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August 27, 1997updated 03 Sep 2016 4:42pm

CERIDIAN TO SELL OFF DEFENSE UNIT, DITCHES PAYROLL TOOL

By CBR Staff Writer

Compulsive shopper Ceridian Corp, the former Control Data Corp information services and payroll firm, is turning the tables and looking to sell its once highly important defense business. At the same time, the Minneapolis company is ditching the CII payroll product it has been developing for ‘large organizations with complex needs’, the core of which it acquired with Tesseract Corp in 1994 (CI No 2,424). As a result, Ceridian will take a $150m hit in the third quarter, although it says more than 80% of this will be non-cash, primarily goodwill and capitalized software development costs associated with the original acquisition. Apparently beta tests of CII, which was supposed to be Ceridian’s second major payroll processing product, showed up major problems in processing speeds, and higher than anticipated installation costs, making it non-viable for potential users. It also seems trends overtook the product, which is a back office engine that could not cope with integration with desktop applications. Analysts were pinning their hopes on the product to provide the company with significant growth and higher margins, and seem concerned at where this leaves these prospects. Ceridian says it will now concentrate on enhancing its existing payroll program, Signature, with which it claims customers have remained satisfied, especially since it has been considerably enhanced in the past year. The sale of the defense business, Computing Devices Inc, comes as less of a surprise, as analysts predicted it at least two years ago (CI No 2,738). Lawrence Perlman, Ceridian chairman and chief executive, said increasing consolidation in the defense industry made smaller players less viable. Also, where the business was contributing around 50% of revenues in 1994, it is now down to less than 38% and not achieving anything like the 20% profit growth target Ceridian has set and expects from its information service business. Perlman insists the company will sell its $550m defense business only if terms were attractive.

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