In an attempt to get rid of the prefix troubled once and for all Data General invited journalists to its Westboro, Massachusetts headquarters to discuss its corporate strategy. Mike Evans, the company’s financial director kicked off the proceedings by drawing attention to the Data General Objective which, among other things, aims to grow a business that provides returns to our stock-holders over a long period of time. Somewhat predictably Evans explained that Data General was not looking for quarter on quarter growth which is just as well really as the company reported a loss of $18.4m in its first quarter this year, compounded by a second quarter loss of $7.3m.

Nova II

As if further proof were needed that short-termism is not a problem at Data General, Evans explained that last year 13% of the company’s turnover went into research and development and that over the past five years it has spent $1,400m on research and development yet it is only a $1,300m company. Some might call such high investment in the face of losses foolhardy, but Data General is evidently confident that its big development project over the past few years will be worth it. We are, of course, talking about Data General’s open system offering, its AViiON range. Some people believe that AViiON is an anagram of Nova II, and Herb Richman, one of the original founders of the company likened Data General’s current situation to the time when the company was just starting out in the computer industry. For Data General has lived on the edge since its inception when Richman raised funding to start up an 8-bit computer company only to find that Ed de Castro et al had designed the 16-bit Nova computer – it contravenes securities laws to raise money for one thing and then do another. The funding came through anyway, but the rest has not been Whig history, for progress has by no means been linear – Data General has had its ups and downs as everyone knows. So far it has got itself out of the poverty trap twice – the first time courtesy of the 32-bit Eclipse minis, the second by virtue of its Comprehensive Electronic Office product. Today it looks as if AViiON may offer yet another escape route, with Data General already having a number of meaty contracts for the the new product including the contested $127m contract with the US Interior Department and a $30m deal with Recognition Equipment Inc. With this new emphasis on open systems Data General expects its business (currently split 50:50) to swing more heavily towards the European market and to be less reliant on the slowing US market. Another problem that Evans has been addressing is the reliance of Data General on value added resellers. Since last year this has changed so that Data General now has three revenue streams: value added resellers, service revenues and direct sales. Of course in the UK the business was restructured into three divisions last November, the divisions being distribution, services and solutions (a kind of special task force unit) which targets specific market sectors and addresses large accounts. The US operation is still considering whether to follow the UK’s organisational lead, was made to help compensate for lower profit margins on hardware and software that open systems bring.

By Katy Ring

For on a cumulative basis Evans says the company has been profitable over the past five years but over the past three years Data General has invested $180m in restructuring and whether it has budgeted for any more is a close kept secret. However, at present there is nothing on the company’s balance sheet such as serious litigation or asset write-offs that pose a threat. In 1986 the company had $302m in cash and $241m of debt, so it pared down the cash to pay off the debt. Its latest second quarter figures reveal that it has got its long-term debt down to under $60m with total assets of $971m. As a precaution to ward off hostile bids (or as back-up for its own acquisitive intentions) the company has a $230m loan facility which it can access within hours as well as about $100m cash in its

own bank account. Working with figures available in September 1989 Evans has calculated that Data General has a 9.8% level of cash liquidity as part of its revenue compared with Wang’s 2.8% and Prime’s 3.1%. He clearly believes that his company is on target and says that even if the revenue remains flat year on year at $1,300m then its annualised savings of $96m will mean that it will break even and thereafter will return to profitability. However, Evans said that he believed the revenue line would show growth by the end of this financial year, presumably on the back of AViiON sales as Data General’s president Ron Skates says that by September more revenue will be derived from the new range than from the MV series. This is largely because the AViiON range is less expensive to manufacture than the MV family, however, the latter is worth around $700m in revenue each year and has an installed user base of 35,000. Politic as ever Skates stressed Data General’s commitment to the MV series and would not divulge the research and development split between the MV and AViiON ranges.

MVs are forever

Yet the overall impression given at Westboro is that the MV is a box on the run from Skates’ belief in cost-cutting. The Eclipse product manager Joe Mettee was at pains to explain that the MV Eclipse product range shared its research and development costs with other companies and therefore it was not so expensive to keep up two product lines. For example, Data General is working with Ingres to put SQL and the Ingres database on the MV family.Meanwhile the development of the new high end member of the MV family, which uses a new ECL microprocessor, is described as being on schedule. Despite these protestations, Mettee appeared very defensive. He said that the MV family would not support Posix, but added that the MV could be used as a server in the open environment so that users don’t need to throw it away. Although Mettee was wearing a huge badge emblazoned with the legend MVs are forever, his own more conservative prognosis for the longevity of the range was 10 years at least. Stan Dolberg, in charge of the company’s open systems strategy was far more bullish. He sees one of his objectives as bringing the MV installed base into the AViiON fold. As with so many vendors of a variation on the Unix theme, Dolberg claims that the DG/UX operating system pulls Unix out of the laboratory and enables it to function in the business world. However, he added that Data General will be implementing Unix V.4 and other System V compatible operating systems to the AViiON in the near future since he believes that there won’t be one dominant Unix but interoperability between different open system verions.