The last rites for the European Monetary System could just be held over the weekend, finally enabling the French government to deliver the interest rate slash for which business is screaming, and that day can’t come soon enough for Compagnie des Machines Bull SA, which doesn’t look as if it can survive much more government-induced recession. The company’s first half losses soared to $338m from $288m a year ago, a 17.5% increase, and turnover declined twice as fast as it is at IBM Corp, falling 9.5% to $2,130m, suggesting that the company will soon be smaller than ICL Plc once more.Chairman Bernard Pache blamed the increasing losses on falling prices in the computer market. We were not able to avoid an erosion of our margins due to the sharp fall in prices in the sector, he told Reuter. Sales at the microcomputer arm, Zenith Data Systems, which was the company’s main source of losses and seriously called into question the wisdom of having bought the business, grew at twice the rate of the market in the period, but its losses also rose. Other businesses maintained their operating results but the overall operating loss deepened to $206m from $146.5m in the first half of 1992. Exchange rates were blamed for 3.7 percentage points of fall in turnover – but currencies are more realistically valued now than they were a year ago, so there is not much prospect of relief there.
Politically inspired
Bull has now accumulated losses of $2,530m in the past three years, which may still look like peanuts by comparison with the write-offs at IBM, but the company has shown no signs that it is doing more than managing decline: as with Siemens Nixdorf Informationssysteme AG, with each forecast, the time in the future that profits are seen to be possible actually lengthens, so that the prospects for profitability are receding rather than coming closer as time goes by. The company is now only tentatively forecasting an end to its operating losses in 1995.Industry Minister Gerard Longuet has put the company in notice that it needs a new strategy to stem its losses and stop it bleeding the French treasury dry. So far Bull has announced plans to cut its workforce by 18% over the next two years, has agreed an alliance with Packard Bell Electronics Inc and is poised to announce a new agreement with 4.7% shareholder NEC Corp in mainframes – although it is hard to see where new synergies and savings can be found here. NEC already makes all Bull’s largest mainframes and could sensibly make the lot, but that would not do much for French employment. The company also has two incompatible operating systems and mainframe architectures to support – the 32-bit GCOS 7 and the 36-bit GCOS 8: it would make sense to kill one of these and migrate its users over to the other, but it’s a bit late to start thinking about that now. The politically-inspired alliance with IBM Corp is looking more and more like second best when the other option was a similar alliance with Hewlett-Packard Co: Hewlett-Packard’s Unix machines wear a halo of success around them, where IBM’s have to fight the image of failure that hangs over Armonk like a pall, just as it does over Bull’s Paris headquarters. With a new government in power and the future of Bull up in the air again, the press is taking exceptional interest in the firm and the results were leaked a day early.
