Icl Is Still Standing And Still RefocusingJonathan B. Levine
Peter Bonfield is one of a rare breed. His peers at Siemens, Groupe Bull, Ing C. Olivetti, and Nixdorf Computer lost their jobs amid three years of savage industry restructuring. Yet after eight years on the job, the chairman of Britain's International Computers Ltd. PLC seems more secure than ever. Rarer still, ICL is one of the few mainframe makers outside Japan to remain consistently profitable in the past decade. "I feel like the last of the Mohicans," Bonfield says.
What's his secret? Bad luck, of sorts. Facing bankruptcy in 1981, ICL had to turn to Japan's Fujitsu Ltd. for some mainframe processors. That led to selling an 80% stake to the Japanese powerhouse in 1990. But the crisis helped Bonfield refocus ICL's business substantially. Long before rivals felt the need for such moves, he had killed a whole line of mainframes, closed five factories, slashed employment by 32%, and revamped ICL's strategy.
TURNABOUT. The payoff: This year, more than 50% of ICL's $4 billion in sales will come from software and services, up from 30% in 1987. IBM reached only 36% in 1991. ICL also has targeted just a few industries--retailing, government, and financial services--has specialized in "open" networks using standardized software, and has built a successful desktop business. Says analyst Amit Chaudhuri at market researcher International Data Corp.: "Management has turned the company on its head."
Still, Bonfield expects the current shift to desktop computers to push gross margins down as much as 10 points by 1995. To stay ahead, he has been seeking "catalysts for change." In the past 18 months, ICL has bought PC maker Nokia Data Communications Corp., a PC distributor, a facilities-management firm, and stakes worth $60 million in 12 software developers. It's also in a joint venture with Bell Atlantic Corp.'s Sorbus unit, which fixes computers.
Last year's $355 million purchase of Nokia not only boosted European market share but it also delivered shock treatment to ICL's struggling PC arm. "We bent over backwards to make sure Nokia changed ICL, not the other way around," says PC Div. Director David A. Mills. With control over PCs moved to Nokia, ICL engineers were pressured to shave expenses and speed up development. Within three months, the team combined their two PC lines into one. This year, ICL says, shipments should grow 47%, with sales reaching about $620 million. If so, ICL will rank as Europe's No. 5 producer, according to market researcher Dataquest, up from No. 9 last year.
Likewise, Bell Atlantic's Sorbus is teaching ICL's service group how to win contracts on IBM and Digital machines. Says Bonfield: "By integrating ourselves into these other companies, we're changing old mind-sets."
ATM SALES. No doubt the biggest influence will come from Fujitsu. The Japanese company bought control of ICL from STC PLC when the British phone-equipment maker decided it could no longer afford to support ICL. While Fujitsu manages ICL at arm's length, the companies work more closely than ever. Fujitsu sells ICL PCs and workstations in Asia while ICL pushes Fujitsu automatic-teller machines in the U.S. and supercomputers in Europe. ICL also is developing the optical-communications channels for Fujitsu's next generation of mainframes.
Eventually, subcontractors will probably handle manufacturing and even some engineering for ICL, says Jules Goddard, a visiting professor at London Business School and a consultant to ICL. That would leave ICL to focus on managing big software projects. Says Goddard: "In 5 to 10 years, ICL will be a much simpler, focused business." And it won't be the only one.