The deal IBM Corp cut to finesse Groupe Bull SA into becoming its partner looks as if it could be worth almost the $500m industry sources claimed IBM put on the table once all those Zenith laptops it has promised to buy are factored in. The deal it cut, however, may be a premature statement, since spectators close to happenings in France these last nine months claim IBM and the French rushed their announcement out in the absence of having anything signed, and are still negotiating not only IBM’s equity position in Bull, but on other features of their multi-pronged agreement as well. Their hurry may be attributable to the fact that a decision as to who Bull’s partner would be was supposed to be made last September 24. What caused the delay, sources say, is the fact that what started as a pure technology decision quickly became a political football with French jobs put at stake.
Started shopping
Bull started shopping for a open systems RISC partner last summer after it reportedly realised that it wouldn’t be able to build high-end, commercial, multi-user machines out of MIPS Computer Systems Inc chips – at least not machines that matched the performance of its stock-in-trade mainframes, the installed base that IBM covets. (The MIPS chip for instance only accomplishes in multiple software-based commands what Hewlett-Packard Co’s Precision Architecture RISC chip does in one instruction). Bull sought out IBM, Hewlett-Packard Co and Digital Equipment Corp, the world’s top three computer companies. DEC talked for a while, but dropped out some time last autumn, perhaps because, unsure whether its Alpha RISC would in fact materialise, declined to cut Bull into the piece of Alpha it wanted. Almost immediately after Bull first reached out for someone, the French government, Bull’s overwhelmingly dominant shareholder, kicked off a set of parallel negotiations with the suitors, compounding the agendas of the negotiators. Once the government became involved, the criteria and goal of the deal reportedly never seemed fixed. Though in hindsight it may seem patently obvious that the decision ultimately rested with the government, one negotiator said that from the inside it was never that plain. The government injected a portfolio of non-technical issues into the negotiations, not the least of which was the need to maintain a position consistent with the anti-Japanese stance previously adopted by French Prime Minister Edith Cresson. Enter an equity proposal to offset the piece of Bull owned by NEC Corp with an American interest.
By Maureen O’Gara
Hewlett-Packard had envisioned a nice little partnership of equals, with both companies working on common goals and contributing to the strengths of the other. It was busy firming up co-operative agreements with Bull on such matters as common Open Software Foundation interest, networking, software engineering and multiprocessors. It was negotiating a different kind of deal than the one that eventually went down, and while Hewlett-Packard’s notions may have found favour with the Minister of Industry and key advisors to Mme Cresson, IBM’s pitch appealed more to the Minister of Finance, Mme Cresson herself and apparently President Mitterrand. However, Hewlett-Packard was willing to match NEC’s stake at a cost of around $100m and it did manage to keep discussions going for some weeks with the SGS-Thomson Microelectronics NV angle, since the French – not to mention IBM itself – are very interested in Hewlett-Packard’s ASIC capabilities and its 0.5 and 0.6 micron CMOS and BiCMOS technologies. What it couldn’t stomach was taking on Zenith boxes any more than it could commit to the subcontracting, procurement and future funding that would be required to protect its initial investment from eventual dilution. Sources suggest that the scale of IBM’s commitments, made on its behalf by IBM Europe under the apparent leadership of Michael Armstrong, caused Armonk to draw in its breath once it had tallied them all up. The IBM-Bull nuptials are already being criticised as just the sort of short-term short-
sighted arrangements a bunch of irredeemably interventionist politicians would put together. Prophesies abound predicting that over the next decade the once-proud French flagship will, like Wang Laboratories Inc, gradually drift off into being nothing more than an IBM distributor. That is, if the ravaged company can last that long. There appears to be nothing intrinsic to the IBM agreement to stop its haemorrhaging losses long-term – nothing to alleviate its fundamental problems of uncompetitive technology, unsustainable cost structure, surplus of staff and an overwhelming dependence on the state as customer. Sceptics argue that IBM does not resolve Bull’s fundamental need for high-end commercial multiprocessor RISC technology since it doesn’t have that sort of a box itself and that including Bull in the IBM-Apple Computer Inc axis was a bit of last-minute window-dressing that came as news to Apple. Bull’s abandonment of MIPS Computer Systems Inc and its R-series RISC, however, was written in the stars all along.
Forced to dance
Being forced to dance with IBM instead is going to be a hard step for it to follow. From its corner, MIPS says that Bull accounted only 2.72% of its business in any case. And, although the Sunnyvale, California-based company would not comment, it is thought likely that MIPS may pick up some of Bull’s value-added resellers that have been exposed to its technology. The IBM deal was nothing to do with little MIPS, it cries, saying it was purely down to money. We didn’t get a look-in, even at the very beginning of the negotiations. Bull, it says, was pressing hard for R4000 multi-processing technology to replace its existing Motorola Inc 68000 family kit, but MIPS insisted that it was concentrating on getting the Advanced Computing Environment stuff out of the door, and although it offered all it had at the time for Bull to go off and do what it liked with, Bull simply couldn’t wait. All of which suggests that nothing has actually been solved by the still nebulous agreement with IBM.
