At&T And Computers: Any Signs Of Synergy?John W. Verity
In 1991, AT&T shelled out $7 billion for NCR Corp. and finally staked out the strategic beachhead in computers that it had failed, despite billions of dollars spent, to achieve on its own.
What has come of that initially hostile and bitterly fought takeover? Has AT&T created the synergy between computers and communications to help it play in the world of all-digital communications and multimedia? The answer is mixed, depending on which area of AT&T's computer operations one considers.
Global Information Solutions (GIS), the inelegant new name for the former NCR, still leads the computer industry in having a full product line, from desktop to mainframe, that uses a common line of microprocessors--namely, Intel Corp.'s. Potentially, that's a big boost in helping customers wire up far-flung networks. And NCR has given AT&T presence in scores of foreign countries, including Japan, where the AT&T name was not well-known. In return, NCR has gained access to AT&T's deep pockets, the knowhow of its Bell Laboratories, and its strength in data networking.
But little has come from the acquisition. Of the 30-plus NCR officers on board in 1991, less than a half-dozen are left, most checking out as soon as their contracts allowed them to go. Early this year, Jerre L. Stead, the former AT&T executive who had been called in to streamline NCR in 1993 and improve its suddenly sagging profitability, left to run a software company. Lars G. Nyberg, recruited from Philips Electronics, is slated to become the third GIS head in four years on June 1.
GIS still has its strengths. For example, it leads the market for powerful parallel-processing computers that excel in data mining--finding patterns in reams of retail transactions. But rivals have been raiding GIS. Many of the unit's top technical and marketing personnel have jumped ship for Oracle, Unisys, and even IBM. Says one recently-departed NCR executive: "The top talent's no longer there. They're going to have to rebuild that."
GIS's biggest immediate problem is in PCs, which contributed heavily to a surprising $143 million first-quarter loss at GIS. Margins collapsed under intense price competition and a bumpy transition to new models. Analysts say AT&T CEO Robert E. Allen told them the operation had a limited amount of time to get competitive or it would be shut down. "They were obviously embarrassed that this happened," says Anthony Ferrugia, an analyst at A.G. Edwards & Sons Inc.
A spokesman says GIS intends to remain in the PC business, having streamlined its product development process and reduced the number of models it builds. And to help push its high-end computers, the company added 400 people to its consulting staff last year. A new computer line planned for this fall is designed to give even small and medium-sized retailers, not just giants such as Wal-Mart, the ability to analyze masses of sales transactions. As AT&T has learned in its multimedia forays, the road to an all-digital world where computers and communications (and the companies that make them) blend is a bumpy one, indeed.