Control Data Corp yesterday announced plans to spin off its computer systems arm into a new company, Control Data Systems Inc, and rename the software and computer services rump of the company Ceridian Corp. Bowing to the logic we have suggested here CI No 1,919), Silicon Graphics Inc will take a 10% stake in Control Data Systems, and NEC Corp may take a 5% stake to seal a deal under which the new company will commit to NEC’s versions of the MIPS Computer Systems Inc RISC. The change of name to Ceridian Corp from Control Data Corp will become effective June 1; the Control Data Systems name is effective immediately. The split, which will be effected by issuing one share of Control Data Systems for every four Control Data held, is contingent on the agreement of Control Data’s bankers. The company is currently seeking agreement, and an extension of its credit agreement beyond the current June 30 expiry date. Silicon Graphics has signed a letter of intent to buy 10% of Control Data Systems once it becomes an independent company. Control Data Corp expects to record charges of about $400m against its second quarter, about $130m attributable to Control Data Systems – $115m in restructuring charges and $15m in inventory write-downs as part of the transition from the proprietary Cyber mainframes to integration of open systems and application. The $270m balance of the charges includes an expected loss of $55m arising from sale of the Automated Wagering business; provisions of about $55m for lease and other obligations on excess or under-used facilities, principally the company’s headquarters building in Minneapolis, which is to be sublet; $80m of losses and expenses on other reshaping actions being pursued by the company; and a charge of about $50m associated adoption of Financial Accounting Standard No 106 on post-retirement welfare benefits. Other charges of $30m primarily relate to charges and expenses on separation of Control Data Systems. Lawrence Perlman, president and chief executive, will hold the same posts at Ceridian and James Ousley, who has headed the Computer Products business for three years, will be president and chief executive of Control Data Systems. The company plans to capitalise Control Data Systems with $50m in cash, payable when the spin-off occurs, and another $45m in cash payable in December. There will be no material ownership or management relationship between the two after the spin-off, although they will continue to provide products and services to each other over a transition period. Control Data Systems has applied for listing of its shares on the NASDAQ National Market System, and Silicon Graphics has entered new joint marketing and technology-sharing agreements. Control Data Systems will continue to sell and support Silicon Graphics and MIPS Computer Systems workstations and servers as part of its systems integration activities. NEC and Control Data Systems intend to expand their current supercomputer marketing agreement – CDC sells NEC’s SX-3 to its mainframe customers in the US and Europe – to include joint marketing and technical activities in the Unix RISC area. Control Data Systems also will include NEC personal computers in its systems integrations where feasible. The news put $1.375 on the shares at $13.125.
