2005        2004         2005          2004
                                  ----        ----         ----          ----

    Interest cost                  $  3.5     $  3.5      $10.4         $ 10.5 
    Expected return on plan
       assets                         (.1)        -         (.3)            -
    Amortization of prior service
       benefit                        (.5)       (.5)      (1.5)          (1.5)
    Recognized net actuarial loss     1.6        1.0        4.8            3.0
                                    -----      -----      -----         ------
    Net periodic postretirement 
       benefit expense              $ 4.5      $ 4.0      $13.4         $ 12.0
                                    =====      =====      =====         ======

    The company expects to make cash contributions of approximately $27 million 
    to its postretirement benefit plan in 2005.  For the nine months ended 
    September 30, 2005 and 2004, $18.8 million and $20.0 million, respectively 
    of cash contributions have been made.

j.  Cash paid during the nine months ended September 30, 2005 and 2004 for 
    income taxes was $32.4 million and $47.0 million, respectively.

    Cash paid during the nine months ended September 30, 2005 and 
    2004 for interest was $61.7 million and $57.7 million, respectively.

k.  As part of its ongoing efforts to reduce its cost base and enhance 
    its administrative efficiency, on September 30, 2004, the company 
    consolidated facility space and committed to a reduction of approximately 
    1,400 employees, primarily in general and administrative areas.  These 
    actions resulted in a pretax charge of $82.0 million, or $.18 per diluted 
    share.

    The pretax charge was recorded in the following statement of income 
    classifications:  cost of revenue-services, $28.1 million; selling, 
    general and administrative expenses, $50.2 million; research and 
    development expenses, $8.4 million; and other income (expense), net, $4.7 
    million.


<PAGE> 15

    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                     (753)     (43.4)  (16.3)     (24.6)    (2.5)
    Changes in
      estimates and
      revisions                             (8.1)   (2.2)      (8.9)     3.0
    Translation                             
      adjustments                           (3.3)              (3.3)        
                                  ------------------------------------------

    Balance at
      September 30, 2005           98      $26.3    $4.0      $16.1     $6.2
                                  ==========================================
    Expected future
      utilization:
    2005 remaining 
      three months                 84      $13.5    $3.0      $ 9.7     $ .8
    2006 and thereafter            14       12.8     1.0        6.4      5.4

    ------------------------------------------------------------------------
    * 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 nine months 
    ended September 30, 2005 and 2004 were approximately $49.0 million 
    and $10.0 million, respectively.


l.  During the September 2004 quarter, the U.S. Congressional Joint Committee 
    on Taxation approved an income tax refund to the company related to the 
    settlement of tax audit issues dating from the mid-1980s.  The refund, 
    including interest, of approximately $40 million was received in the 
    June 2005 quarter.  As a result of the resolution of these audit issues, 
    the company recorded favorable adjustments to its tax liability 
    reserves, which resulted in an after-tax benefit of $68.2 million, 
    or $.20 per diluted share, to net income in the third quarter of 2004.

m.  The company currently owns approximately 29% of the outstanding shares 
    of Nihon Unisys Limited (NUL), a Japanese company that serves as the 
    company's exclusive distributor in Japan.  On October 4, 2005, the 
    company and NUL amended the terms of a license and support agreement 
    pursuant to which NUL receives access to certain of the company's 
    intellectual property and support services.  Prior to the revised 
    agreement, NUL paid annual royalties to the company based on a percentage 
    of NUL's revenue.  In 2004 and 2003, these royalties amounted to 
    approximately $103 million and $101 million, respectively.  Under the 
    revised arrangement, the company has granted NUL a perpetual license to 
    the intellectual property, and, in lieu of an annual royalty, NUL has 



<PAGE> 16

     agreed to pay the company a fixed fee of $225 million, one-half of which 
     was paid on October 7, 2005 and one-half of which is payable on October 1, 
     2006.  The company will recognize the $225 million as revenue over the 
     three-year period ending March 31, 2008.  In addition, the parties have 
     agreed that NUL will pay the company a fee of $20 million per year for 
     three years for the support services it provides under the license and 
     support agreement.  NUL has an option to renew the support services 
     arrangement for an additional two years at the same price.  In prior 
     periods, the support services fee was included as part of the royalty 
     payments.

n.  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.  These provisions will not impact the 
    company's 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.

    Effective July 1, 2005, the company adopted 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 nonmonetary exchange has commercial substance if the future cash 
    flows of the entity are expected to change significantly as a result of the 
    exchange.  Adoption of SFAS No. 153 did not have a material effect on the 
    company's 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 
    September 30, 2005, the company's measurements of both the APBO and the net 


<PAGE>17

    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.  Adoption of FSP No. 106-2 did not 
    have a material impact on the company's consolidated financial position, 
    consolidated results of operations, or liquidity.

    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 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 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 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 method would record 
    compensation expense for all unvested stock options beginning with the 
    first period presented.  The company expects to adopt the prospective 
    method.  The company is evaluating the requirements of SFAS No. 123R and 
    currently expects that adoption of SFAS No. 123R will not have a material 
    impact on the company's consolidated financial position and consolidated 
    results of operations due to the acceleration of stock options on 
    September 23, 2005 as disclosed in note h.  However, uncertainties, 
    including the company's future stock-based compensation strategy, stock 
    price volatility, estimated forfeitures and employee stock option 
    exercise behavior, make it difficult to determine whether the stock-based 
    compensation expense recognized in future periods will be similar to the 
    SFAS 123 pro forma expense disclosed in note h.

    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 



<PAGE> 18

    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.

o.  During the nine months ended September 30, 2005, the company (a) issued 
    $400 million 8% senior notes due 2012 and $150 million 8-1/2% senior notes 
    due 2015, (b) repaid $339.8 million of the company's $400 million 8-1/8% 
    senior notes due 2006 pursuant to a September 2005 tender offer by the 
    company and recorded a charge of $10.7 million related to the tender premium
    and amortization of deferred costs related to the notes, and (c) in January 
    2005 retired at maturity all of the company's $150.0 million 7-1/4% senior 
    notes.

p.  In 2002, the company and the Transportation Security Administration (TSA) 
    entered into a competitively awarded contract providing for the 
    establishment of secure information technology environments in airports.  
    The Defense Contract Audit Agency (DCAA), at the request of TSA, reviewed 
    contract performance and raised some government contracting issues.  It is 
    not unusual in complex government contracts for the government and the 
    contractor to have issues arise regarding contract obligations.  Working 
    collaboratively over the past few months, the company believes most of the 
    issues are being addressed - to the initial satisfaction of TSA -- and with 
    the DCAA's review of the action plans.  While the company believes that it 
    and the government will resolve all issues raised, it cannot be certain that
    negotiations will be successfully completed.  Furthermore, the company has 
    not been provided with a copy of the full DCAA audit report and there can be
    no assurance that the full report does not raise additional issues.  It has 
    also been reported recently in the news that the DCAA has referred this 
    report to the Inspector General's office of the Department of Homeland 
    Security for investigation.  The government has not formally informed the 
    company of any such referral.  The company cannot determine whether any 
    claims will be brought or what effect, if any, this will have on the 
    contract or any extension or renewal of it.  



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

Overview
--------

The company's financial results for the third quarter of 2005 were negatively 
impacted by a number of factors that resulted in lower earnings compared with 
the year-ago period.  In its Technology segment, the company experienced 
continued weakness in its high-end server business. Revenue in the Technology 
segment declined 29% in the quarter primarily driven by a 32% decline in sales 
of large enterprise servers.  In its Services segment, the company's results 
were impacted by lower than expected revenue, underutilization of resources in 
project-based businesses, and continuing issues in two challenging outsourcing 
operations.  In addition, the company continues to be negatively impacted by 
higher pension expense.  Pretax pension expense in the third quarter of 2005 



<PAGE> 19


increased to $44.2 million compared with $23.5 million in the year-ago quarter.
The company expects the challenges in the outsourcing engagements, the 
underutilization of resources in project-based businesses, and the higher 
pension expense to continue to negatively impact its financial results in the 
fourth quarter of 2005.

Given the company's recent operating losses, and the impact over the short term 
of its recently announced plans (described below) to restructure its business 
model to focus on high-growth core markets, reduce its cost structure, and 
drive profitable growth, the company has recorded a full valuation allowance 
against all of its deferred tax assets in the U.S. and certain foreign 
subsidiaries.  This resulted in the company taking a third-quarter 2005 
non-cash charge of $1,573.9 million, or $4.62 per share.

To address its performance issues and reposition it for profitable growth, the 
company is taking actions in the following areas:

*     Focused investments.  The company will focus its resources on high-growth 
market areas - outsourcing, open source/Linux, Microsoft solutions, and 
security - delivered through a vertical industry focus.  Within its 
technology business, the company remains committed to its ClearPath and 
ES7000 systems and will continue to invest in operating systems and 
software to drive continuous improvements in new features and 
capabilities.  

*     Divestitures.  As it concentrates its resources on the areas discussed 
above, the company plans to divest non-strategic areas of the business and 
use the proceeds from such asset sales or divestitures to implement cost 
reduction actions, fund its growth core businesses, and pursue 
complementary tuck-in acquisitions.  

*     Cost reduction.  The company plans to rightsize its cost structure to 
support its more focused business model and to improve margins.  As a 
result of a series of actions in services delivery, research and 
development, and selling, general, and administrative areas, the company 
plans to reduce its headcount by 10% of its current workforce over the 
next year.  The company expects to take cost restructuring charges of 
approximately $250 - $300 million through 2006 for these actions.  These 
actions are expected to yield approximately $250 million of annualized 
cost savings on a run-rate basis by the end of 2007.

*     Sales and marketing.  The company continues to make significant changes to
its sales and marketing programs to support its more focused model and 
drive profitable order and revenue growth.  In the sales area, the company 
has recently strengthened its business development skills by recruiting 
first-class sales management and personnel and by implementing high-impact 
training to more effectively manage relationships with large accounts and 
drive new business.

*     Focused Alliances.  The company is focused on driving profitable growth by
expanding its activities with a select group of world-class information 
technology firms.  The company recently signed a memorandum of 
understanding with NEC Corporation to negotiate a partnership to 
collaborate in technology research and development, manufacturing, and 
solutions delivery.  The alliance would cover a number of areas of joint 
development and solutions delivery activities focusing on server 



<PAGE> 20

technology, software, integrated solutions, and support services.  Other 
focused alliance partners include Microsoft, Oracle, IBM, EMC, Dell, 
Intel, Cisco, and SAP.  

The company believes these actions will position it in large, fast-growing 
markets and will enable the company in the coming years to accelerate its 
revenue growth and significantly expand its margins and profitability.

In addition, the company continues to address issues in two large business 
process outsourcing (BPO) operations that have been impacting its financial 
results.  One of these challenging BPO operations is the company's iPSL check 
processing joint venture in the United Kingdom.  The company recently signed a 
memorandum of understanding with its iPSL joint venture bank partners that 
would increase its billing rates in this operation.  The definitive agreements, 
which are expected to be signed by the end of 2005, are expected to improve the 
economics of the iPSL operation in 2006 and beyond.

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

For the three months ended September 30, 2005, the company reported a net loss 
of $1,628.2 million, or $4.78 per share, compared with net income of $25.2 
million, or $.07 per diluted share, for the three months ended September 30, 
2004.  The change was principally due to the increase in the deferred tax asset 
valuation allowance discussed below.

The third quarter of 2004 included a net benefit of $8.2 million, or $.02 per 
diluted share, from (a) a tax benefit of $68.2 million, or $.20 per diluted 
share, from the resolution of a U.S. tax audit and (b) a charge of $82.0 
million, or $.18 per diluted share, related to cost reduction actions.

Total revenue for the quarter ended September 30, 2005 was $1.39 billion, 
down 4% from revenue of $1.45 billion for the quarter ended September 30, 2004. 
Foreign currency translations had a 1% positive impact on revenue in the 
quarter when compared with the year-ago period.  In the current quarter, 
Services revenue increased 2% and Technology revenue decreased 29%.

U.S. revenue increased 3% in the third quarter compared with the year-ago 
period driven by growth in the Federal business, while revenue in international 
markets declined 10% due to declines in Pacific/Asia/Japan, Latin America 
and Europe.  On a constant currency basis, international revenue declined 12% 
in the three months ended September 30, 2005.

Pension expense for the three months ended September 30, 2005 was $44.2 
million compared with $23.5 million of pension expense for the three months 
ended September 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 
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.



<PAGE> 21

Total gross profit margin was 17.7% in the third quarter of 2005 compared with 
23.6% in the year-ago period.  The change principally reflects higher pension 
expense of $30.2 million in the current quarter compared with pension expense 
of $17.1 million in the year-ago quarter, operational issues in two outsourcing 
operations, underutilization of personnel in project-based services and lower 
sales of high-margin enterprise servers.  The year-ago period included a $28.1 
million charge related to 2004 cost reduction actions.

For the three months ended September 30, 2005, selling, general and 
administrative expenses were $261.0 million (18.8% of revenue) compared with 
$303.7 million (21.0% of revenue) for the three months ended September 30, 
2004.  The three months ended September 30, 2005 includes $9.1 million of 
pension expense compared with $4.4 million in the year-ago period.  The three 
months ended September 30, 2004 included a $50.2 million charge related to the 
2004 cost reduction actions.

Research and development (R&D) expense was $61.2 million compared with $75.3 
million a year ago.  The company continues to invest in proprietary operating 
systems 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 $2.0 million in the year-ago period.  R&D in 2004 included $8.4 million 
related to the 2004 cost reduction actions which contributed to the R&D decline 
in 2005 compared with 2004.

For the third quarter of 2005, the company reported a pretax operating loss of 
$76.2 million compared with a pretax loss of $38.0 million a year ago.  The 
change resulted principally from (a) pension expense of $44.2 million in the 
current quarter compared with pension expense of $23.5 million in the year-ago 
period, (b) execution issues in two outsourcing contracts, (c) a decline in 
sales of large, high margin enterprise servers, and (d) underutilization of 
personnel in project-based services.  The year-ago period included a cost 
reduction charge of $86.7 million.

Interest expense for the three months ended September 30, 2005 was $17.1 million
compared with $16.2 million for the three months ended September 30, 2004.  The 
increase was principally due to the September 2005 issuance of $550 million of 
senior notes offset in part by the January 2005 retirement at maturity of all 
of the company's $150 million 7 1/4% senior notes.  These items are discussed 
below in "Financial Condition".

Other income (expense), net was income of $13.3 million in the current quarter 
compared with an expense of $3.0 million in the year-ago quarter.  The increase 
in income was principally due to (a) a gain on the sale of property of $15.8 
million in the current period, (b) foreign exchange gains of $3.2 million in 
the current period compared with losses of $2.7 million in the prior-year 
period, (c) income of $11.1 million in the current period compared with income 
of $2.7 million in the prior-year period related to minority shareholders' 
portion of losses of iPSL, a 51% owned subsidiary which is fully consolidated 
by the company, offset in part by (d) a charge of $10.7 million in the current 
period related to the debt tender offer discussed below.

During the  financial close for the quarter ended September 30, 2005, the 
company performed its quarterly assessment of its net deferred tax assets.  Up 
to this point in time, as previously disclosed in the company's critical 
accounting policies section of its Form 10-K, the company has principally 
relied on its ability to generate future taxable income (predominately in the 
U.S.) in  its assessment of the realizability of its net deferred tax assets.


<PAGE> 22

Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for 
Income Taxes" (SFAS No. 109), limits the ability to use future taxable income 
to support the realization of deferred tax assets when a company has 
experienced recent losses even if the future taxable income is supported by 
detailed forecasts and projections.  After considering the company's pretax 
losses in 2004 and for the nine months ended September 30, 2005, the 
expectation of a pre-tax loss for the full year of 2005, and the impact over 
the short term of the company's recently-announced plans to restructure its 
business model by divesting non-core assets, reducing its cost structure and 
shifting its focus to high growth core markets, the company concluded that it 
could no longer rely on future taxable income as the basis for realization of 
its net deferred tax asset.

Accordingly, the company recorded a non-cash charge in the third quarter of 
2005 of $1,573.9 million to increase the valuation allowance against deferred 
tax assets. With this increase, the company has a full valuation allowance 
against its deferred tax assets for all of its U.S. operations and certain 
foreign subsidiaries. This non-cash charge does not affect the company's 
compliance with the financial covenants under its credit agreements. It has 
been recorded in provision for income taxes in the accompanying consolidated 
statement of income.  The company expects to continue to record a full 
valuation allowance on future tax benefits in such jurisdictions until other 
positive evidence is sufficient to justify realization.

The realization of the remaining deferred tax assets of approximately 
$150 million is primarily dependent on forecasted future taxable income within 
certain foreign jurisdictions. Any reduction in estimated forecasted future 
taxable income may require the company to record an additional valuation 
allowance against the remaining deferred tax assets. Any increase or decrease 
in the valuation allowance would result in additional or lower income tax 
expense in such period and could have a significant impact on that period's 
earnings.

Income (loss) before income taxes was a loss of $80.0 million in the third 
quarter of 2005 compared with a loss of $57.2 million last year.  The provision 
for income taxes was $1,548.2 million in the current period compared with a 
benefit of $82.4 million in the year-ago period.  The current year tax 
provision includes the increase in the deferred tax asset valuation allowance 
discussed above.  The prior year tax benefit includes $68.2 million related to 
a tax refund as well as a $22.0 million benefit related to the cost reduction 
charge.

For the nine months ended September 30, 2005, the company reported a net loss of
$1,700.8 million, or $5.01 per share, compared with net income of $73.5 million,
or $.22 per share, for the nine months ended September 30, 2004.  The current 
period includes the increase in the deferred tax asset valuation allowance 
discussed above.

Total revenue for the nine months ended September 30, 2005 was $4.19 billion, 
down 3% from revenue of $4.30 billion for the nine months ended September 30, 
2004.  Foreign currency translations had a 2% positive impact on revenue in the 
nine months when compared with the year-ago period.  In the current nine-month 
period, Services revenue increased 1% and Technology revenue decreased 19%.



<PAGE> 23

U.S. revenue was flat in the current nine-month period compared with the 
year-ago period and revenue in international markets decreased 4% driven by a 
decrease in Europe and Latin America which was partially offset by increases in 
Pacific/Asia/Japan.  On a constant currency basis, international revenue 
declined 8% in the nine months ended September 30, 2005.

Pension expense for the nine months ended September 30, 2005 was $136.8 million 
compared with $70.5 million of pension expense for the nine months ended 
September 30, 2004.  

Total gross profit margin was 18.7% in the nine months ended September 30, 
2005 compared with 25.6% in the year-ago period.  The change principally 
reflected higher pension expense ($95.0 million in the current period 
compared with pension expense of $50.4 million in the year-ago period), 
operational issues in two outsourcing operations, underutilization of personnel 
in project-based services and lower sales of high-margin enterprise servers.  
The year-ago period included a $28.1 million charge related to the cost 
reduction actions.

For the nine months ended September 30, 2005, selling, general and 
administrative expenses were $790.0 million (18.9% of revenue) compared with 
$837.8 million (19.5% of revenue) for the nine months ended September 30, 2004. 
Selling, general and administrative expense in the current nine-month period 
includes $27.1 million of pension expense compared with pension expense of 
$14.1 million in the year-ago period.  Selling general and administrative 
expenses for the nine months ended September 30, 2004 included $50.2 million 
related to the cost reduction actions.  

R&D expense for the nine months ended September 30, 2005 was $192.7 million 
compared with $218.1 million a year ago.  R&D in the current period includes 
$14.7 million of pension expense compared with pension expense of $6.0 million 
in the year-ago period.  R&D expense in the year-ago period included $8.4 
million related to the cost reduction actions.

For the nine months ended September 30, 2005, the company reported an operating 
loss of $199.0 million compared with operating income of $43.7 million for 
the nine months ended September 30, 2004.  The change principally reflected 
pension expense of $136.8 million in the current period compared with pension 
expense of $70.5 million in the year-ago period, operational issues in two 
outsourcing operations, underutilization of personnel in project-based services,
and lower technology revenue.  The year-ago period included an $86.7 million 
charge related to the cost reduction actions.

Interest expense for the nine months ended September 30, 2005 was $44.9 
million compared with $51.4 million for the nine months ended September 30, 
2004.  The decrease was principally due to the $150.0 million debt repayment 
discussed above.

Other income (expense), net was income of $45.8 million in the current nine-
month period compared with income of $21.6 million in the year-ago period.  
The increase in income was principally due to (a) a gain on the sale of property
of $15.8 million in the current period, (b) foreign exchange gains of $7.4 
million in the current period compared with losses of $3.4 million in the 
prior-year period, (c) income of $28.0 million in the current period compared 
with income of $6.3 million in the prior-year period related to minority 
shareholders' portion of losses of iPSL, a 51% owned subsidiary which is fully 
consolidated by the company, offset in part by (d) discounts on sales of 



<PAGE> 24

accounts receivable of $6.8 million in the current period compared with 
discounts of $1.8 million in the year-ago period, and (e) a charge of $10.7 
million in the current period related to the debt tender offer discussed below.
Income (loss) before income taxes was a loss of $198.1 million in the nine 
months ended September 30, 2005 compared with income of $13.9 million last year.
The provision for income taxes was $1,502.7 million in the current period 
compared with a benefit of $59.6 million in the year-ago period. The current 
period includes the increase in the deferred tax asset valuation allowance 
discussed above, as well as a tax benefit of $7.8 million related to a 
favorable decision in a foreign tax litigation matter.  The prior-year period 
included a benefit of $68.2 million related to the tax refund as well as a 
$22.0 million benefit related to the cost reduction charge.

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 September 30, 2005, total outsourcing assets, net were $428.3 million, 
approximately $213.2 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 revise the iPSL 
corporate structure and the services agreements.  On October 7, 2005, the 
company and the minority shareholders executed a memorandum of understanding 
whereby the company will retain its current 51% ownership in iPSL and the 
fees charged under the outsourcing services agreements will be increased 
beginning January 1, 2006.  The memorandum of understanding also addresses 
changes in the governance of iPSL and shareholder responsibilities for 
funding iPSL.  The estimated increase in iPSL revenue resulting from the 
amended outsourcing services agreements, together with its existing revenue, 
is expected to provide the company with sufficient cash flow to recover all 
of iPSL's outsourcing assets as of September 30, 2005.  The parties have 
undertaken to complete, in the fourth quarter of 2005, definitive agreements 
relating to the matters covered by the memorandum of understanding.  While the 
company believes that the iPSL outsourcing assets at September 30, 2005 will be 
recovered, significant revisions in the final agreements or failure to reach a 
final agreement could result in an impairment of a portion or all of the iPSL 
outsourcing assets.

The company currently owns approximately 29% of the outstanding shares of 
Nihon Unisys Limited (NUL), a Japanese company that serves as the company's 
exclusive distributor in Japan.  On October 4, 2005, the company and NUL 
amended the terms of a license and support agreement pursuant to which NUL 
receives access to certain of the company's intellectual property and support 



<PAGE> 25

services.  Prior to the revised agreement, NUL paid annual royalties to the 
company based on a percentage of NUL's revenue.  In 2004 and 2003, these 
royalties amounted to approximately $103 million and $101 million,
respectively.  Under the revised arrangement, the company has granted NUL a 
perpetual license to the intellectual property, and, in lieu of an annual 
royalty, NUL has agreed to pay the company a fixed fee of $225 million, 
one-half of which was paid on October 7, 2005 and one-half of which is 
payable on October 1, 2006.  The company will recognize the $225 million as 
revenue over the three-year period ending March 31, 2008.  In addition, the 
parties have agreed that NUL will pay the company a fee of $20 million per 
year for three years for the support services it provides under the license 
and support agreement.  NUL has an option to renew the support services 
arrangement for an additional two years at the same price.  In prior periods, 
the support services fee was included as part of the royalty payments.

In 2002, the company and the Transportation Security Administration (TSA) 
entered into a competitively awarded contract providing for the establishment 
of secure information technology environments in airports.  The Defense 
Contract Audit Agency (DCAA), at the request of TSA, reviewed contract 
performance and raised some government contracting issues.  It is not unusual 
in complex government contracts for the government and the contractor to have 
issues arise regarding contract obligations.  Working collaboratively over the 
past few months, the company believes most of the issues are being addressed - 
to the initial satisfaction of TSA -- and with the DCAA's review of the action 
plans.  While the company believes that it and the government will resolve all 
issues raised, it cannot be certain that negotiations will be successfully 
completed.  Furthermore, the company has not been provided with a copy of the 
full DCAA audit report and there can be no assurance that the full report does 
not raise additional issues.  It has also been reported recently in the news 
that the DCAA has referred this report to the Inspector General's office of the 
Department of Homeland Security for investigation.  The government has not 
formally informed the company of any such referral.  The company cannot 
determine whether any claims will be brought or what effect, if any, this will 
have on the contract or any extension or renewal of it.  

On October 25, 2005, the company and NEC Corporation signed a memorandum of 
understanding to negotiate a partnership to collaborate in technology research 
and development, manufacturing and solutions delivery.  This alliance would 
cover a number of areas of joint development and solutions delivery activities 
focusing on server technology, software, integrated solutions and support 
services.  NEC and the company plan to collaborate and develop a common 
high-end Intel-based server platform to provide customers of each company with 
increasingly powerful, scalable and cost-effective servers.  The first of these 
next-generation common platforms is planned for release in 2007.  The new 
servers are to be manufactured by NEC on behalf of both companies.  The company 
will continue to supply its customers with ClearPath mainframes with the 
benefit, over time, of joint research and development by both companies and 
manufacturing provided by NEC.  While non-binding, the memorandum of 
understanding contemplates the negotiation of binding agreements that would 
give effect to the areas of collaboration mentioned above.  However, there can 
be no assurances that a final agreement will be reached.

For 2006, pension expense cannot be reliably estimated until after December 31, 
2005 when the actual amount of pension plan assets is known and the discount 
rate can be determined.  In addition, as previously announced, the company is 
planning to divest non-strategic businesses, reduce its workforce by 10% over 
the next year and is currently evaluating its defined benefit pension plans.  



<PAGE> 26

These actions could have a significant impact on the company's pension expense 
going forward.

Despite these items, in accordance with regulations governing contributions to 
U.S. defined benefit pension plans, the company currently expects that it will 
not be required to fund its U.S. qualified defined benefit pension plan in 2006.
The 2006 pension expense will be determined in January 2006 when the December 
31, 2005 employee levels, pension plan assets and discount rates are known.


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 
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 nine months ended September 30, 2005
and 2004, was $3.3 million and $7.2 million and $13.0 million and $9.8 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.  Therefore, the comparisons below exclude the 2004 
cost reduction charges discussed above.



<PAGE> 27

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

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

Three Months Ended
September 30, 2005
------------------
Customer revenue          $1,387.1                  $1,174.0     $213.1
Intersegment                           $ (57.1)          4.5       52.6
                           -------     -------      --------    -------
Total revenue             $1,387.1      $(57.1)     $1,178.5     $265.7
                          ========     =======      ========     ======
Gross profit percent          17.7%                     11.3%      42.4%
                          ========                  ========     ======

Operating loss percent        (5.5)%                    (5.1)%     (5.9)%
                          ========                   ========    =======

Three Months Ended
September 30, 2004
------------------
Customer revenue          $1,445.7                  $1,147.1     $298.6
Intersegment                           $(63.6)           5.2       58.4
                          --------     -------      --------     ------
Total revenue             $1,445.7     $(63.6)      $1,152.3     $357.0
                          ========     =======      ========     ====== 

Gross profit percent          23.6%                     16.2%      51.0%
                          ========                  ========     ======
Operating income (loss)
     percent                  (2.6)%                    (0.2)%     13.9%
                          ========                  ========     ======

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

In the Services segment, customer revenue was $1.17 billion for the three 
months ended September 30, 2005, up 2% compared with $1.15 billion for the three
months ended September 30, 2004.  Foreign currency translations had about a 1% 
positive impact on Services revenue in the quarter when compared with the year-
ago period.  The increase in Services revenue was due to an 11% increase in 
outsourcing ($456 million in 2005 compared with $412 million in 2004) and a 6% 
increase in infrastructure services revenue ($204 million in 2005 compared with 
$193 million in 2004) partially offset by a 3% decrease in consulting and 
systems integration ($392 million in 2005 compared with $403 million in 2004) 
and a 12% decrease in core maintenance revenue ($122 million in 2005 compared 
with $139 million in 2004).  Services gross profit was 11.3% for the three 
months ended September 30, 2005 compared with 16.2% in the year-ago period.  
Included in gross profit was the impact of pension expense of $29.2 million 
in the current period compared with pension expense of $16.7 million in the 
year-ago period.  Services operating income (loss) percent was (5.1)% for the 
three months ended September 30, 2005 compared with a loss of (.2)% last year.  
Included in operating income (loss) was the impact of pension expense of $36.7 
million in the current quarter compared with pension expense of $20.6 million 
in the year-ago period.  In addition, the current year gross profit and 
operating profit margins were negatively impacted by operational issues in 
two outsourcing contracts and underutilization of personnel in project-based 
businesses.



<PAGE> 28

In the Technology segment, customer revenue was $213 million for the three 
months ended September 30, 2005, down 29% compared with $299 million for the 
three months ended September 30, 2004.  Foreign currency translations had about 
a 1% positive impact on Technology revenue in the quarter when compared with the
year-ago period.  The decrease in revenue was due to a 32% decline in sales of 
enterprise-class servers ($171 million in 2005 compared with $250 million in 
2004) and a 14% decrease in sales of specialized technology products ($42 
million in 2005 compared with $49 million in 2004).  Technology gross profit 
was 42.4% for the three months ended September 30, 2005 compared with 51.0% in 
the year-ago period, and Technology operating income (loss) percent was (5.9)% 
for the three months ended September 30, 2005 compared with 13.9% last year.  
The margin declines primarily reflected lower sales of ClearPath products as 
well as pension expense of $7.5 million in the current period compared with 
pension expense of $2.9 million in the prior-year period.


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

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.  
These provisions will not impact the company's 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.

Effective July 1, 2005, the company adopted 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 nonmonetary 
exchange has commercial substance if the future cash flows of the entity are 
expected to change significantly as a result of the exchange.  Adoption of SFAS 
No. 153 did not have a material effect on the company's 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 



<PAGE> 29

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 September 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.  Adoption of FSP No. 106-2 
did not have a material impact on the company's consolidated financial 
position, consolidated results of operations, or liquidity.

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 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 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 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 method would record compensation expense for all unvested stock 
options beginning with the first period presented.  The company expects to 
adopt the prospective method.  The company is evaluating the requirements of 
SFAS No. 123R and currently expects that adoption of SFAS No. 123R will not 
have a material impact on the company's consolidated financial position and 
consolidated results of operations due to the acceleration of stock options 
on September 23, 2005 as disclosed in note h.  However, uncertainties, 
including the company's future stock-based compensation strategy, stock price 
volatility, estimated forfeitures and employee stock option exercise behavior, 
make it difficult to determine whether the stock-based compensation expense 
recognized in future periods will be similar to the SFAS No. 123 pro forma 
expense disclosed in note h.



<PAGE> 30

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.


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

Cash and cash equivalents at September 30, 2005 were $466.1 million compared 
with $660.5 million at December 31, 2004.  

During the nine months ended September 30, 2005, cash provided by operations 
was $22.5 million compared with cash provided by operations of $242.9 million 
for the nine months ended September 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 $49.0 million compared with $10.0 million for 
the prior-year, and are expected to be approximately $13.5 million for the 
remainder of 2005 and $13 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. Internal Revenue Service (IRS) tax audit settlement 
in 2004.

Cash used for investing activities for the nine months ended September 30, 2005 
was $258.7 million compared with $333.5 million during the nine months ended 
September 30, 2004.  Net proceeds of investments of $12.7 million in the 
current period compared with net purchases of $4.0 million in the prior-year 
period.  In addition, the current period investment in marketable software was 
$93.7 million compared with $88.8 million in the prior-year.  Capital additions 
of properties were $84.9 million for the nine months ended September 30, 2005 
compared with $95.5 million in the prior-year period.  Capital additions of 
outsourcing assets were $115.7 million for the nine months ended September 30, 
2005 compared with $126.6 million in the prior-year period.  In addition, the 
current year nine month period included $23.4 million proceeds from the sale of 
properties.

Cash provided by financing activities during the current period was $57.9 
million compared with $27.6 million of net cash provided in the prior year.  
The current period includes the following: (a) $541.5 million net proceeds from 
the September 2005 issuances of $400 million 8% senior notes due 2012 and $150 
million 8-1/2% senior notes due 2015, (b) the cash expenditure of $349.2 million
(including tender premium and expenses of $9.4 million) for the repayment of 
$339.8 million of the company's $400 million 8-1/8% senior notes due 2006 
pursuant to a September 2005 tender offer by the company, and (c) the cash 
expenditure of $150.0 million to retire at maturity all of the company's 
7-1/4% senior notes.

At September 30, 2005, total debt was $1.1 billion, an increase of $66.3 
million from December 31, 2004.



<PAGE> 31

The company has a $500 million credit agreement that expires in May 2006.  
Borrowings under the agreement bear interest based on the then-current LIBOR 
or prime rates and the company's credit rating.  As of September 30, 
2005, there were no borrowings under this facility, and the entire $500 million 
was available for borrowings.  The credit agreement contains standard 
representations and warranties, including no material adverse change.  
It also 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 and could also limit the company's ability to take cost 
reduction and other charges.  Events of default under the credit agreement 
include failure to perform covenants, materially incorrect representations and 
warranties, 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.  On September 7, 2005, the company and 
its lenders entered into an amendment to the company's $500 million credit 
agreement modifying the financial covenants primarily to provide the necessary 
flexibility to issue the $550 million of notes and tender for or otherwise 
acquire the $400 million of 8 1/8% notes, discussed above.  

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.  It is also terminable by the purchasers if the company's public 
debt securities are rated below BB- by Standard and Poor's Rating Services (S&P)
or Ba3 by Moody's Investors Service, Inc. (Moody's).  During the third quarter 
of 2005, both S&P and Moody's lowered their ratings on the company's public 
debt securities to BB- and Ba3, respectively.  If the facility were to be 
terminated, collections of the sold receivables would be remitted to the 
purchasers.  The average life of the receivables sold is less than 60 days.  At 
both September 30, 2005 and at December 31, 2004, the company had sold $225 
million of eligible receivables.

At September 30, 2005, the company has met all covenants and conditions under 
its various lending and funding agreements.  Since the company expects to 
continue 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 $650 million of debt or equity securities, 
which enables the company to be prepared for future market opportunities.



<PAGE> 32

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 September 30, 2005, the company had deferred tax assets in excess of 
deferred tax liabilities of $2,086 million and a valuation allowance of 
$1,936 million, resulting in $150 million of net deferred tax assets.  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 of the 
$150 million net deferred tax asset at September 30, 2005 were 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.

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 
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.  In the third quarter of 2005, the IRS 
closed its examination of Unisys U.S. Federal Income tax returns for all 
fiscal years through 1999 with no further consequences to the company other 
than for the refund mentioned above.  The company expects that the audit of 
2000 through 2003 will commence in 2006.  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.



<PAGE> 33

Stockholders' equity decreased $1,647.5 million during the nine months ended 
September 30, 2005, to a deficit of $141.0 million principally reflecting the 
net loss of $1,700.8 million, offset in part by $27.1 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 $21.8 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 
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 



<PAGE> 34

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.

Statements in this report regarding the actions the company plans to take to 
address its performance issues and to reposition itself are based on a number 
of assumptions and are subject to various risks and uncertainties that could 
affect actual results.  The company's ability to divest non-strategic areas of 
the business and to use the proceeds as planned is dependent upon the market 
for these businesses and on the company's ability to sell them for an 
acceptable price.  In addition, the estimated charges associated with planned 
cost-reduction actions are subject to change based upon the degree to which the 
company generates cash from the divestitures, the degree to which the company's 
financial covenants allow such charges, the location and length of service 
of the affected employees, the number of employees who leave the company 
voluntarily, and other factors.  The anticipated cost savings associated with 
the planned headcount reductions are subject to the risk that the company may 
not implement the reductions as quickly or as fully as currently anticipated.  
Statements in this report regarding the expected effects of the company's 
focused investment and sales and marketing strategies are based on various 
assumptions, including assumptions regarding market segment growth, client 
demand, and the proper skill set of and training for sales and marketing 
management and personnel, all of which are subject to change.  There can be 
no assurance that final agreements reflecting the matters addressed in the 
memoranda of understanding with NEC Corporation and with the minority 
shareholders of iPSL will be reached.  Statements in this report regarding 
the expected future results of these arrangements are therefore subject to 
change.

Other factors that could affect future results include the following:

The company's business is affected by changes in general economic and business 
conditions. The company continues to face a highly competitive business 
environment.  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> 35

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.  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.  The company will need to have available sufficient financial 
resources in order to take on these obligations and make these 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 on the level of 
demand for systems integration projects.  It will also depend on an 
improvement in the utilization of services delivery personnel.  In addition, 
profit margins in this business are largely a function of the rates the 



<PAGE> 36

company is able to charge for services and the chargeability of its 
professionals.  If the company is unable to attain sufficient rates and 
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 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.

The company frequently enters into contracts with governmental entities.  U.S. 
government agencies, including the Defense Contract Audit Agency and the 
Department of Labor, routinely audit government contractors.  These agencies 
review a contractor's performance under its contracts, cost structure and 
compliance with applicable laws, regulations and standards.  The U.S. government
also may review the adequacy of, and a contractor's compliance with, its systems
and policies, including the contractor's purchasing, property, estimating, 
accounting, compensation and management information systems.  Any costs found to
be overcharged or improperly allocated to a specific contract will be subject to
reimbursement to the government.  If an audit uncovers improper or illegal 
activities, the company may be subject to civil and criminal penalties and 
administrative sanctions, including termination of contracts, forfeiture of 
profits, suspension of payments, fines and suspension or prohibition from doing 
business with the U.S. government.  Other risks and uncertainties associated 
with 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.  In addition, if the 



<PAGE> 37

company's performance is unacceptable to the customer under a government 
contract, the government retains the right to pursue remedies under the affected
contract, which remedies could include termination.

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

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.  The 
company has announced that alliance partnerships with select IT companies are 
a key factor in the development and delivery of the company's refocused 
portfolio.  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.



<PAGE> 38


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 September 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 September 30, 2005 that has materially affected, or is reasonably 
likely to materially affect, the company's internal control over financial 
reporting.  



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


Item 5.  Other Information
------   -----------------

See "Overview" in Management's Discussion and Analysis of Financial Condition 
and Results of Operations for information on the company's planned cost 
reduction actions and on its plan to divest non-strategic areas of the 
business.


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

(a)       Exhibits

          See Exhibit Index


<PAGE> 39


                               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: November 9, 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> 40


                             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)

                                

                                  Nine             
                                  Months     
                                  Ended          Years Ended December 31
                                  Sept. 30,  -----------------------------------
                                  2005      2004   2003   2002   2001   2000  
                                  --------  ----   ----   ----   ----   ----  
Fixed charges
Interest expense                 $  44.9   $ 69.0 $ 69.6 $ 66.5 $ 70.0 $ 79.8 
Interest capitalized during 
  the period                        12.0     16.3   14.5   13.9   11.8   11.4 
Amortization of debt issuance
  expenses                           2.5      3.5    3.8    2.6    2.7    3.2 
Portion of rental expense
  representative of interest        46.2     61.6   55.2   53.0   53.9   42.2 
                                   ------  ------ ------ ------ ------  ----- 
    Total Fixed Charges            105.6    150.4  143.1  136.0  138.4  136.6 
                                   ------  ------ ------ ------ ------  -----
Earnings                             
Income (loss) from continuing
 operations before income taxes   (198.1)   (76.0) 380.5  332.8  (73.0) 348.5 
Add (deduct) the following:
 Share of loss (income) of
  associated companies             ( 2.7)   (14.0) (16.2)  14.2  ( 8.6) (20.5) 
 Amortization of capitalized
  interest                           9.6     11.7   10.2    8.8    5.4    2.2 
                                   ------  ------ ------ ------ ------  -----
    Subtotal                      (191.2)   (78.3) 374.5  355.8  (76.2) 330.2  
                                   ------  ------ ------ ------ ------  -----

Fixed charges per above            105.6    150.4  143.1  136.0  138.4  136.6 
Less interest capitalized during
  the period                       (12.0)   (16.3) (14.5) (13.9) (11.8) (11.4) 
                                   ------  ------ ------ ------ ------ ------
Total earnings (loss)            $ (97.6)  $ 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 nine months ended September 30, 2005 and for the years ended 
December 31, 2004 and 2001 were inadequate to cover fixed charges by $203.2 
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: November 9, 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: November 9, 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 September 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: November 9, 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 September 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: November 9, 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.