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August 10, 1988

COMPUTER CONSOLES “FOR SALE” – CUNNINGHAM: PRIZE FOR STC?

By CBR Staff Writer

In a remarkable interview in the US edition of the Wall Street Journal yesterday, chairman and chief executive John Cunningham effectively hung a for sale sign out over Computer Consoles Inc, declaring that he was looking to sell the company, in which he holds a 10% stake, within the next four or five years. Such a statement however, is certain to precipitate action by any company that has eyed the Waltham, Massachusetts firm as a possible takeover candidate on the basis that if it doesn’t move quickly it may lose the prize. And as the world leader in the manufacture of computer-based directory inquiry systems, as well as a major player in the small but fast-growing market for office and business systems under the Unix operating system, the company looks a remarkably attractive target for STC Plc and its ICL subsidiary. STC markets the directory systems in Europe, and ICL buys Computer Consoles Unix machines OEM, as well as offering the company’s well-regarded Officepower office automation software on all its Unix machines. Cunningham says that he wants another four or five years with the company, and then sell out for three to four times what he paid for his 10% stake and go off and do something completely different. He was once tipped as a possible chief for ICL, and if those years could be put at ICL’s disposal, it would be a very fancy feather in the company’s cap: Cunningham was responsible for much of the phenomenal growth of Wang Laboratories in the late 1970s and early 1980s, and has emphatically turned Computer Cons oles around, a fact that has not yet registered in the share price. He bought in at $6.625, and the shares are now at $7.875 – but any would-be acquirer would have to think in terms of $16 to $20 a share, valuing the company at $208m to $260m, or 18.6 to 23.2 times prospective earnings – the company is expected to do $11.3m or so net, 86 cents a share, on sales up about 21% at $180m. The item boosted Computer Consoles shares first thing – albeit by only 12.5 cents – but that was more than it sounds because the Dow was off 24 points at 11 am New York time yesterday, and all the major computer plays were showing falls of $1 or more.

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