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May 10, 1988


By CBR Staff Writer

Until recently, Data General Corp appeared to be the least promising candidate among the major mini manufacturers to make a successful transition to a new generation of systems and long term growth. The company’s promised new product line, built round the Motorola 88000 processor, is its hope for changing that perception and last month, at a conference nicely timed to coincide with the announcement of a return to profitability, the company put some flesh on the previously announced bare bones of the strategy. The new standards-based Unix product line which will also support the VMEbus – is due to make its first appearance next year, although the centrepiece of the range, the 100 MIPS ECL processor being developed with Motorola in the chipmaker’s new MCA 4 technology, is not due until 1991. Unsullied Without the hint of a smile, the company said distinguishing features of the range would be the purest adherence to standards in the industry as well as the breadth of the product line. Nevertheless, the company anticipated a set of migration tools for users of the proprietary MV range that included common compilers, data management and office automation. With a claimed 250,000 terminals attached to the CEO Comprehensive Electronic Office system, it seems likely that CEO – or a third party package adapted to look like CEO – could be a major sales tool for Data General in future; and even if new users end up being locked into CEO instead of into a proprietary operating system, at least the purity of standards aderence within Data General’s product line will have remained unsullied. In addition to its agreement with Motorola, the company looks set to forge plenty more alliances in order to bring the product line to market: it was hinting at symmetrical multi-processors running fault tolerant Unix, real-time Unix kernels, and networks of graphics workstations and servers used for software development. Indeed, it seems not unlikely that the company could begin reselling complete 88000-based products manufactured elsewhere, although Data General’s insistence that it would continue in its time honoured style of aggressively undercutting other players suggested that it would continue to do as much manufacturing as possible, albeit with an approach of using relatively high-level building blocks. In particular, the market still lacks a manufacturer of 88000-based workstations with the OEM channels and experience to do much damage to Sun Microsystems’ Sparc sales. No major RISC product discussion nowadays is complete without a few swipes at Sun Microsystems and the Sparc scaleable RISC microprocessor, and Data General said that because the Sparc does not integrate cache and memory management on-chip, it is unlikely that shrink-wrapped applications will run across different vendors’ implementations of Sparc. To emphasise the importance of binary compatibility, the company added that it scrapped its own RISC development – which produced a chip that did some 16 MIPS – because it saw it would stand no chance of establishing yet another binary standard. Despite the suggestion that in the long term, Data General expects most of its money to come from the Unix line, the company said that it already had the next two generations of proprietary MV processors under development and expects the vast majority of its revenues to come from proprietary products over the next two to three years. After 20 years of being perceived as an OEM supplier – and a spectacular failure to compete with IBM and DEC as a full scale systems supplier – Data General has levered itself into a position where end user sales are only marginally less than OEM sales, and revenues from servicing end users equipment are again close to the volume of third party sales. It says it expects the balance to continue, and points out that an increasing proportion of revenues are coming from Europe – some 30% this year, expected to be in the $400m range following a fiscal 1987 contribution of $350m. Revenues for the fiscal second quarter fiscal 1988 were $349m, up from $315m a ye

ar previously; net income was $17.2m compared with a loss in second quarter 1986 of $42.6m. Aside from 1987 extraordinary losses and 1988 tax credits that were partly responsible for the contrast between the two quarters, the company said factors in the improvement were cost cutting measures and increased shipments. Continuing the ebullient financial theme, the company declared that gross margins for the first two quarters of fiscal 1988 were up to 48%, from an average of just over 40% between 1984 and 1986. Pact with NTT Next year, Data General’s large OEM agreement with Japan’s giant Nippon Telegraph & Telephone Corp should begin to bear fruit: the agreement, which followed Data General’s acquisition of US telecommunications company Dama for the T-1 digital switching technology it had developed, is due to result in a range of voice+data integrated services digital networking, ISDN, products to be introduced by NTT from next year. Initially the products use Data General’s proprietary MV minis but are expected to shift to 88000 processors and Unix in future. Data General, which boasted that it had met all milestones in the development, said that negotiations had already started with Major telecommunications organisations especially in Europe about potential sales of the NTT products. Despite the optimism, however, Data General personnel admitted that the company’s effectiveness in putting the new products and strategy in place over the next two years will be crucial to its chances for survival as a thriving independent company. Unlike rival Prime Computer Inc, which has used bought-in technology and the acquisition of a major company – ComputerVision Corp – to entrench itself more firmly in niche markets, Data General appears to hold out hopes of success as a broadly-based supplier of general purpose systems. One alternative is that with a standard Unix-based product line in place, the company could itself at least become a more attractive candidate for acquisition.

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