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

                                FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2006

[ ]   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 a large accelerated 
filer, an accelerated filer, or a non-accelerated filer.  See definition of 
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange 
Act.  (Check one):

Large Accelerated Filer [X]  Accelerated Filer [ ]  Non-Accelerated Filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).                YES [ ]    NO [X]


     Number of shares of Common Stock outstanding as of June 30, 2006:  
343,771,654.



<PAGE> 2

Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

                             UNISYS CORPORATION
                         CONSOLIDATED BALANCE SHEETS
                                (Millions)
   
                                          
                                          June 30,    
                                            2006       December 31,
                                         (Unaudited)       2005
                                         -----------   ------------
Assets
------
Current assets
Cash and cash equivalents                 $  655.1       $  642.5
Accounts and notes receivable, net         1,082.2        1,111.5
Inventories:
   Parts and finished equipment              103.4          103.4
   Work in process and materials              80.2           90.7
Deferred income taxes                        110.2           68.2
Prepaid expenses and other current assets    155.7          137.0
                                          --------       --------
Total                                      2,186.8        2,153.3
                                          --------       --------

Properties                                 1,346.6        1,320.8
Less-Accumulated depreciation and
  amortization                               984.9          934.4
                                          --------       --------
Properties, net                              361.7          386.4
                                          --------       --------
Outsourcing assets, net                      420.6          416.0
Marketable software, net                     317.0          327.6
Investments at equity                          1.1          207.8
Prepaid pension cost                       1,318.3           66.1
Deferred income taxes                        138.4          138.4
Goodwill                                     192.1          192.0
Other long-term assets                       138.7          141.3
                                          --------       --------
Total                                     $5,074.7       $4,028.9
                                          ========       ========
Liabilities and stockholders' equity
------------------------------------
Current liabilities
Notes payable                             $   10.7       $   18.1

Current maturities of long-term debt            .8           58.8
Accounts payable                             390.0          444.6
Other accrued liabilities                  1,393.9        1,293.3
                                          --------       --------
Total                                      1,795.4        1,814.8
                                          --------       --------
Long-term debt                             1,049.2        1,049.0
Accrued pension liabilities                  352.4          506.9
Other long-term liabilities                  684.5          690.8

Stockholders' equity (deficit)
Common stock, shares issued: 2006; 345.8
   2005, 344.2                                 3.5            3.4
Accumulated deficit                       (2,330.6)      (2,108.1)
Other capital                              3,931.6        3,917.0
Accumulated other comprehensive loss        (411.3)      (1,844.9)
                                          --------       --------
Stockholders' equity (deficit)             1,193.2          (32.6)
                                          --------       --------
Total                                     $5,074.7       $4,028.9
                                          ========       ========

See notes to consolidated financial statements.



<PAGE> 3

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


                                         Three Months         Six Months
                                         Ended June 30      Ended June 30
                                         -------------      -------------
                                      2006         2005     2006       2005
                                      ----         ----     ----       ----
                                                                             
Revenue                                                                      
  Services                          $1,224.5    $1,236.0  $2,400.9   $2,343.7
  Technology                           182.8       199.5     394.2      458.4
                                    --------    --------  --------   --------
                                     1,407.3     1,435.5   2,795.1    2,802.1
Costs and expenses
   Cost of revenue:
     Services                        1,136.3     1,063.4   2,212.8    2,044.8
     Technology                        108.1        94.7     217.5      219.6
                                    --------    --------  --------   --------
                                     1,244.4     1,158.1   2,430.3    2,264.4
                            
Selling, general and administrative    282.7       267.4     578.1      529.0
Research and development                63.9        66.6     139.2      131.5
                                    --------    --------  --------   --------
                                     1,591.0     1,492.1   3,147.6    2,924.9
                                    --------     -------  --------   --------
Operating loss                        (183.7)      (56.6)   (352.5)    (122.8)

Interest expense                        19.1        15.2      38.9       27.8
Other income (expense), net              (.7)       32.0     152.7       32.5
                                    --------    --------  --------   --------
Loss before income taxes              (203.5)      (39.8)   (238.7)    (118.1)
Benefit for income taxes                (8.9)      (12.7)    (16.2)     (45.5)
                                    --------    --------  --------   ---------
Net loss                            $ (194.6)   $  (27.1) $ (222.5)  $  (72.6)
                                    ========    ========  ========   ========
Loss per share
   Basic                            $   (.57)   $   (.08) $   (.65)  $   (.21)
                                    ========    ========  ========   ========
   Diluted                          $   (.57)   $   (.08) $   (.65)  $   (.21)
                                    ========    ========  ========   ========


See notes to consolidated financial statements.



<PAGE> 4


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

                                                    Six Months Ended
                                                         June 30
                                                    ------------------
                                                       2006      2005
                                                    --------   --------
                                                      
Cash flows from operating activities
Net loss                                           $ (222.5)   $ (72.6) 
Add (deduct) items to reconcile net loss
   to net cash (used for) provided by operating 
   activities:
Equity loss (income)                                    4.3      (11.6)
Employee stock compensation                             3.2           
Depreciation and amortization of properties            58.5       61.8
Depreciation and amortization of outsourcing assets    66.7       65.6
Amortization of marketable software                    66.2       59.2
Gain on sale of NUL shares and other assets          (153.2)          
Increase in deferred income taxes, net                (41.9)     (  .6)
Decrease in receivables, net                           66.7       73.6
Decrease in inventories                                10.2       10.4
Increase (decrease) in accounts payable and other
  accrued liabilities                                   8.0     (249.3)
(Decrease) increase in other liabilities              (44.5)     122.6
Decrease (increase) in other assets                     1.2      (24.8)
Other                                                  11.1       56.4
                                                    -------     ------
Net cash (used for) provided by operating activities (166.0)      90.7
                                                    -------     ------
Cash flows from investing activities
   Proceeds from investments                        3,729.3    3,709.4
   Purchases of investments                        (3,731.3)  (3,698.8)
   Investment in marketable software                  (55.3)     (63.3)
   Capital additions of properties                    (32.7)     (59.4)
   Capital additions of outsourcing assets            (50.1)     (86.3)
   Proceeds from sale of NUL shares and                                
     other assets                                     380.6            
   Purchases of businesses                                         (.5)
                                                    -------     ------

Net cash provided by (used for) 
  investing activities                                240.5     (198.9)
                                                    -------     ------
Cash flows from financing activities
   Net (reduction in) proceeds from 
     short-term borrowings                             (7.4)        .5
   Proceeds from employee stock plans                    .9       12.8
   Payments of long-term debt                         (57.9)    (150.7)
   Financing fees                                      (4.6)
                                                    -------     ------
Net cash used for financing activities                (69.0)    (137.4)
                                                    -------     ------
Effect of exchange rate changes on
   cash and cash equivalents                            7.1      (16.0)
                                                    -------     ------

Increase (decrease) in cash and cash equivalents       12.6     (261.6)
Cash and cash equivalents, beginning of period        642.5      660.5
                                                    -------    -------
Cash and cash equivalents, end of period           $  655.1    $ 398.9
                                                   ========    =======

See notes to consolidated financial statements.


<PAGE> 5

Unisys Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

a. The following table shows how earnings (loss) per share were computed for the
three and six months ended June 30, 2006 and 2005 (dollars in millions, shares 
in thousands):

                                         Three Months         Six Months
                                         Ended June 30      Ended June 30
                                         -------------      -------------
                                      2006         2005     2006       2005
                                      ----         ----     ----       ----

    Basic Loss Per Share

    Net loss                        $ (194.6)   $   (27.1) $ (222.5) $  (72.6)
                                    ========    =========  ========  ========
    Weighted average shares          343,414      340,047   342,936   339,147
                                    ========    =========  ========  ========
    Basic loss per share            $   (.57)   $    (.08) $   (.65) $   (.21)
                                    ========    =========  ========  ========
    Diluted Loss Per Share
    
    Net loss                        $ (194.6)   $   (27.1) $ (222.5) $  (72.6)
                                    ========    =========  ========  ========
    Weighted average shares          343,414      340,047   342,936   339,147
    Plus incremental shares 
      from assumed conversions
      of employee stock plans           -             -         -         -  
                                    --------    ---------  --------  --------
    Adjusted weighted average shares 343,414      340,047   342,936   339,147
                                    =========   =========  ========  ========
    Diluted loss per share          $   (.57)   $    (.08) $   (.65) $   (.21)
                                    =========   =========  ========  ========

At June 30, 2006, no shares related to employee stock plans were included in 
the computation of diluted earnings per share since inclusion of these shares 
would be antidilutive because of the net loss incurred in the three and six 
months ended June 30, 2006.

b.   As part of the company's repositioning plan to right size its cost 
structure, on March 31, 2006, the company committed to a reduction of 
approximately 3,600 employees.  This resulted in a pretax charge in the first 
quarter of 2006 of $145.9 million, principally related to severance costs.  The 
charge is broken down as follows: (a) approximately 1,600 employees in the U.S. 
for a charge of $50.3 million and (b) approximately 2,000 employees outside the 
U.S. for a charge of $95.6 million.  The pretax charge was recorded in the 
following statement of income classifications: cost of revenue-services, $83.4 
million; cost of revenue-technology, $2.0 million; selling, general and 
administrative expenses, $45.4 million; research and development expenses, 
$17.6 million; and other income (expense), net, $2.5 million.  The income 
recorded in other income (expense), net relates to minority shareholders' 
portion of the charge related to majority owned subsidiaries which are fully 
consolidated by the company.

As part of the company's continuing repositioning plan to right size its cost 
structure, during the three months ended June 30, 2006, the company committed 
to an additional reduction of approximately 1,900 employees.  This resulted in 
a pretax charge in the second quarter of 2006 of $141.2 million, principally 
related to severance costs.  The charge is broken down as follows: (a) 
approximately 650 employees in the U.S. for a charge of $22.1 million and (b) 
approximately 1,250 employees outside the U.S. for a charge of $119.1 million.  
The pretax charge was recorded in the following statement of income 
classifications: cost of revenue-services, $101.4 million; selling, general and 
administrative expenses, $28.3 million; research and development expenses, 
$11.8 million; and other income (expense), net, $.3 million.  The income 
recorded in other income (expense), net relates to minority shareholders' 
portion of the charge related to majority owned subsidiaries which are fully 
consolidated by the company.


<PAGE> 6

For the six months ended June 30, 2006, the pretax charge of $287.1 million was 
recorded in the following statement of income classifications:  cost of revenue-
services, $184.8 million; cost of revenue-technology, $2.0 million; selling, 
general and administrative expenses, $73.7 million; research and development 
expenses, $29.4 million; and other income (expense), net, $2.8 million.  The 
income recorded in other income (expense), net relates to minority 
shareholders' portion of the charge related to majority owned subsidiaries 
which are fully consolidated by the company.

Of the total of approximately 5,500 employee reductions announced in the first 
half of 2006, approximately 90% are expected to be completed by the end of 2006 
with the remaining reductions targeted for the first half of 2007.  Net of 
increases in offshore resources and outsourcing of certain internal, non-client 
facing functions, the company anticipates that these combined actions will 
yield annualized cost savings in excess of $325 million by the second half of 
2007.  The company continues to explore other approaches to reducing its cost 
structure, including additional work force reductions and potential idle 
facility charges which could result in additional cost reduction charges in the 
second half of 2006.

A further breakdown of the individual components of these costs follows (in 
millions of dollars):

                                  Headcount     Total      U.S.     Int'l.
                                  ---------     -----      ----     ------

Charge for work force reductions    5,528     $287.1      $72.4    $214.7

Minority interest                                2.8                  2.8
                                   ------     ------      ------   -----
                                    5,528      289.9       72.4     217.5

Utilized                           (2,017)     (29.8)      (8.8)   (21.0)
Changes in estimates and
  revisions                          (195)       (.4)       1.6     (2.0)
Translation adjustments                          4.5                 4.5
                                   ------     ------      -----    -----

Balance at June 30, 2006            3,316     $264.2      $65.2    $199.0
                                   ======     ======      =====    ======

Expected future utilization:
2006 remaining six months           2,800     $150.6      $40.6    $110.0
2007 and thereafter                   516      113.6       24.6      89.0


c.  On March 17, 2006, the company adopted changes to its U.S. defined 
benefit pension plans effective December 31, 2006, and will increase matching 
contributions to its defined contribution savings plan beginning January 1, 
2007.

The changes to the U.S. plans are part of a global effort by the company to 
provide a competitive retirement program while controlling the level and 
volatility of retirement costs.

The changes to the U.S. pension plans affect most U.S. employees and senior 
management. They include: 

* Ending the accrual of future benefits in the company's defined benefit 
pension plans for employees effective December 31, 2006.  There will be no new 
entrants to the plans after that date.

* Increasing the company's matching contribution under the company savings plan 
to 100 percent of the first 6 percent of eligible pay contributed by 
participants, up from the current 50 percent of the first 4 percent of eligible 
pay contributed by participants.  The company match is made in company common 
stock.


<PAGE> 7

The changes do not affect the vested accrued pension benefits of current and 
former employees, including Unisys retirees, as of December 31, 2006.

As a result of the amendment to stop accruals for future benefits in its U.S. 
defined benefit pension plans, the company recorded a pretax curtailment gain 
of $45.0 million in the first quarter of 2006.  U.S. GAAP pension accounting 
rules require companies to re-measure both plan assets and obligations whenever 
a significant event occurs, such as a plan amendment.  The company has 
performed such re-measurement as of March 31, 2006.  As a result of the re-
measurement, the company's U.S. qualified defined benefit pension plan is no 
longer in a minimum liability position and, accordingly, the company has 
reclassified its prepaid pension asset from other comprehensive income to a 
prepaid pension asset on its balance sheet.  Based on the changes to the U.S. 
plans, the March 31, 2006 re-measurement and including the $45.0 million 
curtailment gain, the company currently expects its 2006 worldwide pension 
expense to be approximately $135 million, down from $181 million in 2005.  The 
expected pension expense in 2006 is based on actuarial assumptions and on 
assumptions regarding interest rates and currency exchange rates, all of which 
are subject to change.  Accordingly the expected expense amount could change.

Net periodic pension expense for the three and six months ended June 30, 2006 
and 2005 is presented below (in millions of dollars):

                                     Three Months             Three Months
                                 Ended June 30, 2006     Ended June 30, 2005
                                --------------------     -------------------
                                       U.S.    Int'l.            U.S.    Int'l.
                               Total   Plans   Plans    Total    Plans   Plans
                               -----   -----   -----    -----    -----   -----

    Service cost             $  27.4  $  15.2  $ 12.2  $  28.1  $  15.6 $ 12.5
    Interest cost              111.9     84.2    27.7     93.0     66.2   26.8
    Expected return on
      plan assets             (140.7)  (110.3)  (30.4)  (119.8)  ( 90.2) (29.6)
    Amortization of prior
      service (benefit) cost     (.2)     (.5)     .3   (  1.7)  (  1.9)    .2
    Recognized net actuarial 
      loss                      42.1     29.9    12.2     46.2     36.0   10.2
                               -----   ------   ------   ------   -----   ----
    Net periodic pension
      expense                $  40.5  $  18.5   $22.0   $ 45.8  $  25.7  $20.1
                              ======   ======   ======  ======  =======  =====


                                     Six Months                  Six Months
                                Ended June 30, 2006          Ended June 30, 2005
                                -------------------          -------------------
                                       U.S.    Int'l.            U.S.    Int'l.
                               Total   Plans   Plans    Total    Plans   Plans
                               -----   -----   ------   -----    -----   ------

    Service cost             $  57.2  $  33.6   $23.6    $ 59.8  $ 34.7  $ 25.1
    Interest cost              206.8    152.3    54.5     186.1   131.5    54.6
    Expected return on
      plan assets             (260.6)  (201.0)  (59.6)   (240.8) (180.5)  (60.3)
    Amortization of prior
      service (benefit) cost     (.5)    (1.0)     .5      (3.0)   (3.8)     .8
    Recognized net actuarial 
      loss                      90.5     66.4    24.1      90.5    70.1    20.4
    Curtailment gain           (45.0)   (45.0)                                 
                             -------  -------   -------  -------  ------  -----
    Net periodic pension 
      expense                $  48.4  $   5.3   $43.1    $ 92.6   $ 52.0  $40.6
                             =======  =======   =======  ======   ======  =====

The company currently expects to make cash contributions of approximately $75 
million to its worldwide defined benefit pension plans in 2006 compared with 
$71.6 million in 2005.  For the six months ended June 30, 2006 and 2005, $33.7 
million and $30.1 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 2006.


<PAGE> 8

Net periodic postretirement benefit expense for the three and six months ended 
June 30, 2006 and 2005 is presented below (in millions of dollars):

                                    Three Months                  Six Months
                                    Ended June 30                Ended June 30
                                    -------------                -------------

                                2006           2005          2006          2005
                                ----           ----          ----          ----

    Interest cost               $3.2         $3.5            $ 6.4        $ 6.9
    Expected return on assets                 (.1)             (.1)         (.2)
    Amortization of prior 
      service benefit            (.5)         (.5)            (1.0)        (1.0)
    Recognized net actuarial 
      loss                       1.3          1.6              2.6          3.2
                                ----         ----             ----        -----
    Net periodic postretirement 
      benefit expense           $4.0         $4.5            $ 7.9        $ 8.9
                                ====         ====             ====        =====

The company expects to make cash contributions of approximately $28 million to 
its postretirement benefit plan in 2006 compared with $26.4 million in 2005.  
For the six months ended June 30, 2006 and 2005, $12.7 million and $12.4 
million, respectively, of cash contributions have been made.

d.   In March 2006, the company sold all of the shares it owned in Nihon 
Unisys, Ltd. (NUL), a publicly traded Japanese company.  The company received 
gross proceeds of $378.1 million and recognized a pretax gain of $149.9 million 
in the first quarter of 2006.  NUL will remain the exclusive distributor of the 
company's hardware and software in Japan.

At December 31, 2005, the company owned approximately 29% of the voting common 
stock of NUL.  The company accounted for this investment by the equity method, 
and, at December 31, 2005, the amount recorded in the company's books for the 
investment, after the reversal of a minimum pension liability adjustment, was 
$243 million.  During the years ended December 31, 2005, 2004, 2003, and for 
the six months ended June 30, 2006 and 2005, the company recorded equity income 
(loss) related to NUL of $9.1 million, $16.2 million, $18.2 million, $(4.2) 
million and $11.5 million, respectively.  These amounts were recorded in "Other 
income (expense), net" in the company's consolidated statements of income.

e.   Under the company's stockholder approved stock-based plans, stock options, 
stock appreciation rights, restricted stock and restricted stock units may be 
granted to officers, directors and other key employees.  At June 30, 2006, 5.4 
million shares of unissued common stock of the company were available for 
granting under these plans.

As of June 30, 2006, the company has granted non-qualified stock options and 
restricted stock units under these plans.  Prior to January 1, 2006, the 
company applied the recognition and measurement principles of APB Opinion No. 
25, "Accounting for Stock Issued to Employees," and related interpretations in 
accounting for those plans, whereby for stock options, at the date of grant, no 
compensation expense was reflected in 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.  Pro forma information regarding net income 
and earnings per share was provided in accordance with  Statement of Financial 
Accounting Standards (SFAS)  No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" (SFAS No. 148), as if the fair value method defined 
by SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123) had 
been applied to stock-based compensation.  For purposes of the pro forma 
disclosures, the estimated fair value of stock options was amortized to expense 
over the options' vesting periods.

Effective January 1, 2006, the company adopted SFAS No. 123 (revised 2004), 
"Share-Based Payment" (SFAS No. 123R), which replaces SFAS No. 123 and 
supersedes APB Opinion No. 25.  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 company adopted SFAS 
No. 123R using the modified-prospective transition method, which requires the 
company, beginning January 1, 2006 and thereafter, to expense the grant date 
fair value of all share-based awards over their remaining vesting periods to 
the extent the awards were not fully vested as of the date of adoption and to 
expense the fair value of all share-based awards granted subsequent to December 
31, 2005 over their requisite service periods.  Stock-based compensation 



<PAGE> 9

expense for all share-based payment awards granted after January 1, 2006 is 
based on the grant-date fair value estimated in accordance with the provisions 
of SFAS No. 123R.  The company recognizes compensation cost net of a forfeiture 
rate and recognizes the compensation cost for only those awards expected to 
vest on a straight-line basis over the requisite service period of the award, 
which is generally the vesting term.  The company estimated the forfeiture rate 
based on its historical experience and its expectations about future 
forfeitures.  As required under the modified-prospective transition method, 
prior periods have not been restated.  In March 2005, the Securities and 
Exchange Commission (SEC) issued Staff Accounting Bulletin No. 107 (SAB 107) 
regarding the SEC's interpretation of SFAS No. 123R and the valuation of share-
based payments for public companies.  The company has applied the provisions of 
SAB 107 in its adoption of SFAS No. 123R.  The company records share-based 
payment expense in selling, general and administrative expenses.

The company's stock option and time-based restricted stock unit grants include 
a provision that if termination of employment occurs after the participant has 
attained age 55 and completed 5 years of service with the company, or for 
directors, the completion of 5 years of service as a director, the participant 
shall continue to vest in each of his or her awards in accordance with the 
vesting schedule set forth in the applicable award agreement.  For purposes of 
the pro forma information required to be disclosed by SFAS No. 123, the company 
recognized compensation expense over the vesting period.  Under SFAS No. 123R, 
compensation expense is recognized over the period through the date that the 
employee first becomes eligible to retire and is no longer required to provide 
service to earn the award.  For grants prior to January 1, 2006, compensation 
expense continues to be recognized under the prior method; compensation expense 
for awards granted after December 31, 2005 is recognized over the period to the 
date the employee first becomes eligible for retirement.

Options have been granted to purchase the company's common stock at an exercise 
price equal to or greater than the fair market value at the date of grant.  
Options granted before January 1, 2005 generally have a maximum duration of ten 
years and were exercisable in annual installments over a four-year period 
following date of grant.  Stock options granted after January 1, 2005 generally 
have a maximum duration of five years and become exercisable in annual 
installments over a three-year period following date of grant.  On September 23,
2005, the company accelerated the vesting of all of its then-issued unvested 
stock options.  On December 19, 2005, the company granted fully vested stock 
options to purchase a total of 3.4 million shares of the company's common stock 
at an exercise price of $6.05, the fair market value of the company's common 
stock on December 19, 2005.

Prior to January 1, 2006, restricted stock units had been granted and were 
subject to forfeiture upon employment termination prior to the release of the 
restrictions.  Compensation expense resulting from these awards is recognized 
as expense ratably from the date of grant until the date the restrictions lapse 
and is based on the fair market value of the shares at the date of grant.  

For stock options issued both before and after adoption of SFAS No. 123R, the 
fair value is estimated at the date of grant using a Black-Scholes option 
pricing model.  As part of its adoption of SFAS No. 123R, for stock options 
issued after December 31, 2005, the company reevaluated its assumptions in 
estimating the fair value of stock options granted.  Principal assumptions used 
are as follows: (a) expected volatility for the company's stock price is based 
on historical volatility and implied market volatility, (b) historical exercise 
data is used to estimate the options' expected term, which represents the 
period of time that the options granted are expected to be outstanding, and (c) 
the risk-free interest rate is the rate on zero-coupon U.S. government issues 
with a remaining term equal to the expected life of the options.  The company 
recognizes compensation expense for the fair value of stock options, which have 
graded vesting, on the straight-line basis over the requisite service period of 
the awards.


<PAGE> 10

The fair value of stock option awards was estimated using the Black-Scholes 
option pricing model with the following assumptions and expected weighted-
average fair values as follows:

                                                Six Months Ended June 30
                                                ------------------------

                                                      2006          2005
                                                      ----          ----

Weighted-average fair value of grant                 $2.53          $3.27
Risk-free interest rate                               4.35%          3.43%
Expected volatility                                  45.88%         55.00%
Expected life of options in years                     3.67           3.50
Expected dividend yield                                 -              -

Prior to January 1, 2006, the company would grant an annual stock option award 
to officers, directors and other key employees generally in the first quarter 
of a year.  For 2006, this annual stock option award has been replaced with 
restricted stock unit awards.  The company currently expects to continue to 
grant stock option awards, principally to newly hired individuals.  The 
restricted stock unit awards granted in March of 2006 contain both time-based 
units (25% of the grant) and performance-based units (75% of the grant).  The 
time-based units vest in three equal annual installments beginning with the 
first anniversary of the grant, and the performance-based units vest in three 
equal annual installments, beginning with the first anniversary of the grant, 
based upon the achievement of pretax profit and revenue growth rate goals in 
2006, 2006-2007, and 2006-2008, for each installment, respectively.  Each 
performance-based unit will vest into zero to 1.5 shares depending on the 
extent to which the performance goals are met.  Compensation expense resulting 
from these awards is recognized as expense ratably for each installment from 
the date of grant until the date the restrictions lapse and is based on the 
fair market value at the date of grant and the probability of achievement of 
the specific performance-related goals.  

During the six months ended June 30, 2006, the company recorded $3.2 million of 
share-based compensation expense, which is comprised of $3.0 million of 
restricted stock unit expense and $.2 million of stock option expense.  

The adoption of SFAS No. 123R had an immaterial impact to income before income 
taxes and net income for the six months ended June 30, 2006.

A summary of stock option activity for the six months ended June 30, 2006 
follows (shares in thousands):

                                              Weighted-
                               Weighted-      Average        Aggregate
                               Average        Remaining      Intrinsic
                               Exercise       Contractual    Value
   Options        Shares       Price          Term (years)   ($ in millions)
   -------        ------       ---------      ------------   ---------------

Outstanding at
   December 
   31, 2005       47,536       $16.54
Granted              447         6.49
Exercised           (150)        6.25
Forfeited and
   expired        (2,344)       15.32
                  ------
Outstanding at
   June 30, 2006  45,489        16.54             4.7        $    .8
                  ======
Vested and 
   expected to
   vest at 
   June 30, 2006  45,489        16.54             4.7             .8
                  ======
Exercisable at
   June 30, 2006  44,789        16.71             4.7             .8
                  ======


The aggregate intrinsic value in the above table reflects the total pretax 
intrinsic value (the difference between the company's closing stock price on 
the last trading day of the period and the exercise price of the options, 
multiplied by the number of in-the-money stock options) that would have been 
received by the option holders had all option holders exercised their options 
on June 30, 2006.  The intrinsic value of the company's stock options changes 
based on the closing price of the company's stock.  The total intrinsic value 
of options exercised for the six months ended June 30, 2006 and June 30, 2005 
was immaterial.  As of June 30, 2006, $1.6 million of total unrecognized 
compensation cost related to stock options is expected to be recognized over a 
weighted-average period of 1.6 years.


<PAGE> 11

A summary of restricted stock unit activity for the six months ended June 30, 
2006 follows (shares in thousands):

                                                                Weighted-
                                         Restricted             Average
                                         Stock                  Grant Date
                                         Units                  Fair Value
                                         ----------             ----------

Outstanding at December 31, 2005             352                   $8.89
Granted                                    1,777                    6.63
Vested                                      (128)                   7.62
Forfeited and expired                        (83)                  10.45
                                           -----
Outstanding at June 30, 2006               1,918                    6.81
                                           =====

The fair value of restricted stock units is determined based on the average of 
the high and low trading price of the company's common shares on the date of 
grant.  The weighted-average grant-date fair value of restricted stock units 
granted during the six months ended June 30, 2006 and 2005 was $6.63 and $7.62, 
respectively.  As of June 30, 2006, there was $9.0 million of total 
unrecognized compensation cost related to outstanding restricted stock units 
granted under the company's plans.  That cost is expected to be recognized over 
a weighted-average period of 1.7 years.  The total fair value of restricted 
share units vested during the six months ended June 30, 2006 was $.8 million.  
No restricted share units vested during the six months ended June 30, 2005.

For the six months ended June 30, 2005, 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, except 
per share amounts):

                                          Six Months Ended June 30
                                          ------------------------
                                                    2005
                                                    -----       
    Net loss as reported                          $(72.6)
    Deduct total stock-based employee
      compensation expense determined
      under fair value method for all
      awards, net of tax                           (11.1)
                                                  ------       
    Pro forma net loss                            $(83.7)
                                                  ======
    Loss per share
      Basic - as reported                         $ (.21)
      Basic - pro forma                           $ (.25)
      Diluted - as reported                       $ (.21)
      Diluted - pro forma                         $ (.25)

Common stock issued upon exercise of stock options or upon lapse of 
restrictions on restricted stock units are newly-issued shares.  Cash received 
from the exercise of stock options for the six months ended June 30, 2006 and 
2005 was $1.0 million and $.3 million, respectively.  The company did not 
realize any tax benefits from the exercise of stock options or upon issuance of 
stock upon lapse of restrictions on restricted stock units in light of its tax 
asset carryforwards.  Prior to the adoption of SFAS No. 123R, the company 
presented such tax benefits as operating cash flows.  Upon the adoption of SFAS 
No. 123R, tax benefits resulting from tax deductions in excess of the 
compensation cost recognized are classified as financing cash flows.

f.  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.  


<PAGE> 12

Also included in the Technology segment's sales and operating profit are sales 
of hardware and software sold to the Services segment for internal use in 
Services engagements.  The amount of such profit included in operating income 
of the Technology segment for the three and six months ended June 30, 2006 and 
2005 was $2.0 million and $4.8 million, and $3.3 million and $9.7 million, 
respectively.  The profit on these transactions is eliminated in Corporate.

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

A summary of the company's operations by business segment for the three and six 
month periods ended June 30, 2006 and 2005 is presented below (in millions of 
dollars):

                               Total    Corporate    Services    Technology
                               -----    ---------    --------    ----------
    Three Months Ended 
      June 30, 2006
    ------------------
    Customer revenue         $1,407.3                $1,224.5     $ 182.8
    Intersegment                        $ (53.2)          3.8        49.4
                             --------   --------     --------      ------
    Total revenue            $1,407.3   $ (53.2)     $1,228.3     $ 232.2
                             ========   ========     ========      ======
    Operating loss           $ (183.7)  $(143.9)     $  (11.6)    $ (28.2)
                             ========   ========     ========     =======


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

    Customer revenue         $1,435.5                $1,236.0     $ 199.5
    Intersegment                         $( 75.7)         4.9        70.8
                              --------   --------    --------     -------
    Total revenue            $1,435.5    $( 75.7)    $1,240.9     $ 270.3
                             ========    =======     ========     =======
    Operating income (loss)  $  (56.6)   $   2.7     $  (46.4)    $ (12.9)
                             =========   =======     ========     =======

    Six Months Ended
    June 30, 2006
    ----------------

    Customer revenue         $2,795.1               $2,400.9     $ 394.2 
    Intersegment                         $ (95.8)        7.2        88.6 
                             --------    --------   --------     --------
    Total revenue            $2,795.1    $ (95.8)   $2,408.1     $ 482.8 
                             ========    ========   ========     ========
    Operating loss           $ (352.5)   $(288.7)   $  (22.1)    $ (41.7)
                             ========    ========   ========     ========

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

    Customer revenue         $2,802.1               $2,343.7     $ 458.4
    Intersegment                         $( 135.6)       9.7       125.9
                             --------    --------   --------     -------
    Total revenue            $2,802.1    $( 135.6)  $2,353.4     $ 584.3
                             ========    ========   ========     =======
    Operating income (loss)  $ (122.8)   $   (7.7)  $ (121.5)    $   6.4
                             ========    ========   ========     =======


<PAGE> 13

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


                                    Three Months                Six Months
                                   Ended June 30               Ended June 30
                                   -------------               -------------

                                  2006         2005          2006        2005
                                  ----         ----          ----        ----

    Total segment operating loss $ (39.8)   $ (59.3)       $ (63.8)    $(115.1)
    Interest expense               (19.1)     (15.2)         (38.9)      (27.8)
    Other income (expense), net      (.7)      32.0          152.7        32.5 
    Cost reduction charge         (141.2)                   (287.1)            
    Corporate and eliminations      (2.7)       2.7           (1.6)       (7.7)
                                 -------    -------        -------     ------- 
    Total loss before income                                                   
      taxes                      $(203.5)   $ (39.8)       $(238.7)    $(118.1)
                                 =======    =======        =======     =======

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

                                    Three Months                Six Months
                                   Ended June 30               Ended June 30
                                   -------------               -------------

                                  2006         2005          2006        2005
                                  ----         ----          ----        ----

    Services 
     Consulting and systems 
       integration               $  404.0    $ 443.5       $  785.3    $  813.3
     Outsourcing                    471.2      452.6          926.4       852.8
     Infrastructure services        229.5      208.4          454.5       411.2
     Core maintenance               119.8      131.5          234.7       266.4
                                 --------   --------       --------    --------
                                  1,224.5    1,236.0        2,400.9     2,343.7
    Technology
     Enterprise-class servers       145.6      165.7          313.7       363.9
     Specialized technologies        37.2       33.8           80.5        94.5
                                 --------   --------       --------    --------
                                    182.8      199.5          394.2       458.4
                                 --------   --------       --------    --------
    Total                        $1,407.3   $1,435.5       $2,795.1    $2,802.1
                                 ========   ========       ========    ========


g.  Comprehensive income (loss) for the three and six months ended June 30, 2006
    and 2005 includes the following components (in millions of dollars):

                                    Three Months                Six Months
                                   Ended June 30               Ended June 30
                                   -------------               -------------

                                  2006         2005          2006        2005
                                  ----         ----          ----        ----
    Net loss                     $(194.6)   $  (27.1)      $ (222.5)   $  (72.6)
    Other comprehensive income   
      (loss)                     
      Cash flow hedges
        Income (loss), net of 
          tax of $ -, $1.4, -,                                              
          and $2.7                  (.4)         2.6            (.2)        4.9
        Reclassification 
          adjustments, net of 
          tax of $ -, $ (1.3), $- 
          and $(.6)                  .2         (2.4)            -         (1.0)
      Foreign currency 
        translation adjustments    (1.7)         1.4          (12.2)       17.2
      Reversal of U.S. minimum 
        pension liability            -            -         1,446.0          - 
                                 --------   --------       --------    --------
    Total other comprehensive 
      income (loss)                (1.9)         1.6        1,433.6        21.1
                                 --------    -------       --------    --------
    Comprehensive income (loss)  $(196.5)     $(25.5)      $1,211.1    $  (51.5)
                                 ========    =======       ========    ========


<PAGE> 14

    Accumulated other comprehensive income (loss) as of December 31, 2005 and
    June 30, 2006 is as follows (in millions of dollars):

                                                          Cash    Minimum
                                            Translation   Flow    Pension
                                     Total  Adjustments  Hedges  Liability
                                     -----  -----------  ------  ---------
    Balance at December 31, 2005  $(1,844.9)  $(627.3)   $   .1  $(1,217.7)

    Change during period            1,433.6     (12.2)      (.2)   1,446.0
                                   --------   -------    ------  ---------

    Balance at June 30, 2006      $  (411.3)  $(639.5)   $  (.1) $   228.3
                                  =========   =======    ======  =========

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

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

                                    Three Months                Six Months
                                   Ended June 30               Ended June 30
                                   -------------               -------------

                                  2006         2005          2006        2005
                                  ----         ----          ----        ----

    Balance at beginning of 
      period                     $   9.3    $   11.0      $   8.0      $ 11.6
    
    Accruals for warranties 
      issued during the period       2.1         1.9          5.0         4.3

    Settlements made during 
      the period                    (2.4)       (2.6)        (4.8)       (5.5)

    Changes in liability for 
      pre-existing warranties
      during the period, 
      including expirations          (.1)        (.9)          .7        (1.0)
                                 -------     --------     --------     ------
    Balance at June 30           $   8.9     $   9.4      $   8.9      $  9.4
                                 =======     =======      ========     ======

i.  Cash paid during the six months ended June 30, 2006 and 2005 for income 
taxes was $47.4 million and $24.5 million, respectively.

Cash paid during the six months ended June 30, 2006 and 2005 for interest was 
$49.0 million and $41.7 million, respectively.

j.  Effective January 1, 2006, the company adopted 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.  Adoption of 
SFAS No. 151 did not have a material effect on the company's consolidated 
financial position, consolidated results of operations, or liquidity.


<PAGE> 15

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB 
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an 
interpretation of FASB Statement No. 109," (FIN 48).  FIN 48 prescribes a 
recognition threshold and measurement attribute for the financial statement 
recognition and measurement of a tax position taken or expected to be taken in 
a tax return.  FIN 48 is effective for fiscal years beginning after 
December 15, 2006.  The company is currently evaluating what effect, if any, 
adoption of FIN 48 will have on the company's financial statements.


k.  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.  The company continues to work 
collaboratively with the DCAA and TSA to try to resolve these issues.  While 
the company believes that it and the government will resolve the issues raised, 
there can be no assurance that these issues will be successfully resolved or 
that new issues will not be raised.  It has been publicly reported that certain 
of these matters have been referred to the Inspector General's office of the 
Department of Homeland Security for investigation.  The company has received no 
investigative requests from the Inspector General's office or any other 
government agency with respect to any such referral.  The company does not know 
whether any such referral will be pursued or, if pursued, what effect it may 
have on the company or on the resolution of the issues with TSA.

l.  In June 2006, the company retired at maturity all $57.9 million of its 
remaining 8 1/8% senior notes.

Effective May 31, 2006, the company entered into a three-year, secured 
revolving credit facility.  The new credit agreement, which provides for loans 
and letters of credit up to an aggregate of $275 million, replaces the 
company's $500 million credit agreement that expired on May 31, 2006.  
Borrowings under the new facility will bear interest based on short-term rates 
and the company's credit rating.  The credit agreement contains customary 
representations and warranties, including no material adverse change in the 
company's business, results of operations or financial condition.  It also 
contains financial covenants requiring the company to maintain certain interest 
coverage, leverage and asset coverage ratios and a minimum amount of liquidity, 
which could reduce the amount the company is able to borrow.  The 
credit facility also includes covenants limiting liens, mergers, asset sales, 
dividends and the incurrence of debt.  Events of default include non-payment, 
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.  The credit facility is secured by the company's assets, 
except that the collateral does not include accounts receivable that are 
subject to the receivable facility, U.S. real estate or the stock or 
indebtedness of the company's U.S. operating subsidiaries.  As of June 30, 
2006, there were letters of credit of approximately $24 million issued under 
the facility and there were no cash borrowings.

m.  Certain prior year amounts have been reclassified to conform with the 2006 
presentation.



<PAGE> 16


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

Overview

For the six months ended June 30, 2006, the company reported a net loss of 
$222.5 million, or $.65 per share, compared with a net loss of $72.6 million, 
or $.21 per share, for the six months ended June 30, 2005.  The current period 
includes pretax charges of $287.1 million relating to cost reduction actions.

During the first half of 2006, the company executed against its previously-
announced plan to fundamentally reposition the company for profitable growth.
During the period, the company:

* began implementing personnel reductions by committing to a reduction of 
approximately 5,500 employees, which resulted in pretax charges of $287.1 
million.  See note (b) to the financial statements.

* adopted changes to its U.S. defined benefit pension plans effective December 
31, 2006, and will increase matching contributions to its defined contribution 
savings plan beginning January 1, 2007.  As a result of stopping the accruals 
for future benefits, the company recorded a pretax curtailment gain of $45.0 
million.  See note (c).

* took initial steps in its program to divest non-core assets.  In March the 
company divested its stake in Nihon Unisys, Ltd. (NUL), a leading IT solutions 
provider in Japan.  The company sold all of its 30.5 million shares in NUL, 
generating cash proceeds of approximately $378 million, which will be used to 
fund the company's cost reduction program.  A pretax gain of $149.9 million was 
recorded on the sale.  The company also sold certain assets of its Unigen 
semiconductor test equipment business for cash proceeds of $8 million.  See 
note (d).

* reached a definitive agreement with its partner banks on renegotiated terms 
for its iPSL payment processing joint venture in the United Kingdom.  The terms 
of the new agreement, which went into effect on January 1, 2006, include new 
tariff arrangements that are expected to yield an additional approximately $150 
million in revenue to the company over the 2006-2010 timeframe.

* reached a series of alliance agreements with NEC Corporation (NEC) to 
collaborate in server technology, research and development, manufacturing, and 
solutions delivery.  Among the areas included in the agreements, the two 
companies will co-design and develop a common high-end, Intel-based server 
platform for customers of both companies, and NEC is recognizing the company as 
a preferred provider of technology support and maintenance services and managed 
security services in markets outside of Japan. 

* announced new high-end products in the company's ClearPath and MCP families 
which should help improve demand in the Technology business in the second half 
of 2006 compared with the first half of 2006.

Results of operations

Company results
    
For the three months ended June 30, 2006, the company reported a net loss of 
$194.6 million, or $.57 per share, compared with a net loss of $27.1 million, or
$.08 per share, for the three months ended June 30, 2005.  

Revenue for the quarter ended June 30, 2006 was $1.41 billion compared with 
$1.44 billion for the second quarter of 2005.  Revenue in the current period 
decreased 2% from the prior year.  This decrease was principally due to a 
decrease of 8% in Technology revenue and a decrease of 1% in Services revenue.  
Foreign currency fluctuations had a negligible impact on revenue in the current 
period compared with the year-ago period.  U.S. revenue declined 6% in the 
quarter compared with the year-ago period principally in the company's Federal 
business.  Revenue in international markets increased 2% due to increases in 
Latin America and Europe offset in part by a decline in Pacific/Asia.  On a 
constant currency basis, international revenue increased 2% in the three months 
ended June 30, 2006 compared with the three months ended June 30, 2005.

Pension expense for the three months ended June 30, 2006 was $40.5 million 
compared with $45.8 million for the three months ended June 30, 2005.  The 
company records pension income or 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 active employees 
are charged.


<PAGE> 17

Total gross profit margin was 11.6% in the three months ended June 30, 2006 
compared with 19.3% in the three months ended June 30, 2005.  This decline 
principally reflected a $101.4 million cost reduction charge in the current 
quarter.

Selling, general and administrative expenses were $282.7 million for the three 
months ended June 30, 2006 (20.1% of revenue) compared with $267.4 million 
(18.6% of revenue) in the year-ago period.  The increase was principally due to 
a $28.3 million charge in 2006 relating to the cost reduction actions.  

Research and development (R&D) expenses in the second quarter of 2006 were 
$63.9 million compared with $66.6 million in the second quarter of 2005.  The 
company continues to invest in proprietary operating systems, middleware and in 
key programs within its industry practices.  R&D expense in the second quarter 
of 2006 included an $11.8 million charge relating to the 2006 cost reduction 
actions.  The decline in R&D, exclusive of the current period cost reduction 
charge, was principally a result of cost reduction actions.

For the second quarter of 2006, the company reported a pretax operating loss of 
$183.7 million compared with a pretax operating loss of $56.6 million in the 
second quarter of 2005.  The principal item affecting the comparison was a 
$141.5 million charge in 2006 relating to the cost reduction actions.

Interest expense for the three months ended June 30, 2006 was $19.1 million 
compared with $15.2 million for the three months ended June 30, 2005, 
principally due to higher average debt.

Other income (expense), net, which can vary from period to period, was expense 
of $.7 million in the second quarter of 2006, compared with income of $32.0 
million in 2005.  The difference in 2006 from 2005 was principally due to (a) a 
decline in NUL equity income from $15.9 million in the year-ago quarter to zero 
in the current quarter due to the sale of the company's investment in NUL in 
March 2006 (see note d) and (b) expense of $2.2 million in the current quarter 
compared with income of $7.8 million in the last year's second quarter related 
to minority shareholders' portion of gains or losses of iPSL, a 51% owned 
subsidiary which is fully consolidated by the company, due to increased profit 
from iPSL resulting from the renegotiated contract in January 2006.

Income (loss) before income taxes for the three months ended June 30, 2006 was 
a loss of $203.5 million compared with a loss of $39.8 million in 2005.  The 
benefit for income taxes was $8.9 million in the current quarter compared with 
a benefit of $12.7 million in the year-ago period.  Due to the fact that the 
company has a full valuation allowance for all of its U.S. tax assets and 
certain international subsidiaries, which was recorded in the third quarter of 
2005, the company no longer has a meaningful effective tax rate.  The company 
will record a tax provision or benefit for those international subsidiaries 
that do not have a full valuation allowance against their deferred tax assets.  
Any profit or loss recorded for the company's U.S. operations will have no 
provision or benefit associated with it.  As a result, the company's provision 
or benefit for taxes will vary significantly quarter to quarter depending on 
the geographic distribution of income.

For the six months ended June 30, 2006, the company reported a net loss of 
$222.5 million, or $.65 per share, compared with a net loss of $72.6 million, 
or $.21 per share, for the six months ended June 30, 2005.  The current period 
includes a pretax charge of $287.1 million relating to the cost reduction 
actions.

Total revenue for both the six months ended June 30, 2006 and 2005 was $2.80 
billion.  Foreign currency translations had a 2 percentage point negative 
impact on revenue in the current six months when compared with the year-ago 
period.  In the current six-month period, Services revenue increased 2% and 
Technology revenue decreased 14%.

U.S. revenue declined 3% in the current six-month period compared with the year-
ago period.  Revenue in international markets increased 2% driven by increases 
in Europe and Latin America which was partially offset by a decrease in 
Pacific/Asia/Japan.  On a constant currency basis, international revenue 
increased 6% in the six months ended June 30, 2006.

Pension expense for the six months ended June 30, 2006 was $48.4 million 
compared with $92.6 million of pension expense for the six months ended 
June 30, 2005. The decrease in pension expense in 2006 from 2005 was 
principally due to the U.S. curtailment gain of $45.0 million recognized in 
March 2006.


<PAGE> 18

Total gross profit margin was 13.1% in the six months ended June 30, 2006 
compared with 19.2% in the year-ago period.  The current period included a 
$186.8 million charge related to the cost reduction actions.

For the six months ended June 30, 2006, selling, general and administrative 
expense were $578.1 million (20.7% of revenue) compared with $529.0 million 
(18.9% of revenue) for the six months ended June 30, 2005.  Selling general and 
administrative expenses for the six months ended June 30, 2006 included $73.7 
million related to the cost reduction actions.  Selling, general and 
administrative expense in the current six-month period includes $10.3 million 
of pension expense compared with pension expense of $18.0 million in the year-
ago period.

R&D expense for the six months ended June 30, 2006 was $139.2 million compared 
with $131.5 million a year ago.  R&D expense in the first six months of 2006 
included $29.4 million related to the cost reduction actions.  R&D in the 
current period includes $1.2 million of pension expense compared with pension 
expense of $9.8 million in the year-ago period.

For the six months ended June 30, 2006, the company reported an operating loss 
of $352.5 million compared with an operating loss of $122.8 million for the six 
months ended June 30, 2005.  The current period includes a $289.9 million 
charge related to the cost reduction actions.  The current period also includes 
pension expense of $48.4 million compared with pension expense of $92.6 million 
in the year-ago period.

Interest expense for the six months ended June 30, 2006 was $38.9 million 
compared with $27.8 million for the six months ended June 30, 2005, principally 
due to higher average debt.

Other income (expense), net was income of $152.7 million in the current six-
month period compared with income of $32.5 million in the year-ago period.  The 
increase in income was principally due to the $149.9 million gain from the sale 
of all of the company's shares in NUL (see note (d)), offset in part by (a) a 
decline in NUL equity income from $11.5 million in the year-ago period to a 
loss of $4.2 million in the current six month period, and (b) an expense of $.8 
million in the current period compared with income of $16.1 million in the last 
year's six month period related to minority shareholders' portion of gains or 
losses of iPSL, a 51% owned subsidiary which is fully consolidated by the 
company.

Income (loss) before income taxes was a loss of $238.7 million in the six 
months ended June 30, 2006 compared with a loss of $118.1 million last year.  
The benefit for income taxes was $16.2 million in the current period compared 
with a benefit of $45.5 million in the year-ago period. 

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. The company continues to work collaboratively 
with the DCAA and TSA to try to resolve these issues. While the company 
believes that it and the government will resolve the issues raised, there can 
be no assurance that these issues will be successfully resolved or that new 
issues will not be raised. It has been publicly reported that certain of these 
matters have been referred to the Inspector General's office of the Department 
of Homeland Security for investigation. The company has received no 
investigative requests from the Inspector General's office or any other 
government agency with respect to any such referral. The company does not know 
whether any such referral will be pursued or, if pursued, what effect it may 
have on the company or on the resolution of the issues with TSA.


<PAGE> 19

Segment results

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 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 agreements.  The amount of such profit included in operating income of 
the Technology segment for the three and six months ended June 30, 2006 and 
2005 was $2.0 million and $4.8 million, and $3.3 million and $9.7 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 segment comparisons below exclude the 
cost reduction items mentioned above.  

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

                                       Elimi-    
                            Total      nations      Services    Technology
                           -------     -------      --------    ----------
Three Months Ended
June 30, 2006
------------------
Customer revenue          $1,407.3                  $1,224.5     $182.8
Intersegment                           $(53.2)           3.8       49.4
                          --------     -------      --------     ------
Total revenue             $1,407.3     $(53.2)      $1,228.3     $232.2
                          ========     =======      ========     ====== 

Gross profit percent          11.6 %                    14.3 %     37.6 %
                          ========                  ========     ======
Operating loss percent       (13.1)%                    ( .9)%    (12.2)%
                          ========                  ========     ======

Three Months Ended
June 30, 2005
------------------
Customer revenue          $1,435.5                  $1,236.0     $199.5
Intersegment                           $( 75.7)          4.9       70.8
                          --------     -------      --------     ------ 
Total revenue             $1,435.5     $( 75.7)     $1,240.9     $270.3
                          ========     =======      ========     ====== 
Gross profit percent          19.3%                     12.2%      44.6%
                          ========                  ========     ======
Operating loss percent        (3.9)%                    (3.7)%     (4.8)%
                          ========                  ========     ======


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

In the Services segment, customer revenue was $1.22 billion for the three 
months ended June 30, 2006 compared with $1.24 billion for the three months 
ended June 30, 2005.  Foreign currency translation had a negligible impact on 
Services revenue in current quarter compared with the year-ago period.  Revenue 
in the second quarter of 2006 declined 1% compared with 2005, principally due 
to a 4% increase in outsourcing ($471.2 million in 2006 compared with $452.6 
million in 2005) and a 10% increase in infrastructure services ($229.5 million 
in 2006 compared with $208.4 million in 2005), offset by a 9% decrease in 
consulting and systems integration revenue ($404.0 million in 2006 compared 
with $443.5 million in 2005) and a 9% decrease in core maintenance revenue 
($119.8 million in 2006 compared with $131.5 million in 2005).  Services gross 
profit was 14.3% in the second quarter of 2006 compared with 12.2% in the year-
ago period.  Services operating income (loss) percent was (.9)% in the three 
months ended June 30, 2006 compared with (3.7)% in the three months ended June 
30, 2005.  The Services margin improvements were principally due to operational 
improvements in several large BPO contracts.

<PAGGE> 20

In the Technology segment, customer revenue was $183 million in the current 
quarter compared with $200 million in the year-ago period.  Foreign currency 
translation had a negative impact of approximately 1 percentage point on 
Technology revenue in the current period compared with the prior-year period.  
Revenue in the three months ended June 30, 2006 was down 8% from the three 
months ended June 30, 2005, due to a 12% decrease in sales of enterprise-class 
servers ($145.6 million in 2006 compared with $165.7 million in 2005) offset in 
part by a 10% increase in sales of specialized technology products ($37.2 
million in 2006 compared with $33.8 million in 2005).  Technology gross profit 
was 37.6% in the current quarter compared with 44.6% in the year-ago quarter.  
Technology operating income percent was (12.2)% in the three months ended June 
30, 2006 compared with (4.8)% in the three months ended June 30, 2005.  The 
decline in revenue and margins in 2006 compared with 2005 primarily reflected 
weak demand for enterprise servers based on customer technology lifecycles and 
buying patterns.  The company expects the technology segment to strengthen in 
the second half of the year over the first half of the year as the company 
introduces new enterprise server models.


New accounting pronouncements

Effective January 1, 2006, the company adopted 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.  Adoption of SFAS 
No. 151 did not have a material effect on the company's consolidated financial 
position, consolidated results of operations, or liquidity.

Effective January 1, 2006, the company adopted 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 company adopted SFAS No. 123R using the modified-
prospective transition method, which requires the company, beginning January 1, 
2006 and thereafter, to expense the grant date fair value of all share-based 
awards over their remaining vesting periods to the extent the awards were not 
fully vested as of the date of adoption and to expense the fair value of all 
share-based awards granted subsequent to December 31, 2005 over their requisite 
service periods.  During the six months ended June 30, 2006, the company 
recorded $3.2 million of share-based compensation expense.  Previous periods 
have not been restated.  See note (e) for further details.

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB 
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an 
interpretation of FASB Statement No. 109," (FIN 48).  FIN 48 prescribes a 
recognition threshold and measurement attribute for the financial statement 
recognition and measurement of a tax position taken or expected to be taken in 
a tax return.  FIN 48 is effective for fiscal years beginning after 
December 15, 2006.  The company is currently evaluating what effect, if any, 
adoption of FIN 48 will have on the company's financial statements.


Financial condition

Cash and cash equivalents at June 30, 2006 were $655.1 million compared with 
$642.5 at December 31, 2005.  

During the six months ended June 30, 2006, cash used for operations was $166.0 
million compared with cash provided of $90.7 million for the six months ended 
June 30, 2005.  The prior-year period included a tax refund of approximately 
$39 million.  Also contributing to the reduction in operating cash flow was a 
reduction in the amount of receivables sold in the company's U.S. 
securitization and a reduction in the amount of customer prepayments.  Cash 
expenditures in the current period related to the current year and prior-year 
restructuring actions (which are included in operating activities) were 
approximately $39.6 million compared with $33.6 million for the prior-year 
period.  Cash expenditures for the current-year and the prior-year 
restructuring actions are expected to be approximately $158.4 million for the 
remainder of 2006, resulting in an expected cash expenditure of approximately 
$198 million in 2006 compared with $57.8 million in 2005.  


<PAGE> 21

Cash provided by investing activities for the six months ended June 30, 2006 
was $240.5 million compared with $198.9 million of cash used during the six 
months ended June 30, 2005.  The principal reason for the increase was that the 
company received net proceeds of $380.6 million from the sale of the NUL shares 
and other assets.  Net purchases of investments was $2.0 million for the six 
months ended June 30, 2006 compared with net proceeds of $10.6 million in the 
prior-year period.  Proceeds from investments and purchases of investments 
represent derivative financial instruments used to manage the company's 
currency exposure to market risks from changes in foreign currency exchange 
rates.  In addition, in the current period, the investment in marketable 
software was $55.3 million compared with $63.3 million in the year-ago period, 
capital additions of properties were $32.7 million in 2006 compared with $59.4 
million in 2005 and capital additions of outsourcing assets were $50.1 million 
in 2006 compared with $86.3 million in 2005.

Cash used for financing activities during the six months ended June 30, 2006 
was $69.0 million compared with $137.4 million of cash used during the six 
months ended June 30, 2005.  The current period includes a cash expenditure of 
$57.9 million to retire at maturity all of the company's remaining 8 1/8% senior
notes.  The prior-year period included a cash expenditure of $150.0 million to 
retire at maturity all of the company's 7 1/4% senior notes.

At June 30, 2006, total debt was $1.06 billion, a decrease of $65.2 million 
from December 31, 2005.

The company has various lending and funding arrangements as follows:

Effective May 31, 2006, the company entered into a three-year, secured 
revolving credit facility.  The new credit agreement, which provides for loans 
and letters of credit up to an aggregate of $275 million, replaces the 
company's $500 million credit agreement that expired on May 31, 2006.  
Borrowings under the new facility will bear interest based on short-term rates 
and the company's credit rating.  The credit agreement contains customary 
representations and warranties, including no material adverse change in the 
company's business, results of operations or financial condition.  It also 
contains financial covenants requiring the company to maintain certain interest 
coverage, leverage and asset coverage ratios and a minimum amount of liquidity, 
which could reduce the amount the company is able to borrow,.  The 
credit facility also includes covenants limiting liens, mergers, asset sales, 
dividends and the incurrence of debt.  Events of default include non-payment, 
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, discussed below.  The credit facility is secured by the 
company's assets, except that the collateral does not include accounts 
receivable that are subject to the receivable facility, U.S. real estate or the 
stock or indebtedness of the company's U.S. operating subsidiaries.  As of June 
30, 2006, there were letters of credit of approximately $24 million issued 
under the facility and there were no cash borrowings.

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.

Under the accounts receivable facility, the company has agreed to sell, on an 
on-going basis, through Unisys Funding Corporation I, a wholly owned subsidiary,
interests in up to $300 million of eligible U.S. trade accounts receivable.  
The receivables are sold at a discount that reflects a margin based on, among 
other things, the company's then-current S&P and Moody's credit rating.  The 
facility is terminable by the purchasers if the company's public debt securities
are rated below B by S&P or B2 by Moody's and requires the maintenance of 
certain ratios related to the sold receivables.  At June 30, 2006, the 
company's public debt was rated BB- and Ba3 by S&P and Moody's, respectively.  
On July 20, 2006, Moody's lowered its rating on the company's public debt to B2.
The facility is renewable annually at the purchasers' option until November 
2008.

At June 30, 2006, the company has met all covenants and conditions under its 
various lending and funding agreements.  The company expects to continue to 
meet these covenants and conditions.  The company believes that it will have 
adequate sources and availability of short-term funding to meet its expected 
cash requirements.


<PAGE> 22

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.
         
Stockholders' equity increased $1,225.8 million during the six months ended 
June 30, 2006, principally reflecting the reversal of the minimum pension 
liability adjustment of $1,446.0 million for the U.S. qualified defined benefit 
pension plan, offset in part by the net loss of $222.5 million.


Factors that may affect future results

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

Statements in this report regarding the company's cost reduction plan are 
subject to the risk that the company may not implement the planned headcount 
reductions or increase its offshore resources as quickly as currently planned, 
which could affect the timing of anticipated cost savings.  The amount of 
anticipated cost savings is also subject to currency exchange rate fluctuations 
with regard to actions taken outside the U.S.  Statements in this report 
regarding the revenue increases anticipated from the new iPSL tariff 
arrangements are based on assumptions regarding iPSL processing volumes and 
costs over the 2006-2010 time-frame. Because these volumes and costs are 
subject to change, the amount of anticipated revenue is not guaranteed. In 
addition, because iPSL is paid by its customers in British pounds, the U.S. 
dollar amount of revenue recognized by the company is subject to currency 
exchange rate fluctuations.

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 
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. 


<PAGE> 23

Future results will also depend in part on the success of the company's focused 
investment and sales and marketing strategies.  These 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.  

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, and 
realization of expected profitability of existing outsourcing contracts.  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 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 an improvement in the company's 
technology business.  This will require, in part, an increase in market demand 
for the company's high-end enterprise servers and customer acceptance of the 
new models announced in the second quarter of 2006.  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.  Future results will depend, in part, on 
customer acceptance of new ClearPath 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, 
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.  Future 
results of the technology business will also depend, in part, on the successful 
implementation of the company's new arrangements with NEC.


<PAGE> 24

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 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> 25


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

The Company's management, with the participation of the Company's Chief 
Executive Officer and Chief Financial Officer, has evaluated the effectiveness 
of the Company's disclosure controls and procedures as of June 30, 2006.  Based 
on this evaluation, the Company's Chief Executive Officer and Chief Financial 
Officer concluded that the Company's disclosure controls and procedures were 
effective for gathering, analyzing and disclosing the information the Company 
is required to disclose in the reports it files under the Securities Exchange 
Act of 1934, within the time periods specified in the SEC's rules and forms.  
Such evaluation did not identify any change in the Company's internal controls 
over financial reporting that occurred during the quarter ended June 30, 2006 
that has materially affected, or is reasonably likely to materially affect, the 
Company's internal control over financial reporting.  



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


Item 1A.  Risk Factors
-------   ------------

See "Factors that may affect future results" in Management's Discussion and 
Analysis of Financial Condition and Results of Operations for a discussion of 
risk factors.



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

(a)    The company's 2006 Annual Meeting of Stockholders (the "Annual 
       Meeting") was held on April 20, 2006 in Philadelphia, Pennsylvania.

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

   (1) Election of Directors as follows:

   Randall J. Hogan - 302,803,483 votes for; 9,493,299 votes withheld

   Edwin A. Huston - 295,929,801 votes for; 16,366,981 votes withheld

   Leslie F. Kenne - 302,872,185 votes for; 9,424,597 votes withheld

   Joseph W. McGrath - 301,196,395 votes for; 11,100,387 votes withheld

   (2) Ratification of the selection of the company's independent registered 
public accounting firm for 2006 - 304,389,020 votes for; 5,306,945 votes 
against; 2,600,817 abstentions.



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

See note (b) of the notes to consolidated financial statements for information 
on the restructuring charge taken in the second quarter of 2006.


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

(a)       Exhibits

          See Exhibit Index



<PAGE> 26



                               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: August 9, 2006                        By: /s/ Janet Brutschea Haugen
                                                -----------------------------
                                                Janet Brutschea Haugen
                                                Senior Vice President and 
                                                Chief Financial Officer 
                                                (Principal Financial Officer)


                                             By: /s/ Joseph M. Munnelly
                                                 ----------------------
                                                 Joseph M. Munnelly
                                                 Vice President and 
                                                 Corporate Controller
                                                 (Chief Accounting Officer)



<PAGE> 27




                             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 December 1, 2005 
         (incorporated by reference to Exhibit 3 to the registrant's Current 
         Report on Form 8-K dated December 1, 2005)

12       Statement of Computation of Ratio of Earnings to Fixed Charges

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

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

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

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






                                                                      Exhibit 12

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

                                

                                  Six             
                                  Months     
                                  Ended          Years Ended December 31
                                  June 30, -----------------------------------
                                  2006      2005   2004   2003   2002   2001
                                  --------  ----   ----   ----   ----   ----
Fixed charges
Interest expense                $  38.9   $ 64.7  $ 69.0 $ 69.6 $ 66.5 $ 70.0
Interest capitalized during 
  the period                        5.8     15.0    16.3   14.5   13.9   11.8
Amortization of debt issuance
  expenses                          1.9      3.4     3.5    3.8    2.6    2.7
Portion of rental expense
  representative of interest       30.5     60.9    61.6   55.2   53.0   53.9
                                 -------  ------ ------ ------ ------  ----- 
    Total Fixed Charges            77.1    144.0   150.4  143.1  136.0  138.4
                                 -------  ------  ------ ------ ------  -----
Earnings                            
Income (loss) from continuing
 operations before income taxes  (238.7)  (170.9)  (76.0) 380.5  332.8  (73.0)
Add (deduct) the following:
 Share of loss (income) of
  associated companies              4.3     (7.2)  (14.0) (16.2)  14.2   (8.6)
 Amortization of capitalized
  interest                          6.4     12.9    11.7   10.2    8.8    5.4
                                 -------  ------ ------ ------ ------  -----
    Subtotal                     (228.0)  (165.2)  (78.3) 374.5  355.8  (76.2)
                                 -------  ------  ------ ------ ------  -----

Fixed charges per above            77.1    144.0   150.4  143.1  136.0  138.4
Less interest capitalized during
  the period                       (5.8)   (15.0)  (16.3) (14.5) (13.9) (11.8)
                                 -------  ------ ------ ------ ------ ------
Total earnings (loss)           $(156.7)  $(36.2) $ 55.8 $503.1 $477.9 $ 50.4
                                 =======  ======  ====== ====== ====== ======

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

* Earnings for the six months ended June 30, 2006 and for the years ended 
December 31, 2005, 2004 and 2001 were inadequate to cover fixed charges by 
$233.8 million, $180.2 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: August 9, 2006


                                /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: August 9, 2006

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




Exhibit 32.1


                  CERTIFICATION OF PERIODIC REPORT

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

(1)   the Quarterly Report on Form 10-Q of the Company for the quarterly period 
ended June 30, 2006 (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: August 9, 2006



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



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








Exhibit 32.2


                  CERTIFICATION OF PERIODIC REPORT

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

(1)   the Quarterly Report on Form 10-Q of the Company for the quarterly period 
ended June 30, 2006 (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: August 9, 2006



/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.