Can At&T Keep Ncr's Clients On Line?Peter Coy
Rodney McComas is not the biggest computer customer around. But he may be among the most grateful. Thirteen years after the fact, McComas praises computer maker NCR Corp. for sending programmers to his Cleburne (Tex.) coverall factory to upgrade its software. The one-of-a-kind solution gave every terminal on the system access to instant updates on orders, inventories, and the like. Says McComas, data processing manager for Walls Industries Inc.: "NCR has a total commitment to their customers."
These days, McComas is edgy. He and other NCR customers worry about what will happen to their Dayton-based supplier if it's swallowed up by American Telephone & Telegraph Co., which has launched a hostile $6.1 billion tender offer. They fear that AT&T will meddle with NCR's strategy--and spoil it. Or that the takeover will drive out NCR's top talent, including Chairman Charles E. Exley Jr. Or that the challenge of combining NCR with AT&T's money-losing computer business will distract NCR just at a crucial moment in the transition of its product line.
But fretting won't stop this deal. And Chuck Exley's strident opposition will probably just slow it. A determined AT&T is likely to triumph eventually, possibly at a higher price, most observers believe. So the real question is: If the deal does go through, what will AT&T do to prevent an ambitious initiative from turning to ashes?
The biggest challenge will be to avoid messing up a good thing. The history of computer mergers, especially unfriendly ones, is not good. Most famously, Unisys Corp. has faltered badly since it was formed in 1986 through Burroughs Corp.'s hostile acquisition of rival Sperry Corp. Many NCR customers, while withholding judgment for now, are concerned that history might repeat itself.
AT&T managers face a tricky tradeoff. They need to assuage such customers as Ronnie L. Anderson, chairman of the national Federation of NCR User Groups, who worries: "With new people involved, there's concern about what would be the direction in the future." So AT&T has vowed to leave NCR intact and let it run AT&T's own computer business as well. But leaving NCR entirely to its own devices would mean giving up on the grand plan to unite AT&T's communications skills with NCR's computing talents--a union that is, after all, the logic of the deal.
THE UNIX FACTOR. A few years ago, AT&T would have been confident that NCR's customers wouldn't jump ship. That's because they were stuck. Their programs would run only on NCR computers. That's less true today. NCR is moving to embrace Unix, a software foundation invented by AT&T that lets customers run their programs on many brands of computers. If NCR didn't do as well under AT&T ownership, many customers could move their programs onto computers made by someone else. AT&T Computer Systems President Richard A. McGinn concedes the point but says: "It's only a vulnerability if you fail."
AT&T might have most trouble with the personal side of a merger. NCR's Exley has vowed to quit if it goes through, except in the unlikely event that AT&T raises its offer nearly 40%. But it's not clear who else would follow him, since he has prohibited his subordinates from talking to the press. AT&T's McGinn says one NCR executive called him to say he was looking forward to the deal. If friendly mergers are any guide, AT&T's recent track record is good. Equipment maker Paradyne Corp. and Istel Ltd., a British data services firm, have been smoothly incorporated since their purchase in 1989.
Still, even if AT&T is right that NCR's histrionics are just "deal dynamics," denunciations of the phone company as a predator with a failed strategy in computers could poison the air for a long time. Says J. C. Penney Co.'s David Evans, senior vice-president for information systems: "The more it degenerates, the more likely it is to have an impact on one or the other's ability to deliver a continued stream of service." To make this deal work, AT&T will have to demonstrate a nimbleness and sensitivity that are hardly its most noted characteristics.
HOW AT&T COULD MAKE THE NCR PURCHASE WORK PROBLEM
Top NCR management could quit
SOLUTION Concede that NCR Chairman Charles Exley Jr. is likely to resign, but offer incentives to retain other key executives
PROBLEM NCR's computer strategy could be thrown off course
SOLUTION Proceed cautiously with attempts to meld AT&T's communications skills with NCR's talents in computing
PROBLEM NCR customers could jump to other suppliers
SOLUTION Keep up service, support, and technology so that NCR remains the customers' preferred supplier